Moldova Credit Demand Rises as Household Bad Loans Reach 4.9%

NBM: Demand for loans has risen, as has the number of non-performing loans to households

In the second quarter of this year, Moldova saw a tightening of lending conditions against a backdrop of growing demand for loans from households and businesses. This is evidenced by data from a recent survey of commercial banks on bank lending, conducted by the National Bank of Moldova.

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According to representatives of the banking sector, financial institutions have become more selective in their lending. Lending standards have tightened for both non-financial corporations (legal entities) and households (individuals). Banks cite the current economic situation and internal risk management policies as the main factors behind this stricter risk assessment.

Despite the stricter framework, interest in borrowing continues to grow in the country. Bankers note a marked increase in demand for loans from both categories of borrowers. Businesses are actively seeking financing for working capital and investment projects, whilst individuals are increasingly turning to consumer and mortgage loans.

The volume of new mortgage loans fell by 5.5 per cent compared with the same period last year and by 22.9 per cent compared with the previous quarter, totalling 2,951.8 million MDL.

The volume of new consumer loans increased by 16.2 per cent compared with the same period last year and by 20.7 per cent compared with the previous quarter, totalling 5,119.7 million MDL.

Non-performing loans

The level of non-performing loans among households rose to 4.9 per cent. The main drivers of this increase were the mortgage and consumer segments. To limit further household debt, the NBM has tightened the rules on retail lending.

In the commercial (corporate) sector, by contrast, the situation has improved — the ratio of non-performing loans among companies fell to 3.8 per cent.

The risk profile of individual borrowers remains prudent: 78.2 per cent of new loans granted to individuals have a debt-service-to-income (DSI) ratio below 40 per cent, whilst 96.9 per cent are below 55 per cent. Furthermore, 95.1 per cent of new loans granted to individuals have a loan-to-collateral ratio (LCLR) below 80 per cent.

According to the NBM’s analysis, loans granted for the purchase and construction of property, as well as loans for commercial (retail) purposes, could exert the greatest pressure on banks’ capital adequacy in the event of a deterioration in the quality of the loan portfolio.

This story was translated with the assistance of artificial intelligence.The translation was also reviewed by the Logos Press editorial team.

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