Strategies of the Development of Entrepreneurship and SME

• the loan is secured with movable property pledged by the borrower or theguarantor. The loan amount does not exceed 70% of the market price of theproperty pledged;• the loan is secured with a real estate mortgage by the borrower or theguarantor. The loan amount does not exceed 70% of the market price of thecollateralized real estate; the real estate must be inscribed in the bank benefit.• the loan is secured by a specialized financial institution. The loan amount doesnot exceed 50% of the guaranteed amount;• the loan is secured by an escrow deposit in Lek or foreign currencies. Thisdeposit shall be at least 25% higher than the amount of granted loan when theyare in different currencies, and 20% higher when they are in the same currency.As it has been already noted, the credit activity from the banking to the privatesector remains at very modest rate. However, in the last two years there have beenimpressive growth rates of the loans extended in the economy. The outstanding creditincreased by Lek 11.9 billion in 2003. New credit was Lek 92.6 billion in 2003 (48%higher than in 2002).3.1.4.2. Specific credit lines for SMEsIn 2004, there are no specific credit lines designated to the SMEs. Data on theStrategy for the development of the SMEs, indicate that total committed financing for theSMEs from the donor amounted at USD 177 millions, of which only 86 millions werespend. Although they might have been provided by donors not on commercial terms, theywere actually converted on commercial terms when extended to SMEs. There is noinformation available regarding the success rates of these loans.As above indicated, there is actually a new credit line approved by the Governmentof Italy for a total fund of USD 30 millions to be used for the SME development. At thistime, the modalities on terms and conditions the funds will be provided to SME are not yetspecified.Considering the very family type of business which is mostly present in Albania,other forms of financing other then banks remain the most important source of finance. Inparticular, the non-bank financial institutions, such as credit and loan schemes, havegrown rapidly during the last years.The expansion of activities of non-bank credit institutions has been note worthy.These organizations have succeeded to establish their presence in rural areas, especiallyin the mountain regions. Figures in the following table 7. highlight the increasing role ofthese institutions.24