No Kurt Development Bank to develop: Experts say it cannot be opened

The opening of the Development Bank in Kosovo is one of the main electoral promises of Albin Kurti, who may soon become head of government. This bank, based on the promises of “government Kurti”, will be able to start operating within two years. But according to economic connoisseurs, the Development Bank cannot open up in our country. They even say this bank does not need Kosovo at all.

Less than a few days left when Albin Kurti will climb to the head of the state of Kosovo. Under Kurti's direction, the Government of Kosovo claims to create the Development Bank as well. In fact, establishing this bank is also a top priority of Kurti Government.

Several lines to the Development Bank have been tied to the priority the Vetevendosje Movement has presented in the report to the next government.

“Development Banks will be the lending component, which will be financed by public money and the sale of debt letters, and will invest in specific branches of industry that create jobs and improve trade balance by focusing on increasing exports and replacing imports”, it says.

The document presenting government priorities Kurti also speaks of the creation of the Sovereign Fund and Development Agency.

Our government will implement the development plan supported by the creation of the Sovereign Fund, Development Agency and Development Bank. The Sovereign Fund will take over the strategic assets of the Republic of Kosovo and have exclusive responsibility for investments in the growth of Trepca's value, KEK, Telekom and Post. The Kosovo Privatisation Agency will be extinguished, and its assets pass to the Sovereign Fund, which is investment fund and industrial development instrument. The development agency directly will support Kosovo's private and public sector in achieving strategic development goals through increased local business capacities, promotion of foreign investment and export” is written additional favors in the document.

But how much such priorities can be realized, especially the Development Bank.

The News Agency FactePlus has received answers from the Central Bank of Kosovo, economic connoisseur and representatives of the Chamber of Commerce concerning the possibility of creating this bank, “Banca of Albin Kurti”.

The Kosovo Central Bank has not been very clear in response, when asked whether the Development Bank could be established in our country, writes FactePlus.

In the CEC, they have only shown that they observe laws that are designed to open banks.

“The CEC, in implementing legal responsibilities as the licenseal authority of financial institutions in the country, engages in regulating the market of potential investors, establishing the criteria for licensing institutions, possessing enough capital for supporting previous activities, presenting adequate preparations for risk assessment and monitoring, adequate policy and procedure for its control, as well as high-level managers with a high level of qualifications, professionalism and etik”, says BQC for facts.

“Confirming to open development bank government is wrong and impossible”

And Berat Rukiqi chairman of the Kosovo Economic Ode has said he is sceptical that such a bank could be opened in Kosovo.

“We are skeptical about the Development Bank, we have a banking system with its own shortcomings and benefits. What needs to be seen is to look at the possibilities for lowering rates and interests within the banking system and creating better conditions for citizens and for businesses”, Rukiqi told Rukiqi of FactePlus.

He says that better than an Development Bank is a Development Fund, which would support small- and medium-sized businesses, in the form of grants or in another form of financial support for investment projects which, according to him, are very important for growth of production or exports.

These are terms of the termological issue, someone can understand the fund the same as the bank, but they distinguish, in essence, the function and the results they give. When the Development Bank was explained, I understood more as a Development Fund it may have seemed more interesting to call the bank, but in this banking conclusion that we have it is difficult to have a state bank. So these alternatives that have made other countries that have created funds for export support or funds for small and medium-sized businesses are much better than a state-made bank”.

Even bank economy connoisseur Milazim Abazi says that the promise to open the development bank is wrong and impossible.

“Promising to open development bank government is wrong and impossible. In this case the country would also be added to a public enterprise, while it is well known that all public enterprises are nests of corruption”, Abazi has said.

He says opening a state-owned bank would damage the banking system in Kosovo as a whole.

“In a bank where the government is owner, ministers would influence credit approval perhaps even violating professional criteria. Even in the past there has been an effort for PTK to open Post Bank, and this unfortunately was not allowed by the CEC because this would lead to a more Kosovo problem, as is today the problem of Telekom”.

According to Abbas, democratic governments do not establish banks, but according to the need they form development funds for the need to develop specific areas of interest to the government and the public.

When can this bank start work, how much will its capital be?

In contrast, Iron Murati, who has already been elected Kosovo Assembly MP by the Vetevendosje Movement during the time of the campaign held in Kosovo, had shown how this bank will be established and how it will be financed.

He has indicated that the initial capital of this bank will be 50m euros.

The original “capital will be the state capital, the capital of establishing the bank that could be around 50m euros. While continued financing will be due to the sale of state-guaranteed debt papers. So, in this way, continued financing is created and tools are created to issue loans for development of certain industries, such as agriculture and food industry with the aim of replacing the body”, he said.

Murati has shown that this development bank can begin within the first or second year.

The first time it's released, it's hard to say, but I'm confident that considering the procedures, where to get licenses from the central bank, it could be within the first year or within the second year”.

Murati has said the interest rate could be 2 to 2.5%.

“How much interest will be done in the borrowing cost, which is currently under 2%, add there now even a management margin, and it can be 2 to 2.5, % rates and interest, so we're talking about soft loans, long-term returns, and with women”.

Development banks are the bank that countries create to cover the gap in medium- and long-term investment needs in various sectors. These institutions are no substitute for financial institutions, but should be seen as supplementary in state financial architecture, which can provide additional financing for sectoral needs. Investments of the type of bank tend to be in infrastructure or in those sectors that note the investment deficit, which can limit growth within the country or the region.

Such banks are in Croatia, Slovenia, Hungary, Denmark.

In Kosovo, according to Vetevendosje, the Development Bank would serve much in the functioning of the economy, providing medium- and long-term loans to potential sectors, but the access to capital is lacking.

Development banks are usually funded by the state and release long-term debt instruments. It is often possible that other countries will contribute capitalally as a form of assistance to improve one country's economy and as a better channel for planning and implementation of projects than through governments. In Kosovo, the Development Bank can be created through contributions from the Government budget, for the start; issuing valuable letters ( !) for which the government will be guaranteed; long-term loans from regional development banks and those from developed countries (for example: B ERZH, KfW etc), and capital participation of friendly states, which would reduce risk and as a result the cost of funding.

In Kosovo today, 10 commercial banks operate and account for 67.5 percent of total financial sector assets. Their products and services include bank accounts, loans, local and international payments, bank cards, bank guarantees, credit cards, e-banking.

At the same time, commercial banks in Kosovo continue to have tremendous profits. From January to August of this year, they have jointly realised a net profit of 58.5m euros.

According to Kosovo Central Bank statistics, total sector revenues for the period amounted to 177.2m euros, while spending 117.8m euros. /FactePlus