Efficient Use of Public Credit Guarantee Schemes Can Increase Small and Medium Enterprises’ Access to Finance

Tirana, 27 July 2020 – Micro, small, and medium enterprises (MSMEs) in Albania are significant contributors to the Albanian economy, accounting for 99.8 percent of active enterprises. They employ 79.8 percent of the workforce and realize around 69 percent of value added. This sector is generally characterized by high informality (especially in agriculture), limited availability of collateral, and low levels of financial capability. Limited access to finance, particularly bank credit, poses a challenge for MSMEs in Albania.

A virtual joint workshop was organized today by the Albania Investment Council, Ministry of Finance and Economy, and the World Bank to present the main findings of the World Bank Report “Albania Credit Guarantee Scheme Assessment” and also to discuss ways on improving MSMEs access to finance through these schemes, making them more efficient and effective.

Deputy Minister of Finance and Economy, Ms Belinda Ikonomi provided a brief overview on the current government’s credit guarantee schemes (CGSs). “During a downward economic cycle induced by the coronavirus (COVID-19) pandemic, which further aggravated the financing needs of MSMEs,” said Ms. Belinda Ikonomi, the Deputy Minister of Finance and Economy, “the Credit Guarantee Schemes proved to be very effective and helpful to the MSMEs.”

Commending the targeted credit guarantee emergency programs launched by the government in response to the COVID-19 crisis, the World Bank Country Manager for Albania said that “Over time it would be important to transform these schemes into a regular public Credit Guarantee Scheme to help kick-start economic recovery and address the financing gap for MSMEs”.

The World Bank experts presented the main recommendations of the Credit Guarantee Schemes Assessment report, emphasizing that well-designed schemes facilitate financing to creditworthy customers, which would have been denied credit in the absence of sufficient collateral. CGSs are important means to address the market failures, which prevent or constrain enterprises from accessing credit. In addition, they shared the finding of a recent granular analysis of aggregated loan level data of the Albanian Credit Registry.

The Secretariat of Albania Investment Council (AIC) presented local evidence about access to finance by this sector based on the findings of its Survey (March-May 2020) on Covid-19 impact on the business. According to this survey, SME’s still consider banks as third option for support in spite of intensive efforts taken recently.

Discussants from the private sector valued the moment as very important and stressed the need for higher transparency and awareness about the available CGS in the country. They emphasized that improving access to finance for MSMEs in the country must be tackled in a holistic and strategic manner, by addressing simultaneously supply and demand.

This virtual event was attended by around 50 representatives from the public sector, development banks/financial institutions, development partners, representatives of second-tier local banks, as well as microfinance institutions.

Full report in English: https://documents.worldbank.org/curated/en/907601595607606723/Albania-Credit-Guarantee-Scheme-Assessment

*This is a joint press release of the Ministry of Finance and Economy, Albania Investment Council, and the World Bank

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