The EBRD and Albania are joining forces to boost local currency lending in the country, supporting small and medium-sized enterprises (SMEs) by offering an alternative to foreign-currency financing.
This agreement was formalised in a Memorandum of Understanding (MoU) signed by Albania’s Minister of Finance and Economy Arben Ahmetaj, Bank of Albania Governor Gent Sejko and EBRD President Suma Chakrabarti, at the Bank’s headquarters in London today during the third EBRD Western Balkans Investment Summit.
President Chakrabarti said: “This is a milestone agreement as it combines two critical areas for Albania’s economy, namely the development of a sustainable local capital market and the domestic SME sector. Strengthening transactions in local currency will reduce risk and volatility and thus create more stable conditions for the real economy, conducive to long-term growth.”
The MoU sets out Albania’s intention to boost lending in Albanian lek to SMEs and to join the EBRD’s SME Local Currency Programme. Established in 2016, the facility supports participating countries as they implement reforms that enhance access to affordable local currency funding for micro, small and medium-sized firms, increase the availability of local currency funding sources and develop local capital markets, according to the EBRD.
Under the programme, the EBRD can provide loans in local currency to local companies and banks for on-lending. It also works with the national authorities, either directly or in coordination with international financial organisations and partners, to foster a positive environment for local currency lending.
The MoU also includes plans for the EBRD to work with Albania’s Ministry of Finance and Economy and Bank of Albania on an action plan on capital market development.
Minister Ahmetaj said: “Credit growth is a very important instrument for accelerating economic growth. From this perspective, the Albanian government is very interested in stimulating access to credit for SMEs. This MoU contributes directly to this purpose and it also mitigates exchange rate risks that SMEs face when borrowing in foreign currencies, thus bringing it also in line with the de-euroisation efforts by the Bank of Albania. The EBRD remains an important partner for the development of the financial sector and instruments in Albania and we hope to further rely on their experience for further developments.”
Governor Sejko added: “The exclusive role of the Bank of Albania as the monetary and bank supervision authority is concretely supported by this agreement. The parties’ commitment to cooperate on accelerating the development of the Albanian capital market by strengthening the use of local currency, in addition to the ongoing work in the area of banking supervision and governance as well as on NPL resolution, will have a positive impact in improving the effectiveness of economic and monetary policies, and in reducing financial stability risks for our country.”
To date, the EBRD, a leading institutional investor in Albania, has invested over €1 billion in over 80 projects in the country.