Why the Credit Costs are High in Moldova and What are the Solutions?

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Publishing date: Wednesday, 23 February 2011
Views: 13682

The problem of limited access to banking credits has always been relevant for the Republic of Moldova, which became even more acute during the recent economic crisis. The aim of this study is to identify the main factors which have determined over the last years the credit costs to be so high and, respectively, affected the accessibility of banking credits. The analysis is based on a set of comparable indicators applied for region countries which allows for a more objective estimation of the banking sector situation in Moldova and the causes of high credit costs. Additionally, some econometric methods are employed in order to quantitatively determine the impact of the main factors driving the lending interest rates. The estimation results reveal that the main culprits of high credit costs in Moldova are the high costs of attracted resources by banks/limited confidence of the population in the banking system, large risk premiums and the inefficiency in the banking activity. The study proposes a set of policy recommendations aimed at addressing these issues.

Full version available only in Romanian.

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