The loan granted by non-bank financial institutions exceeds the limit of 600 million euros

2024-10-01 07:42:00, Ekonomi CNA

The loan granted by non-bank financial institutions exceeds the limit of 600

Statistics show that the rapid growth of credit is proceeding in parallel in the banking and non-banking sectors.

The loan granted by non-bank financial institutions exceeded the value of 600 million euros in the second quarter of this year. According to data from the Bank of Albania, the loan portfolio of non-bank financial institutions in mid-2024 reached ALL 60.9 billion, or almost EUR 485 million.

The loan portfolio granted by these institutions has increased by 9.1% since the beginning of the year and by 17.8% compared to the same period of the previous year. In the vast majority, the loan portfolio of non-bank financial institutions belongs to lending and microfinance entities. It is estimated that the loan granted by this sector already constitutes approximately 7.5% of the total loan portfolio for the economy.

The credit of non-bank financial institutions is mainly given in the local currency and this has caused the effect of the strengthening of the lek on the exchange rate to be smaller compared to the banking sector. In the middle of this year, the loan in Lek accounted for almost 69% of the total value of the loan portfolio.

The rapid growth of credit from non-banking financial institutions proves the good performance of lending to the economy in general, but also a several-year positive growth cycle of the sector of non-banking financial entities.

The main contribution to the increase in lending in recent years has been given in particular by microfinance products. Microfinance credits the consumer needs of individuals and the activity of small and micro businesses, mainly in that segment that does not find access to financing from the banking sector.

The data of the Bank of Albania show that parallel to the increase in credit, the quality of the portfolio has also improved. The ratio of non-performing loans at the end of the 6th month of 2024 fell to 12.8%, from 13.3% a year ago.

However, the rapid growth of lending from the non-banking financial sector and especially from the segment of microfinance products may be affected by the new regulatory measures expected to be adopted by the Bank of Albania.

Based on the provisions of the draft regulation "On risk management in the activity of non-banking financial entities", a strong tightening in the lending space of non-banking financial institutions is expected.

A non-bank financial institution will not be allowed to grant more than two consumer loans to the same borrower at the same time.

The draft regulation also establishes a ceiling value of the loan installments in relation to the net monthly income of the borrowers. The debt service ratio against income (DSTI) will be calculated as the value of the total monthly installments of existing loans, including the loan for which it is being applied for, divided by the net income of all co-borrowers.

The value of the debt service ratio against income should not exceed the value of 40%. This value can be higher only in cases where the borrower has sufficient evidence that the higher level of the ratio does not affect the payment of the loan obligations.

The draft regulation also provides for more detailed and rigorous risk management requirements on consumer lending.

The new requirements, which envisage a detailed assessment of the ability to pay, are expected to make it very difficult to grant loans with only an identity document within very fast time frames (within a few minutes), a practice that is widely followed by some consumer microfinance institutions. / Monitor magazine