The banking system “frenoi” economic development

The financial and banking sector in Kosovo is estimated not only the most profitable but also the most stable performance sector. The sector, characterized by a large presence of foreign capital, where 87 percent of total assets are managed by foreign banks, so foreign capital dominates 8 of the 10 banks currently operating in Kosovo.

The value of loans and deposits per year has increased. According to Kosovo Central Bank data (BQK), this year the amount of loans has reached 2.7 billion euros, marking annual growth of over 11 percent. The average interest rate for credit has scored 6.6 percent.

The value of deposits in 10 commercial banks has reached 3.2 billion euros. Meanwhile, the rate of non-aligned loans is 2.7 percent, the rate considered the lowest in the region, and simultaneously the indicator of financial sustainability.

But, otherwise, the banking sector's role in overall economic development is appreciated. Financial experts say this sector has not produced economic growth, has depleted families, narrowed businesses because for a long time it has maintained high interest rates in two digits and the short term of credit return.

Naim Gashi, an expert on economic issues, told Radio Free Europe that the main reason for curbing economic development in post-war Kosovo is precisely the banking system, which with high interest has affected small- and medium-sized enterprises' development and has also impoverished the population.

Keeping high interest in Kosovo for 20 years has rampant or damaged the private sector in Kosovo. Commercial banks when they impoverished the population and destroyed businesses have already begun to lower interest rates. But it's already too late because most of the businesses operating in the country are in credit to '%s' from the interest they received 10 years ago at extremely high prices of over 10 percent”, Gashi says.

Meanwhile, the other financial expert, Milazizim Abazi, says the banking system would have to have a positive impact on the private sector. According to him, businesses and families in Kosovo have no opportunity to invest without bank participation. He says financial institutions have recently reduced interest rates even though they still remain high in the region.

“We have a more developed competition and we have lower interest in credit, so that even in the future this trend of falling interests should continue because Kosovo every day and more the results of stability and any kind of political, economic or judicial stability affect risk reduction and reduced interest in loan”, Abazi says.

On the other hand, Naim Gashi calls the banking sector's situation ironic in front of private businesses.

In general, I think that only the profits of banks in Kosovo and those in the region should be seen. Commercial banking sector profits in the country exceed 60m euros, which is a sum for a state that should be three or four times larger. And credit - taking businesses show that interest rates of between 10 and 15 percent paid for 20 years have claimed about 80 percent of their profits. The private sector in Kosovo for two decades has worked only for the interest of commercial banks in Kosovo”, he said.

Otherwise, in addition to the loans citizens have in commercial banks, a large portion of the customers owe them have in microfinancial institutions operating in the country.

In 22 microfinancial institutions, which are key to credit, citizens have loans of over 177m euros at an average rate of 23 percent. /Rel