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Meanwhile, they add that “the demand for loans is expected to see a further increase for both businesses and individuals”, during the months to come. Besides the need that businesses have for liquidity and the need of individuals for a new home, this growing demand also reflects the fact that they are ready to take risks with the hope that things will go better and that they will be able to pay their loan installments. The survey carried out by the central bank explains that as far as businesses are concerned, all categories of businesses, small sized, medium sized or large sized, have applied for loans.
“Based on what they use these loans for, businesses have demanded more loans to fund their cashflow and to make new investments”, the survey in question states. This shows that for the time being, businesses in Albania need money to increase their cashflow and make new investments, in order to continue operating. As far as individuals are concerned, bank experts say that the main reason they demand a loan relates to the purchase of a new home, but also consumption. “The rising demand of individual loans in the third quarter of 2017 has been mainly due to the rising need to finance consumption and to purchase homes”, experts explain.
Nonetheless, the developments in the real estate market have had a negative effect on the individual demands for loans. In other words, although individuals have wanted to purchase a home, the rising cost of homes has deterred them a little in taking such step.
It’s easier for individuals to obtain a loan
Today, it’s easier for individuals to obtain a loan than it is for businesses. This is confirmed by the Bank of Albania in its Survey on the Crediting Activity for the third quarter of 2017. The survey says that “more strict criteria are being imposed on businesses, while fewer criteria are being imposed on individuals”. The report also says that “consumers who were looking to purchase a home or obtain a consumer loan had fewer requirements to meet”. But where have banks become more lenient and where have they become stricter in issuing loans? It seems that when businesses have been issued loaned, all banks have been inclined to do this. “The main reason why banks decided to apply fewer requirements when issuing business loans relates to competition in the banking market”, the Bank of Albania says. Meanwhile, the Bank also says that the reason for rejecting loan applications relates to non-performing loans and at the same time, the specific problems that the business sector encounters. “Meanwhile, as far as individual loans are concerned, the main factors which have pushed banks to apply fewer requirements when granting them relate to sufficiency of capital, level of liquidity and competition in the banking system”, the Bank of Albania adds.
BoA: 20% of Albanian households have a loan to pay back
“Around 28% of Albanian households say that they have a loan to pay”. This is stated by this year’s Report on Financial Stability, which adds that “in 38% of cases, Albanian households have gone to the bank and non-banking institutions to ask for a loan”. Meanwhile, in 62% of cases, they have resorted to informal sources, such as family and friends. However, according to the Bank of Albania, this tendency is falling, while banks have become “more lenient” in issuing loans for individuals. On the other hand, asked about their ability to pay back these loans, households have declared that it’s becoming more and more difficult for them to pay off their loans.
CURRENCIES
“In the fourth quarter of 2017, banks are expecting to register an increase their lending in lek and a decrease their lending in foreign currency”. This is another assessment made by the Bank of Albania in regards to its expectations about lending at the end of the year. This goes to prove the recent trend that businesses and individuals are opting to take out a loan in the domestic currency, lek, in order to feel more protected from the different shifts in the currency exchange rates.
