Comparison of banks and non – bank creditors

According to 2013 date, 18 licensed creditors were operating in the Latvian non-banking sector, while 28 commercial banks were operating in the banking sector. 

Creditors of the non-bank sector issued loans in the amount of 348347.0 thousand euros, while creditors of the non-bank sector issued loans in the amount of 15618219 thousand euros.

It should be mentioned that the loan portfolio

It should be mentioned that the loan portfolio

It is also called loan portfolio in other words. 6% (61.2 million euro) of total consumer credit was provided by Latvian non-bank creditors, while the remaining 94% (745.6 million euro) of total consumer credit were provided by Latvian bank creditors or Latvian commercial banks.

 1% (EUR 61.2 million) of the total number of loans to households was provided by non-bank creditors, while 99% (6034 million euros) of total loans to households were provided by Latvian commercial banks. 

Total profit of the non-bank creditors sector was 38.4 million euros


While the banking sector’s creditors totaled 246.2 million euros. In the non-bank sector, there were 22% of customers who have difficulty repaying their loan portfolio, or delayed, while the banking sector had 19.9% ​​of delays. If you need to compare non-bank and bank annual interest rates, or LPG, which is, let’s say, the most important factor in the choice of creditor and credit type, in the banking sector, annual interest rates are measured in a few tens of percent while in the non-banking sector, annual interest rates reach hundreds of percent.

However, one important nuance in this regard is that the GPL calculation formula was originally designed to calculate the annual interest rate for long-term services, ie to calculate the APR for services with a maturity of more than one year, so the formula is’ annual interest rate ‘. However, as is well known, non-bank creditors are mainly engaged in short-term services with a maturity of less than one year, one or, at most, a few months.

Despite these significant differences

 Despite these significant differences

The GPL calculation formula is still not adapted to the provision of short-term services, so it is wrong to compare the GPL for banking and non-banking sectors. The high APR for non-bank services sector is due to the short repayment term, the lower the repayment term, the higher the APR.

Of course, we will not deny that the non-bank creditors’ LPG is so high because of their repayment terms – non-bank creditors are private creditors who, like any company, want to make a profit, so they raise their prices for theirs services. As long as there is a demand that is known to be high at this time, there will be no incentive to reduce service prices.



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