Agriculture, "thirsty" for financing - How did banks respond? BoA: In July, about 28.6% fewer loans were granted to this sector
Agricultural credit has returned to decline. According to data from the Bank of Albania, commercial banks financed fewer businesses in this sector in July.
Specifically, new credit for agriculture, forestry and fishing was only 189 million lek, with a decrease of 28.6% compared to June. Meanwhile, the stock of existing credit, that is, those who received credit before July and continue to repay it every month, results in being only 6.2 billion lek, with a slight increase from June as a result of unpaid interest or loan restructuring, but with a decrease of 1% compared to July 2024.
But why does agriculture continue to be an underfinanced sector by banks?
Commercial banks view agriculture as a risky sector. It is considered a highly informal sector that cannot meet bank collateral requirements, and as a result, banks tend to be more reluctant to approve loans to them. Many businesses operating in the agricultural sector turn to non-bank financial institutions for loans, while they view banks as too bureaucratic in their criteria and procedures for approving a new loan.
Despite this, there are several initiatives that could increase support for this sector.
Initially, the sovereign guarantee with a fund of 3 billion lek or 30 million euros is an instrument put at the service of the private sector with the aim of facilitating access to finance for farmers and Small and Medium Enterprises. The rates foreseen for this scheme will be extremely favorable and with coverage of up to 70% of the loan principal, the amount of which will not exceed 25 million lek for each of the applicant entities.
Secondly, the Development Bank will be created to support precisely Albanian enterprises that do not have sufficient access to financing from the traditional market and which often face difficulties in securing loans or investments for expansion and innovation.
Also, a new bank will be added to the Albanian banking sector. The Bank of Albania recently gave preliminary approval for the licensing of a branch of the foreign bank Ziraat Bank in our country. Such a bank specializes in lending to businesses operating in the agricultural sector, so it is expected to further increase financial support to this sector.
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