Expert-Grup

The Banking Sector as Part of the Solution for Consumer Loans

Protecția socialăTuesday, 12 May 20206723 views

Automatically translated summary. The full text is available in Romanian.

Almost two months after the state of emergency was declared in Moldova, Independent Think Tank “Expert-Grup” argues that banks should be seen as part of the solution for households struggling with consumer loan payments, proposing that banks refinance non-bank loans backed by government guarantees.

Consumer lending to individuals roughly doubled from about MDL 10 billion in 2016 to about MDL 20 billion in 2019, while financial literacy lagged behind. Proposals to lower interest rates or defer payments for up to 6 months do not address two problems: the liquidity of non-bank lenders, which cannot access the central bank's emergency liquidity, and the identification of genuinely affected people, many of whom have informal incomes.

The proposed mechanism has four steps: defining the group of financially vulnerable people; developing a refinancing procedure and removing early-repayment penalties; issuing government guarantees, as in the “Prima casă” programme; and ensuring bank liquidity through the National Bank of Moldova. Guaranteed loans should not exceed the roughly 7% rate of “Prima casă”, against market rates of over 20% and sometimes 50%. Non-bank lenders offering deferrals could receive tax payment deferrals.

View the original in Romanian