Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability ReportFindings from BEEPS indicate thatfirms in Kosovo in 2009 did notperceive access to finance as animpediment to their businessoperation and growth. Adversely, theindicators that point to the level ofaccess to finance in Kosovo resultlower compared with other countriesin the region. Among the firmssurveyed in Kosovo, only 15 percenthave declared to have received loansfrom financial institutions, while theaverage for other countries in theregion for this indicator was 58.8percent (Figure 73). This indicatesFigure 73. The percentage of firms receivingloans from financial institutions80706050403020100Burimi: www.enterprisesurvey.orgthat firms in Kosovo rely more on internal funds, while bank financing remains at lowlevels in 2009 as well.The low level of funding from financial institutions in Kosovo was also reflected in the'Financial Access Survey' of the IMF.Figure 74. The number of borrowers fromAccording to this survey, the numbercommercial banks in 1000 adultsof borrowers in commercial banks in900.01000 adult residents in Kosovo was 800.0700.0only about 100 (Figure 74). In region,600.0500.0Serbia and Montenegro had the400.0highest number of borrowers in 1000adult inhabitants (about 171.6 and300.0200.0100.0217.8 borrowers per 10000.0inhabitants). Most of the countries inthe region had no available data forthis indicator. With about 132.22008 2009borrowers per 1000 adult residents,Kosovo has the lowest number ofSource: Financial access survey, IMFborrowers from commercial banks, leaving behind only Albania with 99.6.That firms in Kosovo face higher financing constrained relative to countries in the region isalso reflected through the low rate of private sector lending as a share to GDP indicator. In2009, private sector lending rate as a share to GDP in Kosovo was around 32.9 percent,while the regional average for this indicator in the same period was around 52.7 percent.Montenegro reported the highest private sector lending rate (77.7 percent of GDP) followedby Croatia (66.5 percent of GDP). Apart from Kosovo, Albania reported the lowest rate ofprivate sector lending (36.6 per cent of GDP).The literature on access to finance suggests that regardless of size or ownership, firms tendto turn to external funds only after the internal funds have been used completely. This isdue to a number of reasons, including monitoring and transaction costs for obtaining bankloans such as the applications costs, screening costs, bankruptcy costs, etc. (Hashi and Toçi,2010). However, using internal funds rather than bank financing has been considered toadversely affect business growth and development, regardless of firm size (Chavis et al.2010). This, to some extent, may be because when a firm is funded by a bank, the bank's94 |