Commercial banks in Montenegro last year achieved a record profit of 165,1 million euros, which is 13% more than in 2023. According to data from the Central Bank, the main reason for this is the growth in income from interest, fees and commissions. In other words - we borrow and pay high interest rates and various fees, and banks count millions.
Total bank income at the end of 2024 amounted to 500,5 million euros, of which interest, fees and commissions alone brought in 459,5 million - as much as 55,6 million more than the year before. All banks are in the black, all are winners. And who are the losers?
Citizens are increasingly borrowing, not only from banks but also in other ways. Buying on installments through stores and trade unions has become an everyday occurrence, while many, when formal loans are not available to them, turn to loans from friends or, in extreme cases, to moneylenders. The increasing cost of basic necessities, high interest rates and low incomes are forcing people to make do as best they can, while banks and financial institutions are recording record profits.
An additional blow to citizens' budgets comes through the increase in utility prices. Electricity bills are increasing, and the price of water has increased in several municipalities. In addition, fuel prices are also rising, which further affects the costs of transportation and basic groceries. While banks are getting rich on interest and fees, the average citizen is wondering how to get through the month.
After the ES1 and ES2 programs, it is clear who came out on top. Banks are undoubtedly the biggest winners, while citizens and the economy bear the brunt of high interest rates, price increases and rising living costs. Numbers speak louder than words.
To buy and furnish a 45m² one-bedroom apartment, you need around 120.000 euros. A mortgage loan of 120.000 euros with a repayment period of 20 years, with a nominal interest rate of 5,95%, means a monthly installment of 856 euros. This would make it possible to buy and furnish the apartment, but the average citizen would ultimately repay the bank at least 205.000 euros. And that over a period of two decades, with a high monthly installment that significantly burdens the budget. If the repayment period were longer, the amount returned to the bank would be even higher. So, what costs 120.000 today becomes twice as expensive through banking arrangements.
In addition to citizens feeling the consequences of high interest rates, the Montenegrin economy is also suffering. Our companies are less competitive in the European market because they borrow on significantly less favorable terms than companies in developed countries. High interest rates and unfavorable credit arrangements hinder their growth and development, while poor infrastructure further slows down business. Expensive logistics costs, unreliable transport connections and dependence on imports make it difficult for Montenegrin companies to compete with European competition.
A particular paradox is that despite the small population, we have an exceptionally high number of banks and credit institutions per capita. Instead of this meaning better conditions for citizens and the economy, the reality is completely different - financial institutions are making huge profits, while loans remain expensive, and the business environment remains unfavorable. Banks have found a way to secure their interests, but where is the space for the common man?
Montenegro is a small country, but it is not small in terms of the income that the financial sector generates at the expense of its citizens. And its citizens - they are counting every cent, wondering how much longer they will be able to withstand this pressure.
Whose is Montenegro?
There are few people, a few more banks and big capital.
That it is eternal!
The author is an economist
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