bne IntelliNews – Household borrowing drives credit growth in Moldova
Bank lending volume in Moldova, defined as the net claims of the banking system, increased 13.6% year-on-year to reach MDL 51.0 billion (â¬ 2.37 billion) at the end of 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 private real estate sector remains limited.
Of the total loans, 65% were in local currency, up from 56% five years earlier.
The share of loans to households (bank loans on the residential segment, more precisely) represented 37.5% of total loans in April 2021, i.e. more than double than five years earlier (17.3%). Business credit remains dominant, but it is gradually losing ground.
Even with active loans over the past 12 months, households have increased their exposure to banks faster than the private business sector. Overall, the stock of local currency loans increased by 17.2% year-on-year (to 1.54 billion euros), which represents an annual increase well above the annual average increase of 7.2 % of the last five years.
Thus, during the last 12 months to the end of April of this year, the stock of loans expressed in local currency against private companies increased by 15.3% year-on-year to MDL 13.4 billion (622 million euros). while local currency loans to households jumped from 21.8% y / y to MDL 18.6% (â¬ 862m).
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. Foreign exchange lending to the private sector increased 8.2% year-on-year (in local currency). But, in particular, over the past five years, the stock of these loans has contracted by an average of 0.3% per year.