Microfinance lending, weak performance even in the third quarter of 2025

2026-01-05 17:50:21, Ekonomi CNA

The performance of lending by non-bank financial institutions was also weak in the third quarter of 2025, confirming the slowdown in the microfinance segment.

Bank of Albania data show that the value of the loan portfolio provided by non-bank financial institutions reached 61.6 billion lek, down by approximately one billion lek compared to the previous quarter.

Credit provided by non-bank financial institutions is almost at the same level as at the end of last year, while marking a modest increase of 2.2% compared to the third quarter of last year.

The value of the loan portfolio included in these statistics includes loans granted by all non-depository financial institutions, which means that banks and savings and loan associations are excluded from the classification. The classification includes all other financial institutions licensed by the Bank of Albania and the Financial Supervisory Authority.

However, among them, only non-bank financial institutions for lending and microcredit have lending as their object of activity, so it is largely estimated that this portfolio belongs to them and can be used as a rough indicator of the performance of microfinance lending.

This portfolio includes not only consumer lending, but also loans granted to business entities. On the other hand, it is a fact that the rapid growth of consumer microcredit in recent years has been the main impetus for the expansion of the loan portfolio of non-bank financial institutions. Therefore, the slowdown in portfolio growth in the first half of this year can be interpreted, at least in part, as an effect of the austerity measures of the Bank of Albania.

At the beginning of 2025, the application of what was called the public consumer protection package began, especially in relation to microfinance products. The Bank of Albania adopted several measures aimed at strengthening lending criteria by microfinance institutions, increasing the transparency of these products, but at the same time reducing the maximum allowed price of small consumer loans.

According to representatives of the microfinance sector, the impact of the new regulations on slowing lending and narrowing the client base has been tangible and measurable. In particular, the obligations for formal documentation of income, detailed analysis of household expenses and new verification procedures have meant that a significant group of the sector's traditional clients no longer meet the criteria.

According to them, this has produced two main effects: a decrease in the number of qualified loan applications and an increase in the risk of clients returning to informal borrowing, which is more expensive and less secure./Monitor.al