Blog » How the financial cooperative FED invest in Albania has been affected by COVID-19 by Perlat Sulay - CEO FED invest (Albania)
Circumstances changed rapidly in the first half year due to COVID-19 outbreak, with enormous impact in many aspects. First and foremost, the Covid crisis caused a health emergency affecting many, but it also had a huge impact on the economy of Albania, triggering a sharp decline of real GDP growth of circa 5% during H1 2020. Tourism, SMEs, manufacturing are the most most affected sectors, followed by trade and agriculture.
Albania lies in Southeast Europe, having an area of 28 thousand square meters and a population of almost 3 million. It is a low-income country by Western European standards, with an economy based on services (54%), agriculture (21%) and industrial sector (24%). Albania has a total number of 16 commercial banks, of which the largest 5 hold about 75% of the assets.
FED invest is the oldest and the leading credit and savings association (‘SCA’) in Albania, with more than 70 thousand members located throughout the Albanian territory. FED invest has successfully developed into a unique rural cooperative financial institution for Albania, after consolidation of 70 SCAs in 2016. It has the ambition and the plan to introduce bank-like payment services through its network and is working on developing digital banking channels. Focussing on micro credits and savings products, FED invest is operating from 63 branches, with around 250 staff members. SCA FED invest is licensed and supervised by the Bank of Albania.
Lockdown rules and travel restrictions that were imposed by the Albanian Government by early March were very stringent. Medium-size and small farmers that represent the core membership of FED invest have been deeply affected by the disruption of trade with neighbours and the global value chains, a decline in domestic demand due to prolonged shut down of bars, restaurants, hotels and a recession of Albania’s major trading partners. Household consumption has been negatively influenced by lower international remittances. Smallholders too, have been struggling to send their produce in the market, being forced to sell below prices, suffer losses from having their products dumped and some others holding off on harvesting it in the first place. As of end of May, the economic re-opening was fully in place, including even bars, hotels and restaurants in an attempt to recoup the significant economic losses.
Ensure stability of the organisation and impart confidence to our members
During the confinement, starting from March and ongoing in April and May, FED invest experienced significant repercussions. Demand for loans fell more than 50%. Loan repayments and disbursements fell short of the planned targets. Following Bank of Albania’s regulations, FED invest had to restructure circa 22% of its loan portfolio, especially in trade, service and agro-processing sectors. For FED invest it was key to manage the liquidity and manage the services for clients. FED invest team has responded swiftly to the situation, by working extra hard with its staff in branches and head office, ensuring business continuity and adopting new strategies to contain damage. Managing key operational processes was quite challenging due to heavy restrictions in banking hours, travel limitations and limited ability to work from home. Huge efforts of staff and management have been diverted to delivering safe and timely service to members under lockdown, implementing IT system changes and maintain operations to cope with remote work and new loan restructuring rules.
The crisis hit the most vulnerable segments of the society: those without any social protection and informal workers.
FED invest membership profile encompasses typically self-employed, low-income individuals and smallholders residing respectively in semi-urban and/or rural areas, who rely on self-employment, part-time work and income from informal activities and partially from remittances sent by their relatives abroad. While the government stepped in to support enterprises to retain jobs and to provide social protection to the unemployed, that was not the case with rural areas. Farmers did not receive any COVID-related social transfer package.
Bank of Albania and the Government established a set of measure to support businesses and maintain liquidity in the banking system. The base repo rate was reduced to 0.5%. Repayment of loan instalments for all types of customers were suspended until end of August 2020. However, the largest set of Bank of Albania’s and Government relief measures targeted only commercial banking system and no liquidity injections were foreseen for other non-bank financial institutions, SCAs included.