Banks in Kosovo boost credit interest rates

In the latest BQC report, notes that the average interest rate in the banking sector has marked increases compared to the past months of this year.

Kosovo citizens will pay more interest rates for loans they have in banks and will receive.

The Central Bank in the latest published report has shown that the average interest rate for July is 6.1 percent, until 5.9 percent in May.

The increase is noted in the interest rate for consumer loans, amounting to 6.3 percent, up from 6.2 percent in May.

“Effective interest rates, rate on loan 6.1%, for family economies 5.9% of which consume 6.3%, of which mortgage 4.8%. For non-financial corporations 6.2%, out of which agricultural 6.0%, out of which industrial 6.3% of which servants 6.1%”.

A forecast for increased interest rates in the banking sector had made the CEC based on European Central Bank decisions.

“... liquidity-holding costs will be challenged by increasing global interest rates, which are broadcast directly through financing from mother banks. The monetary policies of some central banks have only countered increasing inflation through increasing basic interest rates. The ECB has been reluctant to intervene and change monetary policy in the first half of 2022, largely as a consequence of the impact expected to have an increase in the cost of financing in some of the EU's (potential recession) economies and further weakening of the euro”, says the BQ's “Financial Stability report”.

The Central Bank has said that the pandemic crisis initially increased the uncertainty of actors in the financial system for possible pressure in liquidity management. However, according to the CEC, increasing the preferences of savings for spending, but also of reduced opportunities and insecurities to spend in times of crisis, contributed to the balance of bank financing in favor of the position of liquidity, which was inherited in 2021.

“However, the Persian increase in inflation at unprecedented levels in the last decade has influenced the ECB to signal the potential decision to raise interest rates in the council's collection in July 2022. Changes in interest rates in the ECB will indirectly affect the costs of keeping liquidity and funding costs in the country. Moreover, despite the high levels of liquidity at the sector level, the majority of banks have noted a decline in the liquidity report from last year, among which some with a more emphasisable drop”.

The European Central Bank, for the first time in 11 years, has decided to raise interest rates in an effort to control inflation growth in the Eurozone.

As this institution has announced on July 21st, the basic interest rates of 0.5 percent have actually increased, while further growth is planned during the year.

According to the European Central Bank, when prices in the economy rise rapidly - that is, when inflation is too high - interest rates help restore inflation to the target of 2 percent over the medium term.

In Kosovo, 11 commercial banks operate and the value of loans in them has reached 4 billion euros.

Based on the laws and regulations in force, commercial banks in Kosovo individually define interest rates based on their business policies.

Kosovo Central Bank data shows that the average interest rate in loans in January was 5.66%; in February 5.90%; in March 5,80%; in April, 5.77%; and in the month of May 5.91%.

At the Kosovo Central Bank, they have indicated that between January and July of this year, citizens have received new loans of over 1 billion euros.

According to the CEC, receiving loans from Kosovo citizens has marked increases compared to last year.

From January through July 2021, over 973m euros have been allocated. The difference between 2021 and 2022 is that these years were taken by Kosovars 69.9m euros in loans more”. The Central Bank has indicated that Kosovo citizens mostly receive loans to provide food.