How many loans are banks giving to citizens? - BoA: High demand for loans and competition increased lending
Commercial banks have provided more loans to citizens and businesses in the first half of this year. According to the latest report by the Bank of Albania on lending trends, bank lending to citizens has increased by 17.4% or 1.1 percentage points more than at the end of 2024.
But where did this growth come from?
As a result of favorable financial conditions, rising disposable incomes, and improvements in the labor market, there was high demand from citizens for consumer financing and housing purchases in the first half of the year. This high demand translated into an increase in bank lending. The high supply from banks was also driven by increased competition among them, as well as improvements in digital and technological infrastructure.
The expansion of credit to citizens has been mainly in Lek.
As for businesses, what has been the banks' approach to lending?
Unlike citizens, who experienced stronger credit growth in the second quarter, credit to businesses increased more in the first quarter. Statistics show that credit to businesses increased by an average of 15.5%, about 1 percentage point less than at the end of 2024, but still remains close to peak levels.
This increase in credit has come as a result of high demand from businesses, regardless of their size or purpose of use, a demand which is in line with economic developments in the country, high business confidence and generally positive balance sheets, the Bank of Albania states.
Likewise, banks have continued to offer favorable financing conditions, with low interest rates, in response to lower risk premiums and increased competition among them.
Banks have returned their focus to small businesses, which have seen a 23% increase in lending. There has been a higher demand for loans from this segment, while banks' approach has also been more favorable, as evidenced by lower interest rates and commissions in the first half of the year. Meanwhile, credit growth for large businesses has slowed to 20%. Despite this, large businesses continue to be the main contributor to portfolio expansion.
As for the most financed sectors, banks have expanded financing especially to businesses in trade, hotels-restaurants and industry, while the agricultural sector is the only one that has shown a portfolio contraction in this period, by about 4% on average year over year.
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