ProCredit Bank Albania
Albania is situated in the western Balkans and borders on Montenegro, Kosovo, Macedonia and Greece. Its population as of January 2013 was 2.8 million (source: INSTAT - http://www.instat.gov.al/al/themes/popullsia.aspx?tab=tabs-5).
Like its neighbours, it has had a rich and turbulent history. After World War II, Albania became a communist state and remained isolated from the rest of the world for 45 years. Since emerging from totalitarian rule in 1992, the country has been in transition both politically and economically. As part of Albania's democratisation process, wide-ranging market reforms were initiated that focused on liberalisation, privatisation and decentralisation. Between 1993 and 1996, the economy grew strongly, with GDP increasing by approximately 9% per annum in real terms (source: IMF World Economic Outlook Database). Much of this growth, however, was fuelled by remittances from Albanians working abroad.
Growth was interrupted in 1997 following the so-called "pyramid scandal". The impact of the collapse of a number of pyramid savings schemes was severe: the Albanian currency lost half of its value, and the losses from the failed schemes depressed domestic demand. However, within a few months the economic situation turned around. Since 1998, the Albanian economy, tested again by the Kosovo crisis in 1999, has demonstrated its resilience, and the government has persevered with economic reforms.
The Albanian financial system has also undergone a remarkable transformation. In 1995 three state-owned banks held a large majority of the total assets in the banking system. As part of a far-reaching reform of the financial sector, one of these institutions was successfully privatised, another was liquidated, and the third was bought by a foreign bank in 2004. The result has been an increasingly dynamic banking sector made up of 16 private commercial banks (source: Albanian Association of Banks).
The deficiencies in Albania's financial sector in the early years of transition inhibited the development of the economy, in particular the growth of small and medium-sized enterprises. Banks worked only with large corporate clients and offered little in the way of attractive banking services.
In order to give very small, small and medium-sized businesses access to credit and other banking services, KfW created the Foundation for Enterprise Finance and Development (FEFAD) in 1995. FEFAD quickly developed its credit operations and gained widespread recognition as a reliable partner for small and medium-sized businesses. The fact that the foundation successfully weathered the 1997 financial crisis further strengthened its positive image.
FEFAD was converted into a bank in 1999 and adopted the name "ProCredit Bank" in 2003. The bank successfully transitioned from a donor-supported lending institution to a full-service commercial bank.
The Albanian economy remained generally stable during the financial crisis and its aftermath. This is attributable in large part to the stability of the banking system. The Albanian financial sector has a low level of exposure to the international financial system, and the country’s banks finance their activities mainly with domestic deposits. Another factor for stability was that Albanian businesses tend to be small and flexible, two features which have helped them to deal with the contraction of aggregate demand.
The Albanian lek has been relatively stable, and real GDP growth of 1.7% was reported in 2012 (source: INSTAT, based on quarterly data). As of June 2013, the financial sector’s combined loan portfolio accounted for 42% of GDP, while the deposit portfolio came to 73% of GDP (source: Albanian Association of Banks; IMF ).
Overall, 2012 was a slow year for lending by the Albanian banking sector, reflecting the reluctance of households to spend and the fact that businesses were postponing investment decisions due to the high degree of uncertainty. The quality of the existing loan portfolio further deteriorated, but households’ preference for saving boosted deposits. Overall, Albanian banks were profitable, had strong liquidity and were well capitalized during 2012 (source: Albanian Association of Banks - http://www.aab.al/documents/rp/AABAnnualReport2012.pdf).
Today ProCredit Bank provides high-quality financial services to its clients through a country-wide network of branches and ATMs and through an e-banking platform which allows our clients to manage their finances themselves, whenever they want to. The strong development of ProCredit Bank's business reflects the trust that its customers have in the bank.
ProCredit Bank focuses on serving very small and small businesses because of the pivotal role they play in the development of the domestic economy. In general, Albanian enterprises are still relatively small in size and have simple organisational structures. Very small businesses, i.e. those with 1-4 employees, make up 91% of the total number of registered enterprises and employ 37% of the labour force. Small businesses, with 5-19 employees, account for 7% of the total number of registered companies and 17% of the labour force.
The bank is currently placing particular emphasis on agricultural businesses, reflecting the vital role that they have to play in Albania’s economic development. In addition, in keeping with our commitment to protect the environment, we are increasingly promoting and supporting “green” finance projects. We continue to maximise the efficiency and convenience of our transaction services by employing innovative technologies.
In June 2013, ProCredit Bank Albania's loan portfolio volume increased by 1.6% to EUR 175.0 million (source: internal reporting under IFRS for group consolidation). The high quality of customer service has been a key factor in the bank's success in a rapidly changing environment. ProCredit Bank enjoys a good reputation in the Albanian market, and given Albania's recent history, this is truly a compliment for the bank.