The Alternative Financial Services Association of North Macedonia
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The results from the Second Annual Market Research of Non-Banking Financial Companies were presented: THE FINANCIAL COMPANIES IN THE REPUBLIC OF NORTH MACEDONIA: SECTOR IN EXPANSION BEFORE COVID-19 CRISIS

The digitization and the application of the latest technological advances in finance will be the new normal, both in newly founded financial institutions and in the existing traditional financial institutions.

Organized by the Association of financial companies of North Macedonia, today was held a presentation for the results of the second annual survey on the industry of non-banking financial companies. The research was conducted in October and November by Maja Kadievska-Vojnovikj, a financial expert, former Vice Governor in charge of the Financial Markets and Payment Systems Operations Department and currently a lecturer at the University American College Skopje. The research included qualitative and quantitative desk analysis of data from official sources and through a Survey, which was distributed to all non-banking financial companies.

The share of assets of financial companies in the total assets of the financial sector is still low and at the end of 2019 it was 0.6% (0.2% in 2015). The banks retain a dominant position in the financial sector, but their share is declining due to the share of mandatory pension funds, investment funds, life insurance companies, as well as due to the growth of financial companies.

“In the last four years, the assets and gross loans of this sector grow by 4.7 times, ie by 2.5 times, which is the highest growth within the domestic financial sector. Despite the still low share in the total lending activity, the results of the research indicate that non-banking financial companies are of increasing importance for the domestic economy, reflecting the need for higher financial involvement of certain layers of the population and small businesses. This role is taken over by financial companies, which are complementary to traditional financial institutions,” said Maja Kadievska-Vojnovikj.

Most of the activities of non-banking financial companies refer to providing loans to individuals – 76.3%, whose average value in 2019 amounted to 260 euros. The value of the active contracts of physical persons in the last four years has increased by 2.4 times, while for legal entities by 3 times. Thereby, the number of clients – physical persons has significantly increased, from 14,409 in 2015 to 99,486 in 2019. This highly diversified structure of clients is favorable for financial companies both in terms of achieving a larger volume of lending and in terms of reducing exposure to credit risk. Despite the fact that the number of clients – legal entities is not growing at the same pace as the population, still the threefold increase in the value of loans from financial companies towards this sector is significant and indicates strong support to the companies. Given these movements, the number of loans granted by financial companies is not significant in the total debt of the population and the corporate sector.

The health crisis with Covid-19 had a strong negative effect on the balance sheets of all sectors of the economy. According to official data, as of the second quarter of 2020, the assets of financial companies decreased by 260 million denars compared to the end of March 2020.

“The negative effects of the crisis, as well as the strict regulation during and after the state of emergency in the country, caused a significant disturbance in the balance sheets of the financial companies. They faced liquidity disturbances and operating losses, which led to restructuring of operations, revision of operating costs, in some cases reduction of staff and closure of some operations / subsidiaries. At the same time, they face limited opportunities for financing through credit lines from foreign or domestic banks, which makes their financial situation even more difficult and the possibility for further support of the private sector. The largest decrease is in loans to physical persons (by 283 million denars), while loans to companies slightly increased.

Such trends are not favorable in terms of the role they have in a certain segment of the population. “In conditions when the disposable income of the population will be reduced (due to wage cuts, part-time work, layoffs, reduced remittances, etc.), credit demand in small amounts should gain momentum.” – adds Kadievska-Vojnovikj.

As part of the research, a Survey was conducted, through which for the first time an opportunity was given to hear the opinions of managers in this industry. The survey covered questions that were categorized into three parts, collecting data and opinions of stakeholders in the sector in terms of data on the industry, business climate and expectations and the state of the fintech industry.

For the next twelve months, the expectations of the non-banking financial companies are that the situation in the economy will be stable, but still affected by the Covid-19 crisis. Some of the respondents think that the situation may worsen, and the expectations for both unemployment and the level of the wages are negative. Most of the sector think that in the coming period the Government will not or will partially provide stable economic policies to entrepreneurs, in the context of tax policy and rule of the law. In terms of policies and regulations to support the development of the FinTech industry, more than half do not expect any changes, and a small percentage of respondents believe that the FinTech industry will have the support of the Government.

The answers from the conducted Survey of the non-banking financial companies can be classified into two major areas of attention, Improving the cooperation with the relevant state organs and institutions, and the regulation; and Increasing the reputation and the appearance of the FinTech industry, for which, Kadievska-Vojnovikj specified:

“Improving the cooperation between financial companies and state organs and institutions in order to set common goals is more than evident. The existence of non-banking financial companies increases the degree of financial intermediation, ie increases the financial inclusion and that is why the sector should be fully consulted and involved in the adoption of regulations for the development of the FinTech industry in the Republic of North Macedonia in the long run a country that strives to align it with the EU’s. It is also necessary an equal treatment of all participants in the credit market, but also the development of new opportunities for digital access to information from different databases on the creditworthiness of the population and companies.

At the same time, the perception of the respondents about the low reputation of the industry is in the “hands” of all stakeholders, ie most financial companies believe that through continuous cooperation within the industry and through joint action through the regulator the communication and mutual understanding can improve and accordingly, appearing before the population and the regulator. Last but not least, the digitization and application of the latest technological advances in finance will be the new normal, both for newly established financial institutions and for the existing traditional financial institutions, which is a leading predisposition for strengthening the appearance and reputation of non-bank financial institutions. companies, now perceived as drivers of the Fintech industry in our country.”

The Association of financial companies of North Macedonia, in which some of the financial companies are members, unites the financial technology, known as Fintech. The mission of the Association is to create a safe and responsible industry and practice, while explaining to the general public the various opportunities that alternative financial services can offer for the development of individuals and society as a whole. Hence, in a direction to promote the industry on the Macedonian financial market, the Association of financial companies of North Macedonia takes the initiative to obtain reliable information from credible researchers in order to create responsible development, such as this research. The Association’s plans are to conduct this type of research on an annual basis, in order to follow the dynamics of the industry and to place transparent and relevant information for the society and the stakeholders, as well as to encourage topics that are important for the whole industry, with which will be positioned as a relevant source of information.

The video from the conference is available at the following link.


The full research is available and completely free, with prior expression of interest for receiving it at