One of the long-debated themes in Serbia is the non-existence of a retail non-performing loan (NPL) market in Serbia.
Following the 2008 World Economic Crisis, Serbia managed to regulate the corporate non performing loan market, and to decrease the NPL level from 20% to 3,19 %. However, the retail NPL market remained a taboo. There are several reasons for this and the main one is that the general public fears that regulating the retail non-performing loan (RNPL) market would essentially legalise debt slavery.
However, the truth is quite opposite. Instead of establishing a retail non-performing loan market, the NPL companies mostly offer side services to the banks on debt collection, whereas the real effects of such services is the de facto purchase of RNPL. Bearing this in mind, and the fact that Serbian law completely lacks regulation of personal insolvency (as well as an entrepreneur’s insolvency), this creates a situation close to debt slavery for many citizens that defaulted on loans and brings them into much greater jeopardy. When we take into consideration the current crisis and inflation, which includes the sharp increase in interest rates, Serbian society could enter a dark age.
On the other hand, the necessity of establishing a RNPL market could be beneficial for all parties: (i) the banks could release large amounts of reserves with the National Bank of Serbia (NBS) and invest them further, (ii) the state could improve its legislation through introducing a personal insolvency, which could be further used to improve social service offices, and (iii) citizens in distress could be offered a fresh start and assistance from social services to overcome the crisis.
Even the NPL companies would benefit, as they would be doing their business in a much better environment for investing into RNPLs. Social services have suffered a period of neglect for decades and should be re-established as an institution that can also assist debtors to overcome their personal debts via well-educated and skilled insolvency administrators (counsels). Ultimately, establishing a solid system of personal insolvency on the one hand and a RNPL market on the other, could boost economic growth.
Unfortunately, the state and NBS currently lack such a holistic view and would most likely wait for civil unrest to occur, or for the European Union’s request to deal with these issues within its path to joining the EU. Such an endeavour could require significant funds, but some of this could be secured from the EU funds available for the improvement of institutions. On the other hand, the benefits could far outweigh the cost. EG