The Bank of Albania is working on regulatory changes, which are expected to bring significant restrictions on lending to microfinance institutions, especially those that provide quick loans.

Sources say that they are working with the World Bank consultancy to draft a regulation that aims to limit lending and the client base in consumer microfinance.

Some of the principles on which the new regulation will be supported will be an increased financial analysis of borrowers, the establishment of credit scoring (scoring of borrowers), and the limitation of the number of loans for a single borrower. The goal is to have the new draft regulation ready by early fall.

These changes are coming after growing pressure from public opinion and the Parliament of Albania, driven especially by the criminal case brought against a financial institution for collecting bad loans and the executors connected with it, for legal violations in the process of collecting these obligations.

The draft resolution of the Assembly "On the assessment of the activity of the Bank of Albania for the year 2023", which also includes the main recommendations for the institution's work during 2024 and beyond, requires engagement in drafting the necessary legal changes, with the assistance of international institutions, for consumer protection in the activity of non-banking financial entities.

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, to further strengthen the criteria for licensing these entities, as well as to draft a licensing policy document for banks and non-bank, taking into account elements such as consumer protection, the country of origin of the ultimate owners, and experience in the European financial systems of the subjects applying for licensing.

Also, the Bank of Albania must ensure the improvement of the transparency indicators of all institutions it licenses, especially Non-Bank Financial Institutions, so that the information reflected by them is complete, in a simple language, and easily accessible to consumers.

Non-bank financial institutions earned Lek 5 billion or about Euro 48 million last year. According to data from the Bank of Albania, the profit of these institutions increased by more than two times compared to a year ago.

However, it should be noted that part of the profits of non-banking financial institutions may be related to the dividends received from the companies in which they are shareholders. Two of the non-bank financial institutions are shareholders of commercial banks and their profits are also affected by the distribution of dividends of these banks. Also, this includes not only the profit of lending entities but also those of payment services.

By the end of 2023, 27 licensed non-bank financial institutions were operating in Albania. They are divided into two main activity profiles: lending institutions (including leasing, factoring, or collection of bad loans) and payment services or electronic money institutions.

Last month, the Bank of Albania decided to revoke the license for two of them, after the initiation of criminal prosecution against their shareholders.

The loan portfolio of non-bank financial institutions at the end of 2023 reached Lek 56 billion or almost Euro 540 million.