Interest rates in Kosovo increase - Financial market faces credit contraction
The average interest rate of commercial banks on loans has increased by about 15 percent from January to September this year. In January, the average interest rate was 6.01 percent, while in September it was 6.9 percent. However, in some banks it has gone up to 10 percent, depending on the type of loan.
The data also shows a decline in the value of loans issued in September. In February, the value of new loans was 230 million euros, while in September it shrank to 190 million euros.
Experts explain that the increase in interest rates is related to Central Bank policies, inflation and institutional crisis. “High inflation also increases the risk of non-payment by citizens, because their daily expenses are higher. This pushes banks to demand greater risk compensation and consequently higher interest rates. High inflation increases risk and reduces the real value of returns,” they say.
The increase in the mandatory reserves that banks must hold has also had a major impact. "Until this year, banks had a minimum of 8 percent or 12 percent capital in relation to risk-weighted assets. As of this year, the CBK has increased this to 10 percent and 14 percent. In this case, banks must hold more reserve capital for each loan they grant. This means they have less room to grant new loans," the analysts explain.
The Central Bank announced that it has imposed a 2 percent surcharge on risky assets. “Capital surcharges serve the purpose of strengthening the banking sector, or the ability of banks to face risks in certain situations,” a CBK statement said.
According to this institution, lending growth in the first half of 2025 was more accelerated compared to the previous year, especially in May, when lending increased by about 21 percent compared to the same month in 2024.
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