The growth of Lithuanian banking and financial system has lead to noticeable improvement in business and investment climate in Lithuania. Since the restoration of independence 15 years ago, Lithuania has developed a competitive banking system that meets international standards and practices and is recognized internationally. The development of the Lithuanian banking system was to a great extent affected by the general growth of the Lithuanian economy and changes in law, which has made the Lithuanian market attractive to foreign investors, today holding approximately 87% of the domestic banking sector. The majority of Lithuanian commercial banks are owned by European Union financial institutions having high reliability scores.
The entry of foreign investors has markedly improved the quality of banking services. Sharing the experience of parent banks, Lithuanian banks have implemented new risk management mechanisms, reformed their information technologies and expanded the range of services. These improvements have been positively evaluated by international rating agencies. In recent years, Lithuanian banks have been actively expanding the payment card network, widening the variety of electronic banking services, and increasing the number of leasing and insurance services through their subsidiary companies.
Lithuania’s reliable and strong banking sector determines a favorable investment climate. According to the data given by the Bank of Lithuania, almost all domestic banks and foreign bank branches have been profitable in recent years. The total profit of the banking system in the third quarter of the year 2006 was 493 million litas, 79 percent higher than during the same period in 2005 when it reached 275.5 million litas. The concentration of banks in different market spheres has significantly increased. The share of total assets held by the three largest banks (Vilniaus Bankas, Hansabankas and Nord/LB Lietuva) during the period from 1 October 2005 to 1 October 2006 has grown up to 69%. It is also important that to note that government policies do not interfere in the free flow of financial resources or the allocation of credit.
An efficient financial system in Lithuania ensures an easier access to finance. As the Productivity and Investment Climate Survey carried out in 2004 by the World Bank shows, entrepreneurs do not think access to finance as much of a problem any more as in the past. More than half (56%) of the companies interviewed pointed out that access to finance was not a barrier or a minor barrier for the operation and growth of their business.
Discussions with financial institutions, business support agencies, business associations, and government officials verify the improvement in the accessibility to finance for businesses. Finance companies and banks and are very liquid and are more able to evaluate and more willing to take risks. Financial institutions can offer a range of different means of financing.
Last but not least, the Central Statistical Bureau of Latvia (CSB) reported that Lithuanian banks offer the least expensive loans in the Baltic States. In July 2006 the average price for the long-term loan in national currency in Lithuania was 7% of annual interest rates, meanwhile in Estonia in Latvia it was 9.2% and 11%, respectively. Short-term loans in Lithuanian banks were averagely priced at 5% in Lithuania’s commercial banks, whereas it was 5.5% in Estonian, and 7.4% in Latvian banks. Moreover, the cost of commercial loans from Lithuanian banks is among the lowest in Europe, varying from 5.5% to 6% per year.
More articles about business development possibilities in Lithuania:
Lithuania: A New Target for Foreign Investment
Doing Business in Lithuania
Lithuania Breaking into Foreign Tourism Market |
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