Unhedged loans - Risk remains high. Businesses increase borrowing in euros, individuals withdraw
Borrowing in foreign currency continues to be a sensitive phenomenon in the Albanian economy, especially due to the risk posed by exchange rate fluctuations. Loans not protected by exchange rate are those loans taken in a foreign currency (usually the euro), from entities that do not have income in the same currency. This means that in the event of a depreciation of the lek, the payment of installments becomes more expensive, increasing the financial burden for borrowers.
The Financial Stability Report of the Bank of Albania shows that in the first half of 2025, the unsecured loan balance increased by 4%, while compared to a year earlier, the increase is 6.5%. This expansion was mainly driven by businesses, which increased their unsecured loans by 13.4%, while a slight contraction of 1% was observed among individuals.
The loan structure shows that 56% of unsecured loans are related to real estate, while about 14% to the trade sector. Real estate loans increased by 3.4% in this category, reflecting the continued demand for purchases and developments in the real estate market.
Although exposure remains high, portfolio quality has improved. The ratio of non-performing loans to unsecured loans has fallen from 3.9% to 3.7%, while for real estate loans this indicator is around 4%.
This is seen as a positive development for the banking system, but exchange rate risk is present, especially in conditions of instability in international markets. The Bank of Albania has previously called on borrowers to be cautious and avoid foreign currency loans if they do not have income in the same currency, as this exposes them to unexpected exchange rate shocks.
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