bne IntelliNews – Household borrowing drives loan growth in Moldova
Bank lending volume in Moldova, defined as net claims on the banking system, increased 13.6% year-on-year to 51.0 billion MDL (2.37 billion euros) at the end of the month. April.
Dollarization has declined over the past five years, as lending to households (mostly in local currency) has gained momentum, while lending to businesses lags. The diagram illustrates the progress of the banking system in terms of reforms (regulatory supervision, ownership) compared to the real sector which needs massive reforms, particularly in terms of privatization. Large banks with transparent ownership after the 2015 crisis have resulted in more adequate strategies, while the potential of the real private sector remains limited.
Of the total loans, 65% were in local currency, up from 56% five years earlier.
The share of loans to households (loans from banks on the residential segment, more precisely) represented 37.5% of total loans in April 2021 – more than double five years earlier (17.3%). Business credit remains dominant, but it is gradually losing ground.
Even in an environment of active lending over the past 12 months, households have increased their exposure to banks faster than the private corporate sector. Overall, the stock of local currency loans increased by 17.2% year-on-year (to 1.54 billion euros), representing an annual advance significantly above the average annual increase of 7.2 % of the last five years.
Thus, during the last 12 months from April of this year, the stock of loans expressed in local currency vis-Ã -vis private companies increased by 15.3% year-on-year to 13.4 billion MDL ( 622 million euros) while loans in local currency to households jumped from 21.8% y / y to 18.6% MDL (862 M â¬).
When it comes to foreign currency loans, however, the corporate segment dominates: it accounts for 92% of these loans, which are usually not given to households. Forex loans to the private sector increased 8.2% y / y (in local currency). But, in particular, over the last five years, the stock of these loans has contracted by an average of 0.3% per year.