In the first half of 2016 the undertakings received loans in Latvian banks worth of almost 1 billion Euros. This is the biggest amount over the recent five years. In general the loan portfolio of Latvian banks in the first half of the year grew by 2.4% or by 358,246 million Euros and in late June made up 15,035 billion Euros.
Despite a visible gain in loan services, it is, nevertheless, evaluated as moderate. Anyhow, from the point of view of the Ministry of Finance, where after confronting dilution of investment attractiveness of Latvia they found a potential source of financial feeding of the economics – the banks.
Strange as it may sound, but the civil servants even set a task for private credit institutions – to increase lending by 10% during three years. Curiously, what would happen if commercial banks disobey the ministerial employees? Would be reprimanded with placement in personnel files?
For the sake of justice it is worth mentioning that the banks have money. In their interviews presidents of Scandinavian banks proudly inform of billions of Euros ready to stream in the Latvian economics as loans. Only trouble is, the rubbed through the most severe crisis of 2008-2010 Latvian undertakers do not rush to put themselves to new debts. And many of those, who do not mind to borrow, fail to satisfy strict requirements set by the bankers after the crisis.
We arrive at a known paradox: if five years ago the banks could not make their clients to pay debts, now they cannot make them to borrow.
Yet there is one more problem: debts in Latvia are paid not just by cowards. The banks have encountered high amortization of loan portfolios – loans are taken for a comparatively short term and are repaid on time, thereby decreasing interest yields of the credit institutions.
In this context the situation developed in the construction industry is rather characteristic, where the volumes of lending crashed by one third, on the other hand the credit discipline has grown sharply. The builders – debtors have significantly (by 36%) cut the quantity of overdue payments and do not rush to take new loans.
However, how to fulfil the order of the Ministry of Finance and increase the loan portfolio (and at the same time loan interest yields as well)? While the potential clients steer clear of the banks, there was born a whole list of lending stimulating offers.
Among them – refusal from application of income tax on ploughed – back profit, expansion of the basis and increase of volumes of state guarantees, development of private and public partnership projects, development of a new leasing law.
There is an idea to expand the state programme on the acquisition of housing by young families and by young professionals. It would be nicer to exempt from personal income tax the amount paid by the mortgagors as interest. It would be really good to reduce the mortgage registration fee.
All-in-all, the ball is in the court of the Ministry of Finance. Would you like more loans? Get the Latvian business environment right.