Savings and loan companies market grows by 12.5% annually

2025-12-03 08:01:13, Ekonomi CNA

Savings and loan companies market grows by 12.5% ??annually

The savings and loan association (SLA) market has recorded double-digit growth in the first nine months of this year. According to data from the Bank of Albania, total market assets at the end of September reached the value of 19 billion lek or almost 197 million euros.

The value of market assets has increased by 10.7% since the beginning of the year and by 12.5% ??compared to the same period a year ago.

However, the size of this sector remains modest compared to other segments of the financial market and mainly to the banking sector. SLA assets constitute approximately 0.9% of the total assets of the banking system in the country.

Savings and credit unions or financial cooperatives are a segment of microfinance that has been particularly successful in rural areas of the country, with a primary focus on financing agricultural economies. They accept deposits from members and provide loans to them, primarily aiming to fill the gap created by the lack of banking sector presence in rural and peripheral areas of the country. This model has proven particularly effective in providing financial services in areas with limited access to the banking sector.

The intermediation activity of SLAs relies, for the most part, on member deposits. In September of this year, deposits accounted for approximately 64% of the sector's total liabilities. In value, they reached 12.15 billion lek, up 7.1% on an annual basis.

Even in the SLA sector, an increase in the share of foreign currency deposits has been observed in the last two years. Foreign currency deposits are growing by 10% annually, despite the negative effect of the exchange rate, given that the balance sheet is reported in Lek. Meanwhile, deposits in the local currency recorded a low growth, by 6% compared to September last year. The share of foreign currency deposits in the total has reached 23%, from 22.4% a year earlier.

In general, SLAs offer higher interest rates on deposits than commercial banks, while in parallel, loans generally have higher interest rates.

The growth of SLA deposits in recent years has been largely supported by their inclusion in the deposit insurance scheme. Since 2017, deposits with SLAs have been insured up to the value of two million lek.

However, the insurance becomes effective only when the relevant SLA becomes a member of the Deposit Insurance Agency's insurance scheme. For this purpose, SLAs must be certified and receive a certificate of compliance with the criteria from the ASD's Governing Council. The Deposit Insurance Agency reports nine entities that are members of the deposit insurance scheme.

The loan portfolio provided by SLAs at the end of the 9-month period of this year reached almost 14 billion lek, with an increase of 7.1% since the beginning of the year and 9% compared to a year earlier.

The rest of the assets consist mainly of deposits placed in other financial institutions, while a very small portion is occupied by investments in securities and non-financial assets./ Monitor.al