Albanian Prime Minister Edi Rama has pledged to make the country a cashless place by 2030, a move that has left many in disbelief in a country where cash is the king and trust in banks is almost non-existent, writes Politico.
For years, Albanians have preferred to keep their money under their mattress rather than in banks. However, if Rama succeeds in his plan, Albania will become the first country to go cashless.
The prime minister’s idea is largely driven by the fact that a large number of transactions are currently taking place, as they say, “under the counter.” Selami Xhepa, a professor of economics at the University of Tirana, said that eliminating cash is an absolute priority in countries with a destabilizing amount of illegal money in their financial systems.
Most Albanians prefer to keep their savings outside the banking system. Banknotes are kept somewhere safe, and payments are made in cash at every opportunity. Even in tourist guides, a common advice for tourists is: cash is king. While major chain stores and major restaurants accept payment cards, cafes,
beauty salons, small shops, telecommunications companies and grocery stores prefer to accept cash.
The situation is similar on buses and taxis.
Albania’s center-left government wants to rid the country of what the European Commission’s 2024 report described as a large gray economy that hinders business and healthy competition, not to mention lost tax payments.
The grey economy in Albania is estimated to be between 29% and 50% of GDP.
Spiro Brumbulli, secretary general of the Albanian Banking Association, said the government and relevant institutions are working on a plan to phase out cash. It includes a cap on cash payments and joining the European Union’s SEPA system.
One of the main problems is Albanians’ aversion to banks. A survey by the Albanian Banking Association found that only 34% of Albanians trust banks. The World Bank, meanwhile, reports that less than 50% of Albanians have an active bank account. However, the Bank of Albania says that 78% of the population has access to a bank account.
Genc Pollo, a co-founder of the opposition Democratic Party and former deputy prime minister, told Politico that efforts to curb the shadow economy by banning cash are “shooting sparrows with a cannon.” The
politician called the idea an attack on the personal freedom of legitimate money holders.
Pollo agreed that Albanian banks can be inconvenient and expensive, and that more sensible regulation and more competition would be a better path than a cash ban. He said he has little hope that a society so accustomed to cash could completely eliminate shadow economy transactions.
Several countries, including Sweden, Estonia and Ireland, have considered switching to cashless transactions. However, Albania is a different story, and public skepticism is understandable. After the collapse of the communist regime, various private investment firms, banks and other financial institutions sprang up like mushrooms after a rain, offering interest rates on deposits that were unreasonably high. Some of the firms offered as much as 25% on deposits. At the height of the financial frenzy, one in six Albanians had invested money, and in many cases even all their savings, in financial pyramids. The first investors received generous dividends, but later the scheme collapsed and people were left not only without profit, but also without money.
In January 1997, the first such companies began to go bankrupt, and Albanians tried to withdraw their funds en masse, contributing to further collapse. By March, the country was in complete chaos, and riots began.
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