Złoty reigns in SME financing
Though most banks offer loans for enterprises not only in złoty, but also in dollars, euros and Swiss francs, mBank's product manager, Witold Sencio, notes that there isn't much demand among small enterprises for loans in foreign currencies. "Most companies avoid this type of loan because of the currency risk," he explains.
Rate risk
"Always when taking a loan in a foreign currency one has to keep in mind the risk related to exchange rates. This type of loan would clearly suit these companies that have their incomes in that currency," since this would help the firm avoid fluctuations related to the appreciation or depreciation of the złoty, said the director of the SME department at BRE Bank, Krzysztof Gerlach.
NORD/LB spokesperson Łukasz Piasta agrees. "It all depends on what currency the company is conducting its activities in. If the firm trades a lot with the eurozone, getting a loan in euros would be recommended," he said. But, for most micro-firms and small companies, rotating loans and loans for current operations, which make up the bulk of all loans taken by this sector, are in złotys. Loans denominated in foreign currencies are most popular in the housing loan market.
Let's be franc
"Ninety-five percent of mortgages are taken in [Swiss francs]," Sencio said. However, he sees a trend among banks to limit loans given in francs, euros or dollars. Some banks, such as ING Bank lšski or Bank Zachodni WBK, are even withdrawing from this segment of the loan market since the weakening of the złoty in the recent post-election period, made the installments more expensive for the average mortgage-payer.
There are instruments which help the client reduce the risk factor. "The most popular of these is changing the currency of the loan," Sencio explained. If currency conditions become unfavorable, the currency can be changed, however, "some banks set limits on the annual number of currency switches and have additional charges for doing so," says Sencio. What's more, a loan in złoty usually brings with it a higher interest rate than those in foreign currencies.
The mortgage market still has a lot of growth potential in Poland as the rate of loan debt to salaries is only at 18 percent, in comparison to between 60 and 70 percent in most Western countries, and over 100 percent in some. According to the statistics provided by the Office of Credit Information (BIK), the total value of mortgages for individual clients at the end of Q3 of 2005 was zł.41 billion with the average loan worth zł.85,000.
