Property rights in Kosovo - Analyzing the impact on access to credit

Abstract: After the war in Kosovo in 1999 there was much confusion over property ownerships. This essay examines the importance of increased property rights for economic development in the region since then. The link in focus is that between the decisions over property disputes after 1999 and the access to bank credit. Because of the short time frame, no data can with accuracy reveal the connection between the juridical efforts to solve the property rights situation in Kosovo and bank lending. In addition therefore, other macroeconomical data are used to analyze the effects of other factors on lending. Showing a significant causality is difficult without field studies or larger amounts of data. In this essay, signs of a connection between property rights and bank lending are however observed, where the influence of other factors can be deemed excluded. The connection is attributed to the increased access to credit when bank customers can use their legally owned property as collateral security. When looking at the broader macroeconomical landscape, there are strong indications that credit rationing has been prevalent on the credit market. The interplay between property rights and credit access and how it relates to credit rationing is explained as well. The attention of economists is increasingly turning to the role of well functioning institutions. This essay provides a method by which to study a phenomenon like property rights, even as access to and reliance on the data is severely limited. No previous study found can be closely related to this analysis. There are quantitative examinations of legal ownership in relation to access to credit, but not in any context similar to that of Kosovo.