Demand for investment products is increasing

Why Albanian commercial banks have shown historically little attention to investment products?
Albanian commercial banks have shown a cautious approach regarding investment products, and this is due to several factors:First, economic stability. Albania, as a developing market, has gone through several important phases of financial and economic stability and banks have played an essential role in consolidating this stability by focusing on traditional and safe services such as loans and deposits. They have maintained a careful approach to the promotion of investment products that are affected by economic fluctuations and are subject to market risks, requiring continuous professional management. Second, I would mention the level of maturity of the financial market in Albania, which has consistently been less developed compared to the EU markets and where the infrastructure and expertise to support a wide range of investment products has been limited. Thirdly, consumer demand for investment products used to be low due to a limited financial culture and a generally conservative approach to risk, giving priority to traditional banking products such as savings accounts and deposits.In the end, the historical context undoubtedly had its role. The past financial crises of more than 2 decades ago have led to a more cautious behavior of banks in the presentation and promotion of investment-related services.Regardless of these factors, today we can proudly say that the banks' approach has undergone fundamental changes. The increase in the number of actors whose business focus is on investment products, the expansion of the offer of these products by banks as well as the improvement and completion of the regulatory framework have already created a favorable environment for the development of capital markets and investment products. And banks remain undoubtedly pioneers of these financial market developments.

Do you currently see demand from banking sector clients for investment products?

Definitely! More and more, there is an increase in the demand for investment products from clients of the banking sector in Albania, and this comes for several reasons, which are related to what I mentioned above. A key factor is increasing financial literacy in the general population. Technological developments that increase access to information and financial education initiatives have made clients more aware of investment opportunities and their benefits. This has led to an increase in demand for different investment products, through which customers can diversify their financial portfolio and potentially benefit from higher returns than those of traditional banking products such as deposits.Banks have responded to this demand by offering more and more new financial products. Some of these products include investment funds, mutual funds, pension funds, bonds, certificates of deposit, etc. These new products are easily accessible to a wide range of customers.In addition, the development of the financial market in Albania has played an important role both in increasing the confidence of clients and in that of investment spaces. Even though there is still a need for improvements in terms of regulation and standardization, financial education and product offering, the investment products market in Albania is showing strong signs of steady growth and development. Cilat produkte të investimit mund të kenë potencialet më të rëndësishme për karakteristikat e tregut financiar shqiptar?

Which investment products has the most potential for sales counting on the characteristics of the Albanian financial market?

In the Albanian financial market, some investment products with significant potential are Investment funds, Private pension funds and Bonds.Investment funds (mutual funds) offer diversification and professional asset management. These funds are attractive to investors who seek to minimize risk through a diversified portfolio, thus benefiting from the expertise of the professional managers of these funds. These products also offer the opportunity to have indirect access to financial instruments that are traded in regulated foreign markets, such as shares or sovereign and corporate bonds. Private pension funds are equally important, especially in the context of the latest legal changes related to significant fiscal incentives for fund members. These funds offer a reliable solution for the financial future of individuals, providing alternative benefits during the retirement period. Bonds, whether corporate or government, are a good option for investors who prefer fixed income. With increasing economic stability, these financial instruments can provide stable returns.Shares and indexes are also another category that may be of interest to a more limited range of investors, due to the risk they carry. As awareness and infrastructure for the capital markets improve, investing in shares of listed companies can become a necessity and offer opportunities for diversification both in terms of the investor and in that of the issuer, which in this way expands the spaces for financing. The further development of the Albanian Stock Exchange, through the listing of local companies in it, would facilitate the latter's access to capital as well as enable investors to trade different instruments in a regulated, liquid and safe.

Bonds of commercial companies are among the main innovations in the Albanian financial market after 2012 and banks are among the main issuers. How can you increase the access of potential investors in these instruments? Do you see the potential for more banks to exercise activity as underwriters of debt papers of commercial companies?

To increase the access of potential investors to bonds of commercial companies in Albania, some key and necessary measures can be taken. First, the improvement of the trading infrastructure, including the construction or improvement of private or public platforms, which would facilitate the participation of investors in bonds. Financial education through campaigns and seminars would also help the latter to better understand the benefits and risks of investing in bonds of private companies. A favorable fiscal regime would encourage more investors to enter the market, easing fiscal obligations for investments in these instruments. Meanwhile, transparency, access to information, financial stability of the issuer and liquidity of the instrument are a condition for increasing the credibility of investors.As for the potential for more banks exercising their activity as underwriters of debt papers, this certainly exists and would have a positive impact on our market. The activity of the signatory of the debt letters of the commercial companies creates space for the banks to benefit both in terms of increasing their income and diversification, as well as strengthening the relationship with clients and increasing their reputation and influence in the market.The implementation of clear and stable regulations for underwriting activity would create a more favorable environment for banks to engage in this activity, investing in increasing the professional capacities of their staff and in the systems necessary for this service.

In Albania, direct investment in financial securities issued in foreign markets remains difficult. What role does the banking sector play to open this door to Albanian investors?

The banking sector is in a unique position to play an important role in facilitating the access of Albanian investors to the international financial markets. First, and the simplest form is for banks to offer investment funds, whose assets are fully invested in foreign markets. These funds can be managed by local or foreign management companies and allow investors to diversify their portfolio across national borders.Another important role is related to the title mediation activity. Access to international platforms is a must for investors who want to invest abroad. Banks can provide this access by establishing partnerships with international intermediaries, or by developing their own platforms that support international transactions. This would simplify the process of buying and selling financial securities in foreign markets.Cooperation with global institutions that offer custody services and investment in special systems for these services is also necessary to give investors access to global investment products while ensuring at the same time custody of these instruments.Counseling services and an educational role are also vital. Banks can provide personalized financial advice to help investors better understand international markets, investment opportunities and associated risks. This would include market analyses, strategic recommendations and decision support to ensure investors make informed and confident choices. By fulfilling these aspects, the Albanian banking sector can play an important role in expanding the access of Albanian investors to the international financial markets.

Do you see the Albania's membership in the SEPA single payment as a facilitator to the provision of investments in foreign markets by Albanian financial institutions?

Yes, I personally think that Albania's membership in SEPA will help facilitate the provision of investments in foreign markets by Albanian financial institutions since this type of standardization, will reduce costs by making transactions more economical for investors. Second, with unified payment processes, transactions are carried out in a faster and more efficient way, which can increase the circulation of capital and help Albanian institutions react more quickly to investment opportunities in foreign financial markets.Also, the standardization of payments through SEPA offers a more transparent structure, which can help with better risk management and make it easier to evaluate investment opportunities, bringing our market closer and closer to the markets. of EU countries, where we intend to be a part.