Banks In Kosovo Research Articles

IFRS 9 Transition Effect on Financial Stability of Kosovo Commercial Banks

From January 1, 2018, most of the commercial banks in Kosovo adopted IFRS 9. The new standard introduces the expected credit loss model to allow for timely recognition of credit losses, estimated not only on the actual credit loss but also on forward-looking information regarding the current loan portfolio. Although, transition phases may lead to increasing impairments and a decrease in banks’ equity, which directly influences the financial stability of banks. This paper examines the day-one transition effect of IFRS 9 on the level of assets balance, allowance for loan losses, and capital regulatory class II of banks in Kosovo. To test our hypothesis, we have performed a comparative analysis for the six biggest commercial banks in Kosovo to identify correlation and causality between studied variables. As a statistical technique, we have employed a “paired sample t-test” where we compare financial indicators before and after adopting IFRS 9 to examine the impact on financial stability for commercial banks in Kosovo.
 Our results are in line with the results of recent studies in the IFRS 9 field and conclude that the transition phase has a significant influence on the recognition of additional loan impairment but assets and capital regulations are not affected significantly. Results demonstrate the transition to IFRS 9 causes instability and re-consolidation of capital, but in the long-run reduce the possibility for large and sudden losses. Commercial banks in Kosovo should follow a balanced growth approach without compromising the quality of the loan portfolio.

Challenges of Kosovo Micro Businesses

The challenges that micro-businesses face during the lending process are numerous. Loans are with high-interest rates. There is a lack of loans with low-interest rates that would stimulate the growth of local businesses. On the one hand, the local business faces various trade barriers such as export in the regional market and EU countries, although Kosovo is a signatory to the CEFTA agreement. On the other hand, there is a lack of institutional support, which not only does not support the stimulation of exports but also within Kosovo makes the local business non-competitive about importers of goods. Interest rates are reduced to 2-3% on an annual basis. Increase the repayment period of loans (long-term loans) for capital investments. Allow the grace period at the beginning of the investment as well as have variable payments based on business income. Reduce bureaucracies when taking loans, reduce the demand for collateral by banks when taking loans. Reduce the business tax rate. Reduce unloyal competition and the informal economy that hurts local business. To stimulate start-up businesses, to support projects especially in the field of informatics. Start-up businesses are not so much supported by banks in Kosovo. Increase women's participation in business, through support, because they make up about 13% of businesses operating in Kosovo. It is intended that the participation of women in business will reach 50%. Make greater support of micro-businesses because these businesses can grow and develop and employ a large number of employees. Microbusinesses in Kosovo make up about 98% of enterprises in Kosovo. Establish a development bank that would support local business and create better facilities and conditions for foreign investors.

Factors That Affect Liquidity of Commercial Banks in Kosovo

A very important factor that affects the growth and survival of commercial banks is also the level of liquidity. Banking industry regulators require banks to possess liquid assets in order to fulfill their obligations to depositors and third parties accurately. Lack of liquidity reduces the ability of banks to meet their obligations and otherwise excess liquidity may be the cause of reduced profits for banks. There are many factors that can affect the position of liquidity in commercial banks and which factors cause unbalanced liquidity and as such also affect their performance. As a result, the study of these factors is of particular importance. The main objective of this study is to analyze the liquidity empathy of the banking sector to several specific banking and macroeconomic factors. To achieve this objective, the study uses regression analysis per a data set that includes a time of 8 years respectively the years 2012 - 2019. To build the necessary econometric model and to achieve the purpose of the study, data are taken from the publications of the Central Bank and the World Bank (GDP data), which data are analyzed for each quarter for the study period. After analyzing the available data, the study concludes that between the main factors that can affect the liquidity position of commercial banks, Non-performing loans, Capital adequacy, and Credit interest rate have the grand and most important impact on the liquidity banking position.

Foreign Direct Investments and Attracting Policies to be Undertaken by the Government. The Case of Kosovo

This paper focuses on foreign direct investments in Kosovo, based on a comparative statistical analysis of different sectors of economic activity and different countries of the world that have invested in Kosovo during the reporting period under study. We make use of the comparative analysis expressed in (%) by sorts of economic activity and aim to conclude which sector is more invested by foreign direct investment in Kosovo according to its economic activity. Whereas, through comparative analysis by different countries of the world that have invested in Kosovo, we aim to determine which are the countries that have mostly invested in foreign direct investment in Kosovo, and the level of performance of foreign direct investments during the reported period under study. The data were provided by the Central Bank of Kosovo for the period 2007-2019. In this paper we reflect the performance of foreign direct investments by years based on different sectors of economic activities and by different countries that have invested in Kosovo by applying the comparative analysis. It is of particular importance here to mention some of the options we suggest regarding to some of the government policies that should be undertaken in attracting and increasing foreign direct investments in Kosovo. Received: 7 August 2020 / Accepted: 17 December 2020 / Published: 17 January 2021

Access to Bank Credit and SME Financing. (Case of Kosovo) Paper Title

This study explored the impact of firm and entrepreneurship characteristics such as age, size, manager’s education, business plan, the form of business and gender, on influencing SMEs' access to funding. There are different researchers through their study, evidence that some SMEs may still face difficulties in accessing bank finance. This paper reports an in-depth study into demand issues relating to access to bank finance by Kosovo SMEs and whether there is still a market failure. This paper discusses the ability of SMEs to access debt finance from the commercial banks in Kosovo obtained through questionnaires with 500 SMEs , it reports findings that SMEs had reported having difficulty raising finance and secondary data obtained from magazines, books, and the Internet to review literature. The results show that there is a mutual correlation between firms' ages, business plans, and size and access to credit in Kosovo banks. These characteristics of firms are very important and influential factors in the banks' decision to approve loans required by SMEs. This paper provides some important conclusions for the Kosovo financial system and policymakers to implement SME support and policies.

Legal Regulation of Microfinance Institutions as NGOs Following the Judgment of the Constitutional Court

Purpose: This research analysizes the legal effects that may have in the future Judgment of the Constitutional Court of Kosovo on the inadmissibility of some provisions of the Law in the banking sector. Design/Methodology/Approach: In the study we dealt with the statistics of microfinance in institutions such as NGOs and also addressed the decision of the constitutional court regarding the law on banks, microfinance institutions, and non-bank financial institutions. Findings: It is found that, even after the decision of the court, inconsistencies continue to emerge between the functional and operational objectives of MFI - NGOs with those of the Central Bank of Kosovo and the Ministry of Public Administration. Practical Implications: What is considered unclear in this situation is the negligence of state institutions to amend and synchronize a series of legal acts that should more clearly regulate the position and function of MFI - NGOs in the spirit of the Court Judgment Constitutional of Kosovo. Originality/Value: In reality, this situation presents many legal uncertainties for these entities.

Part Two: Insurance Sector Development And Its Effect On The Financial Markets In Developing Countries: The Case Of Kosovo

The purpose of this study is to identify the connection between the insurance market and the financial markets. More specifically to analyze the nature of insurance companies and their direct role in the economic and financial system development. This market study aims to analyze the insurance system in Kosovo by defining and analyzing its structure, the degree of concentration of insurance companies on the insurance market, their behavior towards price, number of participants, companies operating in this market, and types of products and services they provide. This paper (part two of the study) will present the secondary data from Central Bank of Kosovo, Insurance Companies, and Insurance Association of Kosovo. The analysis are performed on quantitative and qualitative data through applying theories on insurance market development in other countries. It is imported to identify the factors because it enables insurance companies to design policies that tackle the demands of consumers for voluntary insurance policies and at the same time to contribute to financial stability of Kosovo’s economy. The study aims to conclude on the main research question: Does Insurance Development affect the Financial Markets in developing countries? The expected outcome is that the insurance sector in Kosovo is an important factor for the further development of the financial system.

Assessing the Performance of Factors Affecting the Profitability of the Banking System: Evidence from Kosovo

This review done by empirical surveillance observes the significances of a number of the explicit factors of the bank that are matching to bank governance, financial market configuration on one hand, and macroeconomic aspects of the Kosovo bank's performance on another hand. The Management and assessment of Kosovo's bank effectiveness were accomplished through two indicators return on assets (ROA) and return on equity (ROE). To recognize this assessment, the OLS, and Arellano-Bond (GMM) regression method will be applied with the data used from the financial statements of Kosovo banks on a periodical basis over the period 2006-2019. Based on the challenging environments in which the banking system of Kosovo has passed, we have carefully chosen some specific determinants of the banking industry, as well as some of the macroeconomic determinants. The outcomes propose that upcoming studies may contain diverse dynamic models as well as altered dependent and independent features to elucidate the performance of Kosovo banks. Keywords: Bank’s profitability, time series, OLS regression, GMM.

Do Gender and Age of bank clients have an impact on Bank Card usage?

This paper attempts to investigate the ownership and usability of debit and credit cards in Kosovo focusing on two demographic variables: the gender and age of the bank's clients. For research purposes, the Central Bank of Kosovo (CBK) data are used for two consecutive years: 2015 and 2016. The comparative method is used to compare the clients’ behavior on the choice of the method to conduct payment and the usage of credit and debit cards in Kosovo banks for two consecutive years 2015 and 2016 based on the gender and age of bank clients. The results show that there is a gender gap, as debit and credit cards are owned and used more by males than females in all age groups and payment types. Whereas, for the variable age, the results show that both debit and credit cards are mostly used by customers aged 25-35 years followed by those 18-25 years. Based on the results of the paper, conclusions were drawn and some suggestions were given. We suggest that banks should do more to enhance the ownership and usage of debit and credit cards by females and elderly clients. Regarding the variable gender, we suggest that banks should offer credit and bonus cards with preferential rates to female entrepreneurs considering the very small number of female entrepreneurs to boost female entrepreneurship and decrease female unemployment in Kosovo.

Profitability Analysis of Banks: Comparative Study of Domestic and Foreign Banks in Kosovo

Purpose: The purpose of this study is to compare the financial performance of domestic and foreign banks in the banking sector of Kosovo over the period 2008-2018. In order to evaluate the financial performance of banks in Kosovo, both domestic and foreign ones, we have analyzed the financial reviews of these banks for 10 years (2008-2018), subsequently drawing the financial reports. Design/Methodology/Approach: To give an answer to the research question whether banks with foreign capital in Kosovo are more profitable than banks with local capital we have firstly revies the literature to find out what different authors have found in recent researches concerning this area and the methods and models used in collecting, processing and analyzing data. The processing of the data of the above-mentioned reports has been done by the STATA software program, specifically using linear regression, Fixed Effect, Random Effect, Hausman Taylor Regression and GMM modelling. Findings: Based on the empirical results of this study, we conclude that all independent variables (return on equity, net sales to net assets ratio, profit margin ratio) are significant at 5% level of statistical confidence. Return on equity and profit margin have a positive impact on increasing the return on assets of commercial banks in Kosovo, while increasing the ratio of net sales / net assets has a negative impact on return on assets. Practical Implications: This paper will provide a detailed analysis of the profitability of commercial banks in Kosovo, and through comparative analysis will determine which banks are most profitable, those with foreign capital or banks with domestic capital. Originality/Value: This research paper highlights an empirical analysis based on real data, financial reports of the Central Bank of Kosovo and on the financial statements of commercial banks in Kosovo. Given that these results are evident, they are a good reflection for all decision-makers in regulating and supervising commercial banks.

Determinants of Credit Risk in Commercial Banks of Kosovo

Purpose: The purpose of this paper is to analyze some of the determinants of credit risk in commercial banks in Kosovo through the use of regression analysis for a dataset covering a time series of 7 years (2012 - 2018). Design/Methodology/Approach: The data have been collected from publications of Central Bank of Kosovo and from Kosovo Agency of Statistics The data have been analyzed on quarterly basis. In order to conduct the empirical part of the study that gives us the answer to the relationship between credit risk and the determinants of this risk, we analyzed 6 variables in the study. To perform the necessary analysis we have used the statistical software SPSS 23. Through the regression analysis, the main findings and results of the study were generated. Findings: After analyzing the necessary data, the paper concludes that, among credit risk determinants, interest rates on loans and profitability of banks (ROA) have the largest and most significant impact on credit risk, namely non-performing loans as the credit risk measure. Practical implications: For researchers and academics, the study provides a useful basis on which further studies on credit risk and the factors that cause this risk can be conducted. Originality/Value: The research paper is based on recent studies that assess credit risk in other countries and use reliable data on the banking sector in Kosovo.

Insurance Sector Development and its Effect on the Financial Markets in Developing Countries: The Case of Kosovo

The purpose of this paper is to extract the important factors in the nature of insurance companies and their direct role in the economic and financial system development. This market study aims to analyse the insurance system in Kosovo by determining and then analysing its structure, the degree of concentration of insurance companies on the insurance market, their behaviour towards price, number of participants, companies operating in this market and types of products and services they provide. Our analysis are gathered on statistical and qualitative data through the study of the theories on insurance market development in other countries. Furthermore, for the empirical analysis, we used secondary data from Central Bank of Kosovo, Insurance Companies and Association Insurance of Kosovo. Also, we conducted two surveys. First, we conducted a survey with finance managers from all insurance companies and secondary survey was in general, for people who work. This way we tried to get a better understanding of the issue at hand. The identification of these factors would enable insurance companies to design policies that tackle the demands of consumers for voluntary insurance policies and at the same time to contribute to financial stability of Kosovo’s economy. At the end we have to come out with conclusions on the main research question: Does Insurance Development affect the Financial Markets in developing countries? The expected outcome is that the insurance sector in Kosovo is an important factor for the further development of the financial system.

Does working capital management affect the profitability of commercial banks: the case of Kosovo

Purpose: This paper aims to analyze working capital and its impact on the profitability of commercial banks. The other objectives of this study are to analyze the factors that influence the profitability of commercial banks, to find out the relationship between profitability and working capital management. To achieve these research objectives, several research questions have been posited: How much does working capital affect the profitability of commercial banks? What are the relationships between bank profitability and bank size, debt ratio and current ratio? What are the other factors affecting the profitability of commercial banks?
 Methodology: The empirical data to be used in this research are secondary data and will be based on annual reports of commercial banks and reports of the Central Bank of Kosovo. From these data, some indicators such as return on assets, current ratio, debt ratio and banks’ size will be calculated. This research covers a period of 5 years and the data will be analyzed and interpreted through econometric models. In addition, to analyze the impact of working capital on the profitability of commercial banks in Kosovo, trend analysis will also be applied through the comparative method.
 Findings: Based on the empirical results, we can conclude that bank size and the current ratio have positively affected the performance of commercial banks in Kosovo, whereas the debt ratio has had a negative effect. All the independent variables in relation to the dependent variable (ROA) are at the standard level of significance P-value = 0.05.
 Practical implications: Through this study we can recommend all commercial banks in Kosovo to invest much more in working capital, since financial investments in working capital affect the bank's profitability. This means that a high investment in the elements of working capital can lead to increased bank profitability, whereas its profitability decreases when investment in working capital is low.
 Originality: This paper presents real and sustainable results with respect to the conclusions. The period analyzed (2013-2017) is a persuasive period for drawing competent conclusions and recommendations.
 Keywords: working capital, debt ratio, current ratio, bank size, return on assets
 JEL Classification: G2, G20, G21, G3, G32, D24

Factors Affecting Choice of Commercial Banks in Kosovo

This research investigates the factors that influence customers choice of commercial banks in Kosovo and also the factors that influence their continued patronage. A survey research was carried out that involved interviews with bank customers and staffs to explore how customers choose their banks. The input from this group was used to develop the research questionnaire which was responded to by 192 bank customers in Kosovo region. The research revealed that customer service quality, reputation/image of banks and availability of a wide branch network were the most important influences on customers choice of commercial banks in Kosovo It was also observed that the most important factors that encouraged continued patronage of commercial banks in Kosovo were customer service quality, proximity of banks to office or home and reputation/image of the bank.

Electronic Banking Services and Net Profit in Kosovo: Using Simple Linear Regression and the Correlation Method

Abstract The main aim of this paper is to analyze the electronic banking services in Kosovo’s banking net profit during the period 2013 - 2017. The paper discusses the role that these services have played in the development of the banking industry, modernization of e-commerce, and economic growth. These services provide higher security, faster and easier access by reducing transaction costs, access to more distant markets, and access to many products and services. The main paper results have shown that E-banking services have the highest positive impact in banking net profit, while automated teller machine services have shown a slight positive impact. The highest positive correlation results have been seen in point-of-sale services, whereas automated teller machine services showed a negative correlation in banking net profit in Kosovo during the research period. The constant increase of demand for these services has enabled banks to increase their profits in the banking market of Kosovo. Therefore, the paper finds that commercial banks in Kosovo should increase their focus on the advancement and development of electronic banking services (particularly, E-Banking services which are very practical and can be easily used anywhere and anytime).

Risk Management of Commercial Banks in Kosovo

Purpose: This research elaborated on the management of the activity of banks operating in Kosovo. Design/Methodology/Approach: The study provided for the secondary service by reporting goals for the four largest banks in Kosovo. Findings: Problems of commercial banks of Kosovo in managing risks for establishing concepts for managing the activity, defects of the activity management system and backwardness of the research and method of managing the activity. Practical Implications: With the continued development of the financial sector, commercial banks in Kosovo have formed a series of strict risk management systems, while the risk management of commercial banks in Kosovo is still in its infancy. As Kosovo's financial industry is opening up to the outside world, Kosovo's banking industry faces increasingly fierce competition and the risks are also more complex. In this case, understanding the level of risk management of commercial banks in Kosovo and improving the level of risk management is a necessary topic. Originality/Value: The results of the study realize a series of meaningful suggestions are put forward and help to improve the risk management level and control the risks effectively

BASEL III LIQUIDITY RISK AND KOSOVO BANKING SYSTEM

The financial crisis 2007-2009 prompted the Basel Committee on Banking Supervision (BCBS) to intensify its efforts to strengthen the principles and standards for capital, as well as for the measurement and management of liquidity risk. Risk management is very important in the financial system, especially in banks. Among various risks Banks face is a liquidity risk it’s managing enables Banks to fulfil their obligationsBasel III consists of set of measures internally agreed. The implementation of Basel III will considerably increase the quality of banks' capital and significantly raise the required level of their capital. In addition, it will provide a "macro prudential overlay" to better deal with systemic risk.Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.To ensure that banks have sufficient liquidity to survive potential liquidity shocks, as happened few years ago, the Basel Committee has issued two new globally revised minimum standards under the Basel III rules for the first time in the banking history: LCR – Liquidity Coverage Ratio and NSFR – Net Stable Funding Ratio that contain new requirements for bank capital, as well as standardized rules in the liquidity area.Banks need to fully comply with LCR and NSFR rules by January 1, 2019, according to the Capital Requirements Directive & Capital Requirements Regulation (CRD IV & CRR) rules.Basel III rules, in the European Union attain their applicable judicial form through REGULATION (EU) No 575/2013. The regulatory package is due to enter into force on January 1st, 2014, but some provisions will be implemented gradually between 2014 and 2019 and will fully come into force on January 1st, 2019. But these rules are likely to undergo some revisions due to a proposal by European Union (EU), so implementation horizon could go being beyond 2019.Performance of the Kosovo banking sector continued to be positive, thus contributing in maintaining the financial and economic stability of the country. Kosovo’s financial system continues to be characterized with sustainable increase in all its constituent sectors. The banking sector in Kosovo as most successful story is developed by many international institutions, characterized by a large presence of foreign capital, where 89. 2% of all assets are managed by foreign banks and development is based on international standards.Banking sector continued to have good liquidity position, with the main liquidity indicators standing above the minimal level as a required by the regulation.The implementation of Basel III rules in Kosovo related to liquidity depends on the local regulator and Basel III standards.

FINANCIAL IMPACT OF CUSTOMER EXPERIENCE MANAGEMENT - EVIDENCE FROM KOSOVO BANKING MARKET

Customers are becoming increasingly sophisticated in their expectations. Customers are seeking engaging experiences that stimulate, entertain, educate and/or challenge. In the minds of customers brands that can provide such experiences are clearly more valuable as compared to brands that don’t was written in the research paper of Schmitt in year 1999.Consistent delivery of outstanding service has become a must for every organization. Customer experience is considered as a key determinant of customer satisfaction and loyalty and with high impact on the financial growth of the organization. With its exceptional impact on customer behavior, companies are utilizing customer experience for gaining market differentiation through superior services and relationship management with their customers.Designing and mapping right customers’ journeys for their key processes and products is enabling companies to improve their market position through better customer experience provided to their customers. Additionally, companies are positively changing customer perception by increasing their product and service value for the price that customers are paying. As a result, this approach is enabling companies to improve their market position by improving their recommendation scores.This research paper showed that financial institutions operating in Kosovo market have a great opportunity in investing in loyalty, better experience management as well as in improving their recommendation score. Findings showed that a customer centric culture within the organization that puts customer at the heart of everything that company is doing is lacking. Customers perception toward banks in Kosovo is negative since there is no value for the money their spent however they strongly believe that a better experience offered from the bank will change banking in Kosovo.

Management of Liquidity Risk and the Banking Activity

The banking sector in Kosovo continues to have a high level of sustainability and financial stability. Two substantial components for the stability of the banking system appear to be liquidity and liquidity risk. The purpose of this paper is to analyze liquidity management in Kosovo's commercial banks through liquidity risk indicators from 2008 to 2017. By comparing the methodology of the data presented, the study will assess the state of management of the liquidity risk of commercial banks. From 2008 until now, commercial banks in Kosovo have had liquidity reserves at a level higher than the level required by CBK, which means that exposure to liquidity risk was minimal.

ANALYSIS OF THE PREMIUM TREND IN THE INSURANCE INDUSTRY IN KOSOVO 2013 - 2017

Kosovo continues to be one of the countries with the most undeveloped economy in the region and with negative measuring indicators of the economic development, high unemployment, a deep negative commercial balance, and non-favorable macro economical politics to guarantee a faster development trend, although it has marked a positive economical increase in recent years but too insufficient to weaken poverty and decrease the unemployment rate. The insurance sector participates with only 3% in the Kosovo financial sector, except for its very symbolic participation, this industry is characterized by a very low degree of development and the main motive is to analyze the very slow trend of industry development, to identify the causes and factors that have influenced this segment to be so underdeveloped and of a very symbolic weight in the Kosovo economy.The purpose of this paper is to explain the trend of insurance premiums on insurance industry in Kosovo, effect of foreign investments in this sector, also the positive implications in the competition in this market. The purpose of a study can be classified into two major categories; descriptive and explanatory.For our case study, I have collected primary data by conducting closed interviews. I have interviewed 10 senior risk underwriter managers from all companies present in the insurance industry in Kosovo. Methodology and data collection for our research paper it is based on case study method, analyzing trend of premiums through case study, we have collected also secondary data or archival records from Central Bank Kosovo from specific documents: official yearly annual reports, annual financial stability reports. This is based on the reasoning that this data archive consists of official information collected, processed and published by the central bank of Kosovo as the oversight body of the financial system in Kosovo. Other source of secondary data used it is annual reports published on websites of the Insurance Companies.In this paper I focused specifically on inquiring about the level of development of the insurance industry in Kosovo. I have also specifically explored and presented strategic orientation and detailed activities through which the premium structure in Kosovo could be changed in favor of voluntary insurance. Also another very important goal is the susceptibility of the relevant decision maker factors and the whole readers that the results of this analysis relevant findings to influence in order to sensitize the decision maker and readers for the situation and for the need of focus that this segment should be developed because it is one of the most important segments in the economies of developed countries or for an undeveloped country and economy that aims a strategic objective for a faster development.