financial stability report - Banka Qendrore e Republikës së Kosovës

Number 3
Financial Stability Report
25.000 at disbursement, i.e. loans classified as micro-loans. The second segment comprises clients
with loans amounting from euro 25.001 to euro 50.000 at disbursement. Given that the results of the
study indicated a similar debt level and borrowing structure in both segments, the results of this
analysis will be presented as the average of the two segments, with the exception in cases where the
differences between the segments are considered as significant. Of the total number of clients
involved in this study, 96.5 percent were clients of the banking system, while the remaining were
microfinance institutions clients. Regarding the type of credit represented in this study, loans
comprised the highest share in the sample (60 percent), followed by overdrafts (20 percent) and credit
cards (13 percent).
In the study, the debt level was calculated through the information about household and business net
income against the monthly debt payments by the respective clients. The findings suggest that about
30 percent of the clients involved in this study (households and businesses) appear close to being
overloaded with debt. The study provides a clear picture of the level of over-indebtedness for
households and businesses separately. Regarding households, the index of over-indebtedness appears
to be around 35 percent 10 , while for businesses this index is slightly above 30 percent 11 . However, the
study suggests that there is no correlation between the indebtedness level and the loan repayment
performance of clients in Kosovo.
The report shows that about 61 percent of clients involved in the study have been engaged in multiple
borrowing (more than one active credit contract), while 39 percent of customers reported only one
active contract credit. On average, customers in this sample had 2.3 active credit contracts. It should
be noted that clients engaged in multiple borrowing were mostly categorized in the second segment
(loans up to euro 25,001 to euro 50,000). This may occur because customers belonging in the second
segment appear to have more problems in loan repayment thus they might consider new credit
contracts as a potential solution for debt repayment.
The findings of the study indicate that over-indebtedness appears to be more present for the clients
who use cross-borrowing (loans from several financial institutions at the same time). On average, it is
found that one customer uses loans from 1.5 financial institutions at the same time. About 37.5
percent of clients involved in the study claimed to have active credit contracts from several financial
institutions. Cross-borrowing was more pronounced among banks (95 percent of clients), while only 2
percent of clients in the sample reported cross-borrowing from the banks and microfinance
institutions.
Also, an exceptional attention in this study was given to other liabilities category, given that about
41.5 percent of clients have resulted to be co-debtors or guarantors for other borrowers. The study
shows that about 34 percent of clients have been a guarantor for other borrowers while 12 percent of
customers were co-debtors. Tendency to engage in more than one active credit contract is found to
have had a positive correlation with the guarantees provided for other borrowers. The findings of the
study indicate that customers who had guaranteed loans which experienced delays in monthly
payments tended to have problems in repaying their own loans.
The findings of this study also suggest that the majority of clients (about 89.7 percent) were
characterized with a good repayment performance, managing to make their monthly repayment on
time or within 30 days, while 10.3 percent of the clients experienced a delay of 30 days or more.
Clients that were classified in the second segment proved to have a worse repayment performance
(11.9 percent of clients) compared with the first segment clients (8.6 percent). The repayment
performance proved to be poorer also for clients who have been engaged in multiple borrowing
contracts as well as clients who cross borrowed from several financial institutions. Moreover,
experienced borrowers have shown a tendency of being less disciplined in repaying their loan on time.
While only 5 percent of clients who had taken loans for the first time had declared a delay of more
than 30 days, about 11 percent of clients who borrowed in the past were characterized with delays in
10 Monthly debt repayments / net household income.
11 Monthly debt repayments / net income of the businesses.
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