Home loan – The main product of bank lending in Albania

Household credit purchase by households has become the main product in the banking system portfolio in Albania. According to the data of the Bank of Albania, the loan for the purchase of housing at the end of 2018 accounted for 21.8% of total loans for residents in Albania. For the first time, this product passed on overdrafts of businesses, accounting for 21.5% of the total portfolio.

Housing loan purchase reached a record high of ALL 110 billion, up by 3.3% over the previous year. Although in general, credit to business continues to dominate the banking credit structure in the country, over the last few years there has been a significant reorientation towards lending to households. In 2018, household loans amounted to nearly 35% of the total, the highest weight ever recorded.

Credit growth for individuals is fueled by low interest rates, but also a higher offer from banks in this segment, with a view to better spreading credit risk. In households, the ratio of non-performing loans at end-2018 was 6.4%, while in businesses it was twice as high at 13.3%.

Business credit has already fallen to 65% of total credit to the Albanian economy, while five years ago accounted for about 70%. Based on the Bank of Albania’s annual supervisory report, the loan portfolio for resident businesses in Albania fell by over 9% over the previous year.

Unlike most Central and Eastern European economies, credit in Albania continues to have a high concentration in the business segment. According to experts, one of the reasons for business dominance in the credit structure is the lack of a capital market in Albania, which would give the business an alternative channel to secure funding.

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