Nikolin Jaka, the President of the Tirana Chamber of Commerce and Industry denounces what he calls a vassalism and not partnership policy the banks follow toward enterprises
TIRANA, Sept. 17 – With lending striving to remain at positive growth rates, small and medium-sized enterprises which account for the overwhelming majority of registered entities and more than half of the GDP continue suffering from tighter lending standards.
Shpetim Luku, a business analyst, says the downward trend in credit to SMEs is now a fact as also proved by Bank of Albania statistics. “This year has been the worst since the early 2000s when the banking system rapidly developed. The banks have focused only the recovery of loans especially non-performing ones, completely cutting lending to businesses or households. It is exactly the bad loans where the cause for banks’ growing lack of confidence or increased vigilance in new loans must be looked at,” he tells Deutsche Welle in the local Albanian service.
Bad loans, which are considered one of the key problems of the Albanian economy, have almost quadrupled in the past four years climbing to 25 percent and now account for Euro 1 billion. “Even SMEs are suffering from this scrupulous role by the Albanian banks. I find the appeals by the governor of the Bank of Albania for an increase in banks lending role or measures such as the cut in the key interest rate negligible,” he adds.
Luku also blames businesses for the slowdown in lending rate, saying that enterprises lack ideas, creativity and vision. “Today, Albanian businesses seek loans to invest in sectors which are already overcrowded with investments such as construction and other businesses related to it classified as a sector with zero reliability.”
Nikolin Jaka, the President of the Tirana Chamber of Commerce and Industry denounces what he calls a vassalism and not partnership policy the banks follow toward enterprises. “Hesitation does not favour even the banking system and that’s why we are waiting for a reflection to unblock the current situation,” he says.
Although the SME sector in Albania is estimated to account for 99 percent of total business registrations, the SME share of the total credit to the economy is only estimated at 25 percent (including microcredit), says London-based EBRD which is one of the key supporters to SME financing in Albania.
With bad loans at a record 25 percent, lending continues remaining at a historic low hardly managing to preserve positive growth rates of less than 1 percent while deposits are growing at a slightly higher rate. Latest central bank data show lending rose by 0.87 percent year-on-year in the first seven months of this year while deposits decelerated to 2.4 percent. Banks continued applying tight standards even in the second quarter of 2013 while demand for new loans remained sluggish by both businesses and households, according to a central bank survey.
SMEs lack innovation, support services
Albania has implemented business-friendly policies toward SMEs and improved their registration systems, but needs to make greater efforts to boost innovation and provide support services to both start-ups and more established firms, says a joint report by the OECD, the European Commission, the European Training Foundation and the European Bank for Reconstruction and Development. The report recommends as priority actions for Albania continued government support to Albanian Investment Development Agency (AIDA) due to the important role it will play in SME advocacy and the provision of business services. The report praises Albania’s improved operational environment for businesses, in particular by facilitating company registration through initiatives such as a one-stop shop for company registration, single company identification numbers and online registration. “Progress has been made in entrepreneurial skills and education, with entrepreneurship recently introduced as a subject across the secondary school curriculum and enterprise skills requirements being tracked by the Albanian Investment Development Agency (AIDA). Bankruptcy legislation at an early stage, lack of tangible effect on private sector opportunities to comment on draft laws and regulations rank Albania behind its regional competitors.”
“Albania, Kosovo and Montenegro should improve their provision of administrative and regulatory information to the business community, and especially to SMEs,” says the report.
SMEs in Albania
SMEs in Albania account for 99.9 percent of all registered entities, 81.8 percent of employment, and 57 percent of the GDP. Data gathered from the housing and population census also measuring the number of enterprises show some 103,038 active businesses were reported at the end of 2010. Census data show around half of the 103,000 businesses were created during 2005-2009 with 50 percent of them operating in the country’s biggest Tirana and Durres regions, which according to the latest census data have a total resident population of 1 million people compared to 2.8 million nationwide.
More than 4/5 of SMEs in Albania operate in the services sector with 60 percent involved in the trade, bar, restaurant, hotel business. Women manage around a quarter of total businesses in Albania, 99 percent of which are SMEs, and make up 45 to 48 percent of employees in the industry and services sectors. Big enterprises employing more than 50 people contribute to 42 percent of total employment although representing a mere 1 percent of total businesses.
Some 2,739 of total enterprises in Albania are either wholly foreign owned or international joint ventures, with 64 percent of them operating in the services sector. The most surprising data coming from the poll is that around 2/3 of businesses, 62.7 percent of them, are run by self-employed people, meaning a single person.
According to an Italian-government funded study, Albanian small and medium-sized enterprises (SMEs) were severely hit by the outbreak of the global crisis in late 2008, suffering a decrease in demand, activity limitations, and lack of liquidity to higher extent than in other countries. Interviews conducted for this study with SME representatives across Albania showed around 38 percent of medium-sized businesses declared a drop in sales, lack of liquidity and limited financial access at the onset of the global crisis in 2009.
