Individuals lending is increasingly orienting towards the ALL. According to the Bank of Albania, in December 2018, credit in ALL accounted for 62.7% of total credit to households. Compared to the previous year, the specific weight of ALL credit increased by 3.5 percentage points.
Albania currency denominated loans to households grew by over 10% for the previous year, while in foreign currency less than 3%. Low credit interest rates for individuals as well as policies followed by banks for several years lending to households in the currency in which they have the income are thought to be the main factors supporting this shift.
The growth of ALL credit, at least for individuals, is one of the most tangible results of Bank of Albania’s easing monetary policy. The main reason that individuals have shifted towards borrowing in foreign currency in the past has been the cheapest loan price.
However, the significant narrowing of interest rate differentials has caused individuals not to have significant incentives to borrow in a currency other than income. At the end of last year, the difference in average interest rates between euro and euro loans ALL for households was about 0.5 percentage points.