Economics and Finance

How Does the Sovereign Guarantee for Working Capital and Investments in Albania Work?

The sovereign guarantee in Albania is an important initiative of the Albanian government aimed at supporting both local and foreign companies willing to invest in the territory. This measure is designed to stimulate economic growth and facilitate access to credit through a risk mitigation mechanism for the financial institutions involved.

The sovereign guarantee was issued to several commercial banks operating in Albania, including Raiffeisen Bank, Banka Tirana, Banka Union, Banka Intesa Sanpaolo Albania and Banka Kombëtare Tregtare. These banks have the ability to provide loans to businesses for a total maximum amount of up to 15 billion lek, equivalent to approximately EUR 120 million. The loans can be used for both working capital and investments, providing businesses with the necessary resources to expand and innovate.

The key element of the sovereign guarantee is to reduce the risk of non-repayment of funding for the banks. In practice, the guarantee gives financial institutions greater security in lending by covering a significant part of the risk associated with the credit. This mechanism provides an incentive for banks to be more willing to lend, even to those companies that might be considered higher risk in the absence of the guarantee.

The conditions for accessing this guarantee may vary from bank to bank, but there are some common requirements. In general, companies must prove that they have a turnover of more than 14 million lek, approximately 110,000 euroin order to benefit from the sovereign guarantee. This criterion ensures that the benefits of the measure are mainly targeted at companies with an established economic base, contributing to a more effective use of public resources.

The sovereign guarantee in Albania offers a number of significant benefits for local businesses. First of all, it facilitates access to medium- and long-term financingwhich are crucial for working capital and making new investments. This is particularly important in an economic environment where financial resources may be limited or difficult to obtain.

Another relevant advantage of the sovereign guarantee is the risk reduction for banks. By reducing risk, banks are more inclined to lend to businesses, thus improving access to credit. This is essential for companies that need capital to expand or to support their day-to-day operations. The credit lines available from banks are increased, allowing businesses to obtain more funds needed for their activities.

Moreover, one of the primary objectives of the sovereign guarantee is to support Albania's economic recovery, particularly affected by the COVID-19 pandemic. The support financial and security offered by the sovereign guarantee can help companies overcome economic difficulties and resume their activities with greater peace of mind. This is vital for the country's overall economic growth.

In conclusion, the sovereign guarantee is an essential tool for companies wishing to invest in Albania. It offers not only greater security, but also easier access to medium- and long-term financing, thus contributing to a more stable and prosperous economic environment. Companies can benefit from this initiative to consolidate their market position and plan their future with confidence.

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