Non-performing loans declined at the end of June, dropping to 8.1%, the lowest level in 11 years since the first quarter of 2009.
According to the data of the Bank of Albania, this indicator marked a decrease of 0.04 % compared to May 2020 where non-performing loans recorded the level of 8.14%.
The growth of credit to the economy has also had a positive impact on the reduction of the indicator. The loan portfolio marked an average increase above 7% during the second quarter, supported by the expansion of business loans and lek loans.
This is the lowest level since the beginning of 2009. In September 2014, the non-performing loan (NPL) rate of commercial banks in the country peaked at 25% of gross loans. Albania suffered the consequences of the shock of the global financial crisis of 2007 and 2008. But after the start of the implementation of a strategy designed by the Bank of Albania, the indicator decreased, falling to 8.4% at the end of 2019.
The Albanian government and the Central Bank of the country started in 2015 the implementation of a comprehensive action plan with 12 points to reduce the stock and increase NPLs. It included major legal changes regarding the bankruptcy structure, collateral execution, the quality of credit information, the treatment of large clients of borrowing corporations who had not repaid their obligations, and the reduction of informality.
The non-performing loan ratio dropped to 8.1% in June, reflecting the concrete measures taken to reduce them, as well as the improvement of the economic environment and the financial situation of the borrowers. In parallel, the overall financial environment is favorable.
Financial markets are relatively calm, financing costs are low, and the exchange rate is more stable, according to the BoA.