This improvement is attributed to increased lending and the exit of two microfinance institutions from the market, whose entire loan portfolios consisted of problematic loans.

Their licenses were revoked last year following legal actions against their shareholders for violations in debt collection.

Microfinance institutions disbursed 58.7 billion lek in loans by the end of 2024, marking a 9.5% increase compared to the previous year.

Microfinance loans account for about 7% of the total lending portfolio in the economy. The sector has expanded its lending focus beyond rural areas to other sectors like agritourism and services.

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Jonida Teta Kacani, Deputy Director of the Supervision Department at the Bank of Albania, said Friday that the Central Bank has approved regulatory changes aimed at further reducing the maximum effective interest rate for installment loans in small amounts and protecting citizens in the face of lending practices applied by non-bank financial institutions (microfinance).

In a televised interview, Kacani said that the measures have led to a 3-fold decrease in the interest rate on loans from microfinance institutions.

According to her, the new central bank rules are designed to limit hidden cost and fees and to further cut interest rates and consumer loans cost and increase transparency.

Official data show that non-performing loans issued by non-bank institutions fell 4.17% in the end of 2024 from 4.74% in 2023.

By enforcing stricter criteria and oversight on the non-bank institutions, the Bank of Albania aims to stabilize the microfinance sector and prevent future financial problems.

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Loan portfolio of Albania’s microfinance institutions rose 17.8%.

Central bank said that lending provided by the microfinance sector accounts for 7.5% of the total lending for economy.

The Albanian microfinance institutions have already become an engine of socio-economic development and stakeholders of financial education of private enterprises, agribusiness and individuals.

Microfinance lending is mainly focused on individuals and it accounts for 80% of the active lending.

According to central bank, the non-performing loans (NPLs) ratio for the nonbanking institutions in the first half of 2024 fell to 12.8% from 13.3% during the same period of the previous year.

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In a statement after a meeting of the Supervisory Council of the Bank of Albania, governor Gent Sejko announced the changes to the regulation on operational risk management, envisaging additional measures aimed at imposing more rigorous checks on nonbank financial institutions.

The head of the central bank said that the new legal changes are expected to enter into force next January and are designed to ensure that borrowers from microfinance institutions meet stricter financial criteria.

“This regulation is aimed at protecting consumers by improving financial assessments. We want to ensure that only financially stable and qualified individuals can access microfinance services,” Sejko said.

Central bank governor said that appreciation of the Albanian currency is delivering positive effects on the national economy, adding the Euro’s further depreciation has been driven by high tourist influx during the summer season.

“The economy has maintained its upward trend, whereas the non-performing loans ratio has fallen to record low of 4.6 %. Lending has significantly increased by 20 %, while lending to economy has edged up 15% year-on-year,” Sejko said, adding that the inflation rate stands at 2.1 %.

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Around 30% of the loans are issued to non-agricultural businesses, whereas lending of the microfinance institutions for the agriculture account for 10 to 15% of their total loan portfolio.

The volume of new loans granted by the microcredit sector has almost doubled over the past year. With 270,000 loans granted in the span of 12 months, the microcredit sector is among the fastest growing financial market segments.

The sector also enjoys a fairly low rate of non-performing loans.

The Albanian microfinance institutions have already become an engine of socio-economic development and stakeholders of financial education of private enterprises, agribusiness and individuals.

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According to the BoA, at the end of last year, 30 microfinance institutions had a total assets of 66 billion Lek.

While the ratio of non-performing loans at the end of 2020 reached about 12%. /j.p/p.s./

According to the official data published by the Bank of Albania (BoA), the total microfinance system increased to ALL 11.9 billion on an annual basis.

Microfinance plays an important role in funding farmers and small businesses in rural areas, while the growth of consumer credit has a major impact on the country’s economy.

Meanwhile, in the microfinance system about 71.4% of its assets are loans. While 83% of the total deposits at these institutions are in local currency.

Currently, the Bank of Albania has licensed 14 microfinance institutions. //a.i/