Gazeta Metropol
Government officials get loans at negligible rates
DARDAN MALAJ
30/09/2008 The investigation – The common man pays more mortgage than top government officials
with higher loans
Two government decisions and preferential treatments by banks favor the creation of a new rich class
“A bank is a place that will lend you money if you can prove that you don't need it.” This quote from
Bob Hope, the US comedian, fits into what goes on in Albania.
Isuf, 52, hailing from Kukes in northern Albania, now lives in Tirana. He says that it took him a few
months to get a loan. Moving from his native town and having no dwelling in Tirana had forced him to
get a bank loan.
He had to prove what could he mortgage the loan on, but he could not have the bank loan cover all the
cost of his apartment. The funding, in most cases, covers only 70 percent of the amount on which the
cost of the house one purchases.
“It will take me 20 years to get over with this,” he says, adding that the monthly down payment is 238
euros for a loan of 35,000. “I would have to work all my life for the house.”
Most people lodge similar complaints to Isuf, but more disturbingly, one can observe Albanian
government officials that use the influence of their position to get better treatments by the banks.
Ministers, MPs, and top administration officials have received loans at very low interest rates compared
to what the common man pays.
Through these easier deals and preferential agreements, a new moneyed group is made grow its wealth
more, while the poor are shackled by the mortgage payments.
Preferential treatment
Among wealth statement databases at the High Inspectorate for the Declaration of Wealth, a
government watchdog, one spots the form filled by former Defense Minister Fatmir Mediu.
He has received a 300,000 loan in September 2007, with an annual interest of 4 percent.
Euribor, the inter-bank rate, is at 4 percent as well, and that is the minimal rate that a bank can give loan
without having any benefit for itself. That shows that the National Commercial Bank of Tirana has
preferred to lend Mediu money at a negligible rate.
A loan officer for the bank, who asked not to have his name mentioned for this article, said that “such
loans are given only with the permission of top bank officials.” He insisted that such loans can be issued
only if assets more than 360,000 euros are used as collateral by the receiver of the loan.
Nothing of that value figures out in the list of assets that Mediu has shown in his assets statement.
“I have received the loan in direct agreement with the bank,” said Mediu, when asked whether the
government used its influence on such a deal.
Credit officers say that people receiving such loans would be offered those at annual interest rates of 9
percent. A far cry from the 4 percent interest Mediu received.
The former defense minister is now under investigation by the prosecutors for abuse of office after an
explosion in an army base that caused 26 deaths and 300 injured.
But his is not the only case.
The general manager of the Albanian Electricity Corporation (KESh), Gjergj Bojaxhi, has received a loan
at a similar size at similar rates.
He has received 250,000 eurso from the Raiffeisen bank in November 2007, and it will be paid in 300
months. The rate on this, according to his assets statement, is Euribor +0.44 percent, hence, 4.44
percent annually.
This is a similar treatment that Mediu has received, but Bojaxhi has mortgaged some asset with the bank
as a guarantee.
When we asked the bank on how can we receive a 250,000 euro loan, they said that “such loans are
given to large businesses or important people.”
It is difficult to get official pronouncements by the banks themselves for the cases of Mr. Bojaxhi and
Mr. Mediu because this is considered as a confidential relationship between the bank and the client.
But Raiffeisen employees who asked not to be identified, say that to have a common citizen get such
loans commercially would be impossible, let alone with cut rates of 4 percent.
Elvin Meka, the general secretary of the Albanian Bankers’ Association, says that “banks can offer special
products to clients it wants to attract in specific cases.” This amounts to an admission of the fact that a
clientele is being created with more ‘trustfulness’ and that would ‘show no problem in paying the loan.”
“In such cases, the bank makes less money but the risk is lower,” he says, adding that this happens in
other countries as well.
Absurd decisions
While Mediu and Bojaxhi have received loans while in direct relationship with the bank, two Albanian
government decisions, of 1999 and 2007, make it easier for government or top administration officials
to have loans at lower interest rates. The 2007 decision just added to the list of the people who benefit
it. They include government ministers, members of parliament, judges of the constitutional and
supreme courts, the attorney general, deputy ministers or other ranking officials, regional governors and
army generals. The list does not end here. Among others to benefit it are political appointees with the
cabinets of the President, Parliamentary Speaker, Prime Minister and the ministers, and directors of
government institutions, as well as executive directors of independently managed top public
institutions.
In case they have needs of shelter, such officials may ask the government to allow receiving loans at
preferential low rates to buy a lodging at the place they are working. The loan is made in agreement
between the Minister of Finances, that of Transport, and the bank chosen as partner in such deals.
Loans amount to a maximum of 5 million leks at 4 percent rates for new apartments or houses, and 2.5
million leks at 4 percent for extra space in their existing apartments.
The state budget pays for this.
The fund should not exceed 50 million leks annually, starting from 2008, and the number of the loans
issued should not exceed 100.
Finance Ministry officials say that they control only the fund, while the procedures to be admitted to the
scheme are managed by the Ministry of Transport.
The Ministry of Transport said that it has approved 63 people who would get such loans this year,
including members of parliament and top government officials.
The government is expected to approve the list of those who will benefit that this yea. The total amount
of the loans issued to top government officials through this scheme is 3.5 million euros, and the
government pays the difference between the commercial rate and the 4 percent rate that the
government decision has approved.
Buying second homes at tourist areas
The current Interior Minister, Bujar Nishani, had paid a loan of 5 million leks at a 3 percent annual rate,
which he gets according to the 1997 government decision.
Former prime minister Fatos Nano has paid a 60,000 euro loan in 60 months in 2006, at 4.88 percent a
year, which shows that the bank’s own rate here was 0.88 percent.
But not only the officials in need of a house are the ones to get the loans, but also officials who snitched
the possibility to buy vacation houses.
Labor Minister Kosta Barka owns an apartment in Saranda, southern Albania, but he has also a 5 million
lek loan at 3 percent annual rate for an apartment he has bought in Tirana.
This finding comes only after ‘internecine’ fights in his own party, where he proclaimed that “my
children are emigrants in Tirana, and the apartment which I rent is a simple one in Tirana.” What
happened to the loan?
The chairman of the Social Democracy Party, Paskal Milo, has a villa at the tourist area of Palasa, for
which he had received the government loan of Lek5 million.
Barka and Milo are only a two of the many officials who buy their second homes at tourist areas with
such loans.
Such places turn into forbidden apple for the common citizen. Some have armed guards and would not
allow you to get deep, despite the fact that many such constructions are even not fully made according
to legal requirements.
Deepening poverty
Data from the Institute of Statistics and the Bank of Albania show that the average salary of an Albanian
who works in the public administration is Lek35,000 monthly.
While commercial rates for the average citizen are up to 18 percent or more, depending on the bank, for
consumer short-term loans. Long-term loans have interest rates that go up to 8 or 9% annually if
received in Euros, and 13 percent for the loans in local currency.
But data we received during the investigation showed that citizens pay at times more in monthly down
rates for the bank than the top officials despite the fact that the loans they have received are smaller.
The salaries of top officials, including parliamentarians and ministers, is more than 140,000 leks per
month.
“Interest rates are still too high. The costs, too, compared to the countries where such banks originate,”
says Zef Preçi, the expert. “The competition among them is not there.”
This is a situation close to an oligopoly, and would increase the credit cost to citizens and businesses.
This because the citizens would pay, through taxes, the reimbursement for the loans that the
government officials receive at rates of 3 to 4 percent.
This is a reimbursement that is taken upon by the government itself, which pays those costs with
treasury bills it issues at annual rates of 8.12 percent.