Microcredit scandal/ No more ID card loans, conditions for granting loans are tightened

The era of fast loans in the country, just with an ID card, without necessarily being in a job may end soon. With the help of the World Bank, the Bank of Albania is drafting a new legal basis which foresees the tightening of the conditions for granting microfinance loans. With the new regulation that is expected to be ready in the autumn months, in order to give loans, financial institutions, not banks, will have to analyze more deeply the solvency of those seeking loans.

"Unfortunately, in Albania, but also in the world, the same phenomenon happens: Laws or regulations are not established once by the Parliament, by the Bank of Albania or the AMF, but once a crisis occurs... we must burn and then learn", said Mateo Spaho, economics lecturer.

Based also on the recommendation of the Assembly conveyed through the draft resolution, "On the assessment of the activity of the Bank of Albania for the year 2023", the new regulation aims to guarantee consumer protection in the activity of financial entities, not banks.

"And this is especially a problem. This is because microcredit companies assume a higher risk. Exactly, since they give small loans without a collateral. And when things don't go well, because of high interests, what happened happened that seems to have produced a social crisis", he added.

According to the draft resolution, the Bank of Albania is also required to analyze the regulatory framework for the licensing of Non-Bank Financial Institutions, with the aim of further strengthening the criteria for licensing these entities.

"This has been a relatively new market for Albania and therefore there have been legal gaps on the part of the regulators for market management", said Spaho.

On May 23, 2024, the Bank of Albania revoked their licenses, removing from the market the two non-banking financial entities, namely the companies "Final" and "Micro Credit Albania" due to abuses in granting loans.