Kosovo wants to lure investment into its banking industry to increase competition and spur lending as the economy of Europe’s youngest state accelerates, acting central bank Governor Gani Gerguri said.

“There is still plenty of opportunity for new players and as a regulator, we would like to see big regional banks entering Kosovo to increase competition,” Gani Gerguri, the acting central bank Governor of Kosovo said in an interview in Pristina on Nov. 23. “I don’t want to mention any names but I am talking about banks that dominate the markets in southeast Europe.”

Eight banks are currently operating in Kosovo, which unilaterally declared independence from Serbia in 2008, with units of Germany’s ProCredit Holding AG, Raiffeisen Bank International AG of Austria and Slovenia’s Nova Ljubljanska Banka d.d. holding a combined 78 percent of the market, according to the central bank.

The economy of Kosovo, which has a 90 percent ethnic- Albanian population, is powered by exports, foreign direct investments and remittances from Kosovars living in Western Europe, making up to 15 percent of the country’s gross domestic product, according to the United Nations Development Program report.

Direct investments, mostly in the banking and insurance industries, according to Gerguri, dropped to 281.6 million euros ($375.5 million)last year from 366.7 million euros in 2008.

UniCredit is the biggest lender in emerging Europe as a whole, with 107.6 billion euros in assets, ahead of Erste Group Bank AG, Raiffeisenbank International AG and Societe Generale SA.

Remittances Fall

“Our financial sector wasn’t directly affected by the global financial crisis because the banking sector was not exposed so much to the rest of the world,” he said. “Remittances have dropped slightly during the crisis, which is actually good for the sustainability of the economy and the financial sector.”

Kosovo’s GDP is forecast to expand an annual 5.9 percent next year, the fastest pace in the Balkans, after an estimated 4.6 percent growth this year and 4 percent in 2009, Gerguri said. That compares with Slovenia’s forecast for 0.9 growth this year and 2.5 in 2011, according to the Ljubljana-based government’s economic institute.

The country agreed in July to a 110 million-euro aid package from the International Monetary Fund. The total amount pledged by international donors, including the World Bank and European Commission, has increased to 320 million euros, Economy and Finance Minister Ahmet Shala said in an interview earlier this month.

Kosovo, like its Adriatic Sea neighbor Montenegro, has been unilaterally using the euro since 2002, providing the country with the macroeconomic stability, according to the central banker.

Gerguri was named acting central bank chief after the July arrest of Hashim Rexhepi who is accused of corruption, abuse of authority, tax evasion and money laundering. Rexhepi was released on bail on Nov. 18 with his lawyer denying all the accusations.