Loans to Businesses by Purpose of Use

Open Data Albania has conducted a research work on loans given by banks to the Albanian firms in the last years, based on data provided from the Bank of Albania. The types of loans by purpose of use are divided into categories: real estate, equipment purchases, floating capital and overdraft.

• Real estate represents loans for housing or lands purchase, a place where to conduct the business activity.
• Equipments purchase represents long-term purchases of goods such as: machinery, manufacturing equipment, etc.
• Floating capital represents the coverage of short-term activities through short-term loans.
• Overdraft is a short-term loan on the current account of the business.

In 2010 (until the end of November), the loans given by the banks depending on the purpose of use are as follows:

^{Source: Bank of Albania
Analysis and comments: ODA}

As it can be seen from the graph, the majority of loans to businesses is given as an overdraft (105.1 billion ALL), followed by the purchase of equipments (88.1 billion ALL), real estate loans (76.7 billion ALL), and loans for floating capital (53.4 billion ALL).

The shares of the given loans per purpose of use are shown in the following chart:

^{Source: Bank of Albania
Analysis and comments: ODA}

Over the years, a significant increase of the absolute level of business borrowing, especially in the form of short-term loans, is observed.

^{Source: Bank of Albania
Analysis and comments: ODA}

An important indicator for forecasting business performance and prospects of development is the level of the loans given for equipments purchase. In the last years, the share of the loans for purchasing equipments and machineries has been declining from 32.5% in 2007 to 27.3% in 2010. This may also be seen as an indication of reduced business optimism for long-term investments, in the context of meeting customer demand. On the other side, the indicator corresponding to the real estate loans has been increasing (from 20.6% in 2007 to 23.7% in 2010) which indicates larger investment in offices and buildings in order to expand the activity or increase the number of affiliates.

^{Source: Bank of Albania
Analysis and comments: ODA}

In sum, we can say that the loans for long-term investment have been declining from 53.15% in 2007 to 51% in 2010, while the short-term loans have increased from 46.8% in 2007 to 49% in 2010.

All the information is presented in the table below:

^{Source: Bank of Albania
Analysis and comments: ODA}