Source: Albanian Microfinance Association
On November 10, 2020, the Albanian Microfinance Association organized an online presentation, where it made public the results of a survey conducted at the initiative of Kredo Finance regarding the microfinance industry and the future of digitalization in Albania.
The online meeting was attended by leaders of microfinance institutions, well-known experts in the field of economics, researchers, representatives of print and electronic media and representatives of stakeholders. The results of the survey were presented by the President of the Albanian Microfinance Association, and at the same time the Executive Director of Kredo Finance, Mrs. Arlinda Muja. Mrs. Muja presented also some important data related to the study conducted on the industry of Non-banking Financial Institutions, in terms of the current situation, expectations regarding the business climate, plans for new investments, plans for attracting talent, etc.
The survey was conducted with 9 actors in the non-banking financial services industry, who completed the online questionnaire regarding the effects of the pandemic on these companies and the impact that digitalization has on the progress of their operations. Against the expectations of the companies are set the expectations of the clients of these companies in terms of digitalization, with a total number of 270 clients interviewed. This study was undertaken to understand in essence the importance of a proper digitization process for the operational smooth running of the company as well as the direct relationship with the client for the smooth running of the business.
Regarding the entrepreneurial climate: It seems that the entrepreneurial climate in the country is almost divided into two main pillars. 44% of companies are satisfied with the entrepreneurial climate in the country, while 56% of companies are dissatisfied, of which 11% very dissatisfied and 44% dissatisfied.
Employment will always be a strong indicator of economic well-being. 56% of companies think that there will be no mass emigration to the EU in the coming period. The productivity of companies will increase, seem to think 44% of interviewed subjects, while 56% of them think the opposite. Salaries seem unlikely to change, is the forecast of companies with 67% of respondents. It is also seen that unemployment is expected to rise if the economic situation does not change.
Governance policies: 44% of surveyed companies think that the country’s governance policies are supportive of the development of the non-banking financial industry by providing an adaptive environment (flexible programs, and regulatory policies) to drive innovation in products and services. 22% see the most difficult situation in bringing new innovations precisely because of regulatory policies.
Regulatory policies: 56% of respondents think that industry regulators always respect the readiness of the non-banking financial industry to adapt and comply with new rules by clearly defining the transition / adaptation period where necessary. 44% of companies think that regulatory policies related to the digitalization of the non-banking financial industry are appropriate and reasonable but, the same share of companies (44%) think that regulatory policies related to the digitalization of the non-banking financial industry are unpredictable and unstable in the long run.
Cooperation with stakeholders is viewed positively by microfinance industry actors. 66% of companies agree that the main legislative and regulatory authorities engage industry representatives in creating a new regulation that strongly affects the industry and 78% of them think that the main legislative and regulatory authorities are open to dialogue, consultation and cooperation with representatives of industry.
Technology. There is an agreement among microfinance companies that microfinance institutions generally possess a higher information technology integrated in their services and operations and it will be a matter of time before banks reach this technological level. Meanwhile, it is also thought that the microfinance industry still has the potential to gain market share in terms of unserved segments by banks, but also those that banks serve.
Industry Image . The actors of this industry agree that the image of these companies in the eyes of the clients, as well as those of the regulators is not bad, but there is room for improvement to reach higher levels. 56% of the surveyed companies think that the reputation and image of the non-banking financial industry in our country in the eyes of people / clients is positive, while only 22% disagree with this statement.
The future of the industry seems to be moving very cautiously. As noted above, microfinance industry companies do not plan to have significant salary increases, only 22% of companies plan to increase salaries by 5% in the future. While none of the companies are planning a higher growth, 33% of surveyed companies plan to diversify their services and 44% are considering something like this. 67% of them plan to reduce costs and increase efficiency, but the good news seems that most microfinance actors are planning to increase the number of employees, 67% of them.
The future of digitalization. Although the microfinance sector remains one of the most technologically advanced sectors, its services are still not totally digitalized. The future belongs to digitalization but it seems that in the Albanian market the expectations for a massively digitized service are far away. The main microfinance actors seem to agree that only 30% of the Albanian population will carry out all financial transactions (payments, transfers) mainly through mobile phone, all purchases mainly online (mobile or computer) and will use mainly solutions financial technology in their financial transactions (payments, transfers, loans, investments, etc.)
Clients for digitalization: Regarding family transactions, 64% of respondents answered that they will do 50% of their transactions online, 28% of them that they will do 70% of online family transactions, meanwhile 8% responded that they perform all family transactions online. Regarding financial transactions, 19% of respondents answered that they will perform 50% of their financial transactions online, 45% of them that they will perform 70% of their financial transactions online, meanwhile 36% said they would perform all their financial transactions online. Regarding online shopping, 62% of respondents answered that they will do 50% of their shopping online, 45% of them that they will do 29% of their shopping online and meanwhile 9% that they do all their shopping online. 61% of respondents plan that in 3 years they will use information technology solutions for financial transactions at the rate of 40-100%.
Conclusions: The future is digital! The above is turning into an inevitable reality, influenced by the latest developments of the pandemic. There is an agreement among microfinance companies that Microfinance Institutions generally possess a higher information technology integrated in their services and operations and it will be a matter of time before banks reach this technological level. The need for technological tools to carry out financial operations will always grow and microfinance companies must be ready with their solutions.
A closer and more intensive cooperation is needed between microfinance actors and regulators in order to accelerate the adaptation of technology tools to the law to provide more online services! More intensive cooperation is also needed between all stakeholders to increase the level of financial education and to make the implementation of financial services totally digital, more effective and on a large scale. The crisis that we plan to leave behind is still having its effects on individuals and entrepreneurs, but we expect the following period to be more positive, although in the next 12 months no industry area is expected to return to pre-pandemic levels.