United Bank of Albania plans digital turnaround amid losses | Salaam Footbridge

When Bosnian Amel Kovačević took over as CEO of United Bank of Albania (UBA) in 2020, the institution recorded a loss of more than 356.6 million Albanian Lek ($3.3 million), falling from a profit of Lek 30.7 million ($0.3 million) in 2018 and Lek 8.7 million ($0.08 million) in 2019.

Speaking to Salaam Gateway, Kovačević confirmed that the bank founded in 1994 has started a comprehensive turnaround exercise to transform UAB into a progressive and modern Islamic bank.

“In 2020, our strategy was to clean up the bank’s portfolio, consequently leading to negative financial performance,” Kovačević said.

Part of the strategic plan is focused on retail banking and the expansion of its current network of four branches. In addition, the development of a digital ecosystem should bring efficiency gains and attract the younger generation as customers.

Results for the three quarters ending September 30, 2021 showed a loss of Lek 22.1 million ($0.21 million). Kovačević faces challenges ahead, coinciding with a notable change in shareholders.

UBA’s CEO hopes the new structure with Eurosig as the main player will create synergy in customer acquisition. The local insurance company became the bank’s majority shareholder in 2021 when the Islamic Development Bank (IDB) sold 30% of its shares. Currently, Eurosig holds 51.02% and IsDB 42.2%.

Kovačević, who served as Bosnia and Herzegovina‘s ambassador to China and Mongolia from 2010 to 2013, and Sarajevo’s regional finance minister for 16 months, brings his diplomatic skills, experience and knowledge to the table to manage the transformation of the Bank.

Prior to his appointment at UBA, Kovačević was the head of Sharia-compliant Bosna Bank International (BBI) retail banking, which the IDB also co-founded.

Considering that UBA is the smallest of the 12 banks operating in Albania, Kovačević is trying to position the bank as a niche player, banking on the movement around the UN Sustainable Development Goals (SDGs).

“It’s very fashionable now, accepted all over the world and inclined towards Islamic finance too,” Kovačević said.

The financial expert believes that Islamic finance will attract foreign investment to Albania, accelerate economic participation and help redistribute income in society.

But he also pointed out that Islamic banking in Albania, an OIC member state with a population of 2.8 million, will not solve all problems or solve socio-economic problems such as poverty. About 60% of the population is Muslim.

“UBA is trying to provide a new approach to Albania’s development,” Kovačević said.

“Albania is going to be a prosperous country in the years to come due to its competitive advantages,” Kovačević said, referring to its location in the Mediterranean, which offers an ideal climate for agriculture and tourism.

However, the country still presents weak structural conditions for sustainable development.

Although growth averaged 3.3% in 2015-2019, Albania’s stagnant productivity, a landscape dominated by small and medium-sized enterprises that employ a low-skilled and low-paid workforce, limited access to finance, cumbersome logistics and poor market integration discourage private investment. , the world Bank wrote in its Europe and Central Asia Economic Update 2021.

What Albania lacks in private investment, the IDB makes up for in infrastructure investment. In December 2021, the development bank announced the latest project – $56.8 million to construct a section of the Tirana-Korca corridor, improving connectivity between the capital and the largest city in eastern Albania.

Kovačević was surprised that many IDB projects do not go through UBA while realizing the limitation to absorb transactions beyond the bank’s capacity.

“We are working to have much more synergy between IDB and UBA and to channel as much IDB activity as possible to UBA,” Kovačević said. “They understand the need for us to be part of these projects as well,” he said of his talks with the line ministry.

The IDB has so far approved 39 investment projects in Albaniawith a total value of $597.6 million.

Referring to Albania’s economic development over the past 30 years, Kovačević is optimistic about the success of UBA’s transformation.

“Progress is happening,” Kovačević said, “and Albania is a country with great potential.”

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