Changing bank loan policies could keep Kosovo businesses in business.
By Safet Kabashaj for Southeast European Times in Pristina -- 11/01/13
High interest rates and difficult loan terms accounted for many business failures in Kosovo during 2012, according to the Kosovo Business Alliance. [AFP]
Proposed changes in bank loan policies could help businesses avoid bankruptcy as Kosovo weathers the stagnant economic development climate, the Kosovo Business Alliance said.
"Bank competition is too weak in Kosovo," Agim Shahini, chairman of the alliance, told SETimes.
According to its research, approximately 25 percent of Kosovo's 600 business failures in 2012 resulted from banks' high interest rates and short terms for loan repayments. The average interest rate for Kosovo businesses in 2012 was about 14 percent, according to the Kosovo Central Bank.
Shahini said that there is no longer high risk for loans in the country, thus banks should apply more suitable policies toward businesses.
"Businesses in Kosovo are suffering from inaccurate inherited policies for an appropriate economic development, while the reforms are taking too long," Shahini said.
However, Besnik Kada, a Central Bank press officer, told SETimes that interest rates are declining and the number of long-term loans is increasing. The fact that this is happening in a time of economic crisis, Kada said, shows that the banking sector is a major supporter of business development.
"Costs associated with bank loans are fully transparent and enable businesses to clarify and include them in their business plans," Kada said, adding that in some cases businesses are failing due to other factors.
The Ministry of Trade and Industry reported a considerable increase of businesses in 2012, while the number of failed businesses proportionally saw a decline. The ministry approved 9,315 new businesses -- 1,684 more than in 2011 -- while there were 100 more failed businesses than in 2011.
Arta Istrefi, press advisor for Minister of Trade and Industry Mimoza Kusari-Lila, told SETimes that the ministry has considerably improved the business environment.
According to the World Bank's annual Doing Business report, which ranks countries in various categories, Kosovo jumped 44 spots in the ease of starting a business and moved up 76 places in investor protection.
"Substantial improvement in doing business in Kosovo shows the reduction of period to register a business from 58 days to a single day for individual business and at a maximum three days for joint stock companies," Istrefi said.
Shahini welcomed the World Bank report, but insists it is insufficient.
"In terms of fiscal policies, necessary reforms are far from a desired level," Shahini said.
Shaqir Agushaj, who owns a shopping centre in suburban Pristina, has struggled to grow his business. With help from partners, he was able to obtain a bank loan and is nearing the end of the seven-year repayment term.
"The loan I got was crucial for me to complete the business centre and move from a small to a middle-sized business, but I faced serious difficulties to pay it back because of extreme high interest rates," Agushaj told SETimes.
"I feel a bit relaxed now, as I am approaching the final period of loan repayment, but it is crucial for businesses to face more suitable bank policies. Otherwise success is at stake for everyone."