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Prof. Bajram Muçaj

Executive Director, Fondi BESA j.s.c.

Established in 1994, just two years after Albania’s transition to democracy, Fondi BESA’s commitment to offering micro, small and medium loans helped the organization grow while also spurring economic growth at a time when obtaining credit was difficult. Today, it is the country’s leader in microfinance with 600 employees and 80 offices country-wide. Besides achieving sustained growth as a financial organization, it has provided over €600 million in loans that have led to the creation of thousands of new jobs, significant poverty alleviation and improved financial literacy throughout the country. Here, the financial institution’s executive director Prof Bajram Muçaj explains the organization’s milestones and strategy for creating evermore win-win opportunities

How would you describe the sector of microfinance in Albania?

Microfinance is considered an important part of the financial sector to achieve balanced economic growth, providing financial support for micro, small and medium enterprises, which are vital for medium to long term economic growth. The Albanian economy, to a large extent, depends on the micro and small businesses. Almost all enterprises in Albania are classified in this category. About 99.9 percent of active enterprises are small and medium and approximately 90.1 percent of them are enterprises with one to four employees and their contribution on total employment is 47.7 percent.

With highly a fragmented economy, based mainly on family-owned business and with a population that is more than 40 percent rural, Albania has a strong demand for microfinance products.

The microfinance industry’s roots in Albania go back to 1994 when it started as a project for poverty alleviation. Currently, in Albania 31 non-bank financial institutions are operating. Of those, eight are registered to perform regular lending activities (solely or combined with other services), five to conduct microcredit activities, and the rest offer leasing products, factoring services, and payment services. They are fully regulated and all institutions involved in lending are licensed by the Central Bank.

Credit organizations are the second biggest player in the financial market after the banks. It is the banking sector that dominates the market (bank assets in 2017 stood at 92.5 percent of GDP), while non-bank financial institutions (NBFIs) that include microfinance institutions (MFIs), leasing, factoring companies, and savings and loan associations are small in terms of their assets. As of December 2017, the NBFIs total assets amounted to €363 million, accounting for 3.1 percent of total banking system assets.Non-performing Loans (NPL) of the microfinance sector are about 4.4 percent, while the banking sector has a ratio of over 11 percent. The quality of their portfolio clearly shows their ability to lend, while also managing risks.

The sector is developing continuously, applying user-friendly and transparent procedures, thus making it possible for everyone eligible to have access to loans. There is constant geographical expansion with a growing number of new MFIs and expansion of the existing ones.

The Bank of Albania credit register has included reporting even from MFIs, which helps them gather necessary client credit information to prevent over-indebtedness and maintain high portfolio quality.

As mentioned earlier, the sector is growing continuously and, based on the MFI success, banks have started to become interested in the potential of this business. Several commercial banks have started to accommodate these types of clients even by establishing a separate dedicated department. However, banks still target medium and large scale loans and the average loan size is generally very high compared to MFIs average loan size.

Our retention rate is 78 percent. Repeat clients are the most distinguished testimony to the strength of our business, the efforts of our staff and most importantly, the trust that clients have in us

What are the most important factors that account for Fondi BESA’s positive contribution to the socioeconomic development of Albania?

Fondi BESA’s mission is to assist economic growth and poverty alleviation by promoting the development of micro, small and medium-sized enterprises in Albanian urban and rural areas by supporting them with credit. Certainly, the market demands for financial services are different, but Fondi BESA focuses on its market segment, offering qualitative services and products. Fondi BESA is designed to provide customers with high standards of quality, in a swift and fully transparent approach. We want our impact not only be measured by our profit but also in terms of the benefits arising from the increased economic activity we create.

Certainly, Fondi BESA’s activity positively contributes to society by granting loans for market segments that are practically excluded from the banking services. We focus mainly on such market niches, reaching clients who, due to several constraints, fail to benefit from such banking services. With a sustainable network with distinguished capacity and a 25-year history, experience and expertise, Fondi BESA has a lot of advantages in comparison with other potential actors in the sector.

We aim at designing products that answer customer’s needs, desires, expectations and preferences. This requires efforts to study the market and identify products that clients need most, identify what competition offers and then design products and identify delivery channels that can be easily reached by clients.

We also believe that a close relationship with clients, based on honesty and mutual trust, nurtured throughout the credit cycle, is a factor that makes Fondi BESA successful.

One important contribution of Fondi BESA is job-creation. Throughout its activity, Fondi Besa has dispersed about 213,000 loans with a total volume of about €600 million.

Outstanding loan portfolio from year-to-year has gone up by about €100 million. Compared to the beginning of Fondi BESA, activity the loan portfolio has increased 60 times. According to our estimates based on studies we have conducted, each new loan we disburse creates 0.504 new full-time jobs and 0.209 part-time jobs. Job creation, especially among the most vulnerable groups like youth and women, besides strengthening economically, has a strong impact on their social integration. At the same time, through several programs for financing young people, Fondi BESA hopes to have further contributed by restraining some emigration.  

Which sectors of Albania’s economy are most ripe for entrepreneurial activity?

The sectors that contribute mostly to GDP are: services and trade, agriculture and tourism. These are also the ones that play an important contribution to employment – agriculture makes up 41.4 percent and services, 40.3 percent.

Recently, the tourism sector has increased its contribution to total GDP and this sector is predicted to mark significant growth in the near future. The tourism sector is traditionally an important source of income, particularly during the summer months, but more recently during the winter months as well, due to an increase in popularity of snow sports such as skiing. With over 3.8 million tourists annually, tourism generates revenue in excess of €1.5 billion. Albania is ranked among the top 25 most popular tourist destinations in Europe and was voted one of the world’s top tourism destination in 2014 by The New York Times and Lonely Planet.

According to this Forbes Magazine, Fondi BESA is ranked among the best 50 micro-financial institutions in the world

What is in store for Fondi BESA in terms of expanding financial products and services?

Lending is and will remain the main pillar of Fondi BESA’s activity. Considering the high importance that lending has in income-generating, institution sustainability and activity expansion, Fondi BESA has put great efforts to further diversify the loan products range during the following years. The increase in lending volume and product diversification will help us meet the needs of the target market. 

Our strategy is to be as close as possible to clients with the most adequate products for them. Because we have paved our road towards future development, we foresee expanding our geographical area and covering in depth those areas that offer potential regarding economic and business development and the development of the trade, services, agriculture and tourism sectors.

As the evolution of microfinance institutions has shown, it is important for an MFI to keep its good clients. In Fondi BESA, we consider our existing good clients as assets and the main source of activity growth to maintain financial sustainability. That is why we constantly conduct market research to understand what their demands are.

On the other hand, we pay special attention to new clients to ensure the continuity of the activity. In terms of expanding we have a double objective: expansion in new areas with existing products and intensifying our lending activity in existing areas by offering new products and services

Currently, Fondi BESA offers business loans, consumer loans, tourism loans, green loans, youth loans and agriculture loans. Aware that recently there has been an added interest in agriculture, Fondi BESA has intensified its lending activity in this sector. There was a significant growth of loans disbursed in agriculture during the last two years and we are working on designing specific agriculture loan products designed on the basis of the agriculture cycle. We intend to offer new products, mainly to respond to clients’ demands, but at the same time to boost growth and profitability and then maintain and even expand outreach to new areas.

Despite the fact that rural clients are perceived as riskier, less profitable and lacking in proper collateral, Fondi BESA believes that the agriculture sector needs financing. Recent trends reflect the potential for a more modern and competitive agricultural sector if sufficient private investment is made and the right policy is built. The main challenges for rural and agricultural policymakers are the transformation of agriculture beyond consumer-oriented production to a modern, commercial and competitive one, parallel to the creation of alternative income opportunities for the rural population that is moving away from the sector.

Over the next three years (until 2021), we estimate that we will disburse around €300 million in loans.Fondi BESA will remain loyal in the future to its clientele and the microfinance market. Depending on future legal amendments, in cooperation with the Bank of Albania, there could be an opportunity to have a microfinance bank that has status between NBFIs and second level banks. This change would appear to be positive both in terms of providing the need to increase funding and enhancement of competition as well as increase and development of ongoing products.

Fondi BESA’s case has shown that the right business models can be successful even in difficult economic environments of immature and turbulent markets, and indeed these models can survive and flourish in such economies

What are some of the main achievements that you are particularly proud of? 

Fondi BESA is the pioneer in Albania’s microfinance sector. As mentioned, its roots go back to1994, right after the collapse of the communist regime. Thanks to our financial stability, social responsibility and reliability, Fondi Besa has obtained a great reputation and credibility in Albania and beyond.

First and most importantly, is that together with our clients, our lending activity has had a positive impact on financial education, which still remains an important factor in our activity. We started when there was no tradition of individual lending in Albania and now we have prepared bankable clients that manage important businesses. 

Fondi BESA has established a wide network of 80 offices and we are present all over Albania, even in remote areas, where people totally lack banking financial services. Fondi BESA is developing together with its clients by expanding its intervention and designing new innovative products for the target clients. The proximity of service and quick access to our products will be another competitive advantage of Fondi BESA.

In our path towards development, Fondi BESA has endured several crises, when many similar companies found it difficult to provide clients with financial services. However, Fondi BESA evaluated the risk and was there for its clients even at difficult times. Moreover, it was the time when we expanded. In regard to the volume of its assets, capital, outstanding, active clients, Fondi BESA is the leader in the microfinance sector of Albania.

At Fondi BESA we are proud that the service we deliver to our clients is rewarded – our retention rate is 78 percent. Repeat clients are the most distinguished testimony to the strength of our business, the efforts of our staff and most importantly, the trust that clients have in us.

Fondi BESA, though it has been a joint stock company oriented towards profit since 2009, has always tried to maintain a balance between financial and social objectives, which links it closely to its mission to contribute in the country poverty alleviation. Fondi BESA has improved activity and financial performance year after year and has been awarded by the President of Albania for its contribution for poverty elevation and job-creation though crediting. We have also been granted the award of certification for compliance with the European Code of Good Conduct for microfinance provision by the European Commission.

Based on the information gathered by MIX – Market and analyses performed by well-known rating companies like Micro-Credit Ratings International Ltd and MicroRate, Forbes Magazine published a list of these institutions for the year 2007. The rating is made based on some key indicators like portfolio, expenses, loan outstanding, etc. According to this rating, Fondi BESA is ranked among the best 50 micro-financial institutions in the world.

Do you have relationships with any German organizations?

Fondi BESA dedicates its success, besides other things, to the close cooperation with local and international banks and partners. Among many, I am delighted to mention several German companies from which Fondi BESA has obtained loans or technical consultancies like Frankfurt School of Finance & Management, Bank Im Bistum Essen, Finance in Motion, and the European Fund for Southeast Europe (EFSE). EFSE is initiated by KfW, who is also a lead investor and is supported, among others, by the EC, the German government and the Albanian Government.

Fondi BESA has also established a fruitful relationship with Invest in Visions through Developing World Markets (DWM). We believe that this cooperation will continue in the future. 

What final message would you like to send to readers of Die Welt?

Fondi BESA’s activity originated in 1994 as a project of credit for urban areas, financed by the World Bank. The starting of this project was just two years after Albania came out poor and deprived of the communist regime. Fondi BESA’s activity grew rapidly in an economy that had a huge demand for loans, but that faced unexpected event such as the crisis of the 1997 pyramid schemes collapse. Fondi BESA’s impressive performance over the years is credited to its well-designed strategy, its adaptability to the economic environment and the very special relationships that it has established and consolidated with its clients and partners.

Fondi BESA’s case has shown that the right business models can be successful even in difficult economic environments of immature and turbulent markets, and indeed these models can survive and flourish in such economies. Therefore, I encourage investors to consider Albania as a good business opportunity and Fondi BESA as a financial investment opportunity and a good partner.

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