The Central Bank of Kosovo (CBK), in order to ensure the most favourable environment for the development of the financial system and support its stability, has conducted the second study in a row to assess the indebtedness of borrowers in the financial sector of Kosovo, namely the indebtedness of households in Kosovo.
The main purpose of the study is to assess the level of indebtedness of individual creditor clients and their household unit. In addition, the study aims to identify lending trends, possible differences in these trends according to socio-demographic and socio-economic characteristics, as well as borrowing patterns, especially the identification of multiple borrowing in different institutions and different sectors and the their interconnection with the problem of overindebtedness.
The study was conducted with data from March 2021, from almost all lending institutions in Kosovo (9 banks and 9 microfinance institutions), as well as with the inclusion of the total range of credit products for the segment of loans to households. The main sources of data for the study were the Kosovo Credit Registry (KCR), as well as banking and microfinance lending institutions. An additional source of information for assessing the indebtedness of households was a household indebtedness survey, contracted by the CBK and conducted by a local market research company.
Indebtedness of households does not have a definition and standard way of assessment due to the multidimensional nature of the indebtedness/overindebtedness problem. Researchers use a variety of different indicators to assess specific aspects of the indebtedness in order to achieve a more realistic picture of the problem. Therefore, even in this study, the indebtedness assessment was conducted through several objective and subjective indicators, which assessed various aspects of overindebtedness and which together provide more comprehensive information on the situation of indebtedness of households in Kosovo.
The findings of the study suggest that the share of over-indebted households - the sum of monthly instalments on loans exceeds 50 per cent of monthly income - lies in the range between 27.4 and 11.7 per cent, when taking into account the income of the borrower, namely the income of the whole household unit. The assessment of the level of indebtedness based only on the income of the borrower may reflect an overestimation of the state of the indebtedness due to the non-inclusion of the income of the co-borrowers. On the other hand, in assessing the level of household income burden, due to the lack of information on the potential debt of other family members' loans, we may have an underestimated picture of the level of the indebtedness. Therefore, due to the above reasons related to the lack of data but also the quality of data for the household unit, one cannot suggest a specific level of overindebtedness, but it is suggested that the degree of households over-indebted with loans be extended in the range between the results of the borrower indebtedness index and the household indebtedness index. The study suggests that the COVID-19 pandemic crisis has increased household overindebtedness by an average of 2 percentage points.
The study suggests that overindebtedness is associated with multiple borrowing and poorer payment performance. Overindebtedness trends were higher for borrower households with late payment of loan instalments. Problems with payment performance as well as overindebtedness also became more frequent with multiple borrowing, especially in different institutions. The highest levels of overindebtedness were in almost 90 per cent of cases expressed among multiple borrowers from different institutions.
Indebtedness of Households in Kosovo