Covid-19, Business Failure and Bank Loan Collapse: Albanian Case

Armela Anamali,Bitila Shosha,Romeo Mano

doi:10.13189/ujaf.2021.090516

Abstract

Purpose. The purpose of this paper is to make an analysis of challenges to private sectors repaying bank loans during and after lockdown restrictions imposed by Albanian government due to Covid-2019 pandemic, and their prospects for bank lending. Design/ Methodology/ Approach. This paper uses a mixed methodology. To collect primary data, we distributed online questionnaires to a number of Albanian firms. The sample collected is a probability sample of business population operating in Albania. The data collected are subsequently processed with the inferential statistical methods using SPSS version 21. Findings. This study identifies and examines the impact of Covid-19 on businesses that have taken credits during the pre-pandemic period. The results indicate that the risk of deferring loan repayments depends on businesses age, i.e., years of operating in the market, and the use of cash reserve funds of business. The need for liquidity and the perspective shows that firms are reluctant and not sure whether to opt for a bank loan. The factors influencing their decision in this regard are government policies, interest rates and uncertainty in the future. Originality/value. By analyzing the relationship between two important pillars of the domestic economy, this paper represents a novelty. Albania is a developing country and this study would help in future research both for Albania and other similar countries. The findings of this paper can also be used as a baseline for a future forecast model. They could help in analyzing private sector credits in a new socio-economic and geopolitical era caused by Covid-19 pandemic.

Highlights

The Albanian banking system is the main source of the growth and performance of Albanian firms
Several researches have after the global financial crisis effects of 2008, focused on variables influencing credit risk, such as: business environment, nature of industry, level of corruption, banking policies and restrictions, interest rates, size or nature of business, high debt ratio, business performance, etc
In many countries like Albania, where the balances are more fragile, Covid-19 pandemic was a shock for many sectors of the country, such as health, education, tourism, transport, etc

Summary

Introduction

The Albanian banking system is the main source of the growth and performance of Albanian firms. Several researches have after the global financial crisis effects of 2008, focused on variables influencing credit risk, such as: business environment, nature of industry, level of corruption, banking policies and restrictions, interest rates, size or nature of business, high debt ratio, business performance, etc. No study has predicted what kind of effects a global pandemic could have on a country or the global economy. Earlier research has shown the effects of decision-making and actions of society on a country's economy, but not a pandemic effects and reflections on further society behavior. This new approach is applicable in all areas of life. In many countries like Albania, where the balances are more fragile, Covid-19 pandemic was a shock for many sectors of the country, such as health, education, tourism, transport, etc

Objectives

Methods

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Conclusion