The microcredit portfolio recorded its first decline last year after nearly a decade of continuous growth.

According to data from the Bank of Albania, the total loan portfolio of licensed microcredit institutions stood at 23 billion lek at the end of 2025, down 4.6% (approximately 1.1 billion lek) compared to the previous year.

The microcredit sector had experienced strong growth after 2017, driven by the fast consumer lending model introduced to Albania initially by the Estonian company IuteCredit and later by the Latvian company Kredo Finance.

This model offered small loans that could be approved quickly and with minimal risk assessment. However, the convenience of obtaining loans rapidly and easily came at the cost of very high interest rates.

Until 2022, this model was allowed to expand without significant restrictions, until the Bank of Albania introduced a regulatory cap on interest rates for consumer loans.

The regulation led to a gradual reduction in interest rates for small loans. Currently, the maximum Annual Effective Interest Rate (NEI) for loans of up to 200,000 lek has been reduced to 51.37%, compared with the initial level of 171.41% in 2022.

However, the sector underwent a much stricter regulatory tightening last year following the scandal involving two non-bank financial institutions, Micro Credit Albania and Final.

The two institutions became the subject of criminal proceedings brought by the Tirana Prosecutor's Office, facing accusations of numerous legal violations in the process of collecting non-performing loans. Subsequently, the Bank of Albania revoked their operating licenses.

Although the case itself concerned companies involved in bad debt collection, it also damaged the reputation of the broader microfinance sector, particularly institutions specializing in quick loans. More importantly, it highlighted the risks of burdening small borrowers with debt beyond their repayment capacity.

The case also prompted a significant tightening of the regulatory framework governing the microfinance sector. The new measures introduced by the Bank of Albania entered into force at the beginning of 2025.

For the first time, the Central Bank established detailed criteria, including quantitative indicators, for risk management practices in consumer lending by non-bank financial institutions.

According to information from the Bank of Albania, six financial institutions licensed to conduct microcredit activities were operating in Albania at the end of last year.

However, the vast majority of the country's microcredit portfolio is estimated to be held by the two largest microfinance institutions, IuteCredit Albania and ECFA (formerly Kredo Finance).