TIRANA, Feb. 17 – With deposits striving to remain at positive growth rates, the newly established investment funds are emerging as a more competitive alternative in investing savings due to due to higher interest rates compared to traditional bank deposits.
Data published by the Albanian Financial Supervisory Authority which supervises this market operational only for the past three years, shows the only two operators controlled by Raiffeisen Bank, the country’s biggest commercial bank, increased their net asset value by 27 percent to 63.7 billion lek (Euro 446 million) at the end of 2014 compared to 2013.
“The market is dominated by investments in government securities which represent around 76 percent of the funds’ assets, an increase of 15 percent compared to the end of 2013,” says the Supervisory Authority in a report. Some 32,669 people are reported to have invested in these funds by the end of the final quarter of 2014, up 15 percent compared to the end of 2013.
With the key interest rate standing at a historic low of 2 percent and interest rates on 12-month deposits having dropped to below the average inflation rate of 1.6 percent, bank deposits are estimated to have grown by only 1 percent in 2014.
The slowdown in deposits is also a result of sharp cuts in interest rates and more favourable interest rates in the emerging investments funds.
“While these funds have helped diversify the ownership of government securities, they are inadequately supervised and regulated, invest mostly in longer-dated securities and their clients appear to consider these funds as substitutes for bank accounts,” warns the IMF in its latest report.
Currently only two investment funds, Raiffeisen Prestigj and Raiffeisen Invest Euro operate in Albania. The funds were established in early 2012 by Raiffeisen Bank Albania, the leading commercial bank operating in Albania. The timing coincided with the decision of Raiffeisen decision to scale back its participation in the public debt market to limit its exposure to the Albanian sovereign debt.
