TIRANA, Oct. 5 – Informal borrowing among households registered a slight decrease in the first half of this year, but remained widespread as the gap between deposit and loan rates in the national currency widened to 10-fold, poorly reflecting the consecutive cuts to the key interest rates the central bank has made in the past few years.
More than half of indebted households, some 57 percent, said they had addressed informal sources, mainly friends and relatives, to borrow in the first half of this year, a 4 percent decline compared to the second half of 2015, according to a nationwide survey with 1,200 households in urban and rural areas conducted by the central bank.
Households said they mostly borrowed to fund consumption in 35 percent of the cases, usually from local groceries where they buy food on credit in interest-free borrowing. In another 31 percent of cases, households borrowed to purchase or repair property and invest in business development in 13 percent of the cases. The overwhelming majority of more than 90 percent of indebted households said they had borrowed in the national currency.
However, when it comes to total amount of credit, informal borrowing accounts for only 16 percent and 71 percent of loans are is in the national currency.
Households reported a slight improvement in their ability to repay in the first half of this year, but remain pessimistic about the possibility of taking out new loans from banks.
“Demand for loans remains poor, but registered a slight increase in the year’s first half. The possibility of taking out new loans slightly increased in the first half of the year but remains below the long-term average,” said the Bank of Albania.
With the key rate at a historic low of 1.25 percent, lending continues struggling to recover due to both tight lending standards applied by banks as non-performing loans stand at 20 percent and poor demand by both businesses and households.
Average interest rates on loans in the national currency, accounting for 40 percent of total credit, slightly rose to about 8 percent last August, when rates on lek-denominated deposits stood at almost all-time low of 0.8 percent, widening the gap between deposit and loan rates to 10-fold.
Non-performing loans among households who hold about a quarter of total credit dropped to 12 percent in the first half of 2016 but rose to 24.4 percent for businesses.
