gent sejko : lending to and funding the albanian agriculture sector address by mr gent sejko, governor of the bank of albania, at an event, organized to discuss on lending issues of the agriculture sector in albania and launch the initiative on albania agribusiness and tourism support facility ( aatsp ), tirana, 26 january 2022. * * * your excellency prime minister, honourable madame ministers, honourable head of albania for the ebrd, dear friends and colleagues, let me first to thank you for the invitation to participate in this event, organized to discuss on lending issues of the agriculture sector in albania and launch the initiative on albania agribusiness and tourism support facility ( aatsp ) mechanism. the bank of albania has continuously welcomed the transparent and constructive dialogue amid public authorities, private sector, banking industry and international partners, to address issues which serve to unclog the potential development and welfare growth of albania. in particular, allow me to emphasize the fact that – despite the considerable progress in the last years – the albanian agriculture sector, overall, and branches related with it - agritourism and agribusiness – are still far from the full utilisation of both resources and potentials they have. in figures, almost half of the albanian population lives in rural areas and around 1 / 3 of labour force in the country are employed in agriculture sector. yet, this sector generates less than 20 % of value added in the economy, while productivity of labour force employed in agriculture and their income per capital are half of other branches of the economy. in my view, the sustained and balanced development of the country clearly needs a higher attention to agriculture sector, for improving its production capacity coupled with the growing of rural area population ’ s welfare, and in turn promoting social equity. the agricultural sector faces many and complex problems of development. at a considerable degree, these problems are out the competence and expertise sphere of the bank of albania. however, i believe that the topic of our today ’ s discussion : support with funds and loans to the agricultural sector, deserves a higher attention by the banking system. currently, agricultural sector benefits only 1. 7 % of the funding that banks provide to private business. this ratio has not change over the last decade, despite the novelties that banking system has offered to lending market, while it remains far from the real needs of this sector. specific lending issues to agricultural sector have been identified, from some time now

supply side that constrain the sme ’ s access to finance and other banking products and services. on the demand side, these issues can be tackled through a more systematic documentation and disclosure of information by smes and better business planning. on the supply side, bankers ’ reluctance to lend to smes can be addressed through innovative credit assessment tools and techniques like credit scoring and better capacity building efforts for the financial service providers. among various stakeholders that have to play their role for sme development, i think, state bank of pakistan and commercial banks both need to play a proactive role in improving access to finance for smes. as far as sbp is concerned, it has taken a number of important initiatives for improving access to credit for sme sector. these measures include a provision of specialized prudential regulations ( prs ) for smes, refinance schemes for smes, credit guarantee scheme for small and rural enterprises and cluster development surveys. further, sbp has been assisting banks through a holistic ifc technical assistance and capacity building initiative encompassing areas of strategy formulation, product bis central bankers ’ speeches development, risk management and hr development etc. for sme lending. presently, bank alfalah ltd. is being supported for capacity building to boost sme banking, while many other mid - tier banks are being considered for similar ifc technical assistance. ifc is in direct dialogue with a number of banks. we hope that this project will revitalize sme lending by participating financial institutions and will be a prototype for other financial institutions which could see financing to smes as profitable business ventures. aside from the boost sme provides to employment and overall growth to the economy, it also provides diversification to a bank ’ s balance sheet and in turn a stable revenue stream to support long term shareholder value. given the huge potential for this sector, i encourage all the commercial banks to review their sme strategies and assume a greater role in sme lending. ultimately it has to be the private sector which has to take the lead role in lending to the sme sector given their critical positioning and greater capacity in terms of their outreach and availability of funds. as i earlier mentioned, the actual statistics for lending to smes have not been encouraging in recent years. banks ’ credit to smes has declined over the last 4 years from rs 437 billion in 2007 to rs 248 billion in june, 2012. although, this decline can be partly attributed to adverse economic conditions during the period and