In a country where cash is the law, Prime Minister Edi Rama's ambition to make Albania cashless by 2030 could turn the entire society upside down.
For years, Albanians have preferred to keep their money under their mattresses, next to their AK-47 assault rifles, as the national joke goes, rather than in banks. But if Rama succeeds in his plan, Albania could become the world's first cashless economy.
The reason for this plan lies primarily in the fact that a huge number of transactions are currently taking place "in the black." Eliminating cash "is an absolute priority for countries with a high rate of informal economy and destabilizing amounts of illegal money in the financial system," says Selami Xhepa, professor of economics at the University of Tirana.
The problem is that neither the banking system nor society may be ready for that leap.
Most Albanians prefer to keep their savings outside the banking system, hide their money, and pay in cash whenever possible.
Even travel guides to Albania often include the advice "cash is the law." While most supermarket chains and larger restaurants accept cards, cafes, beauty salons, boutiques, telecommunications companies, and grocery stores do not.
Estimates suggest that the shadow economy accounts for between 29 and 50 percent of gross domestic product.
In a boutique in downtown Tirana, when "Politiko" tried to pay with a card, the saleswoman looked confused and asked: "Cash?"
It was similar in the taxi and on the bus - the conductor contemptuously said: "40 leka".
The center-left government wants to rid Albania of what the European Commission called in its 2024 country report a "large informal economy" that stifles entrepreneurship and competition (not to mention reducing tax revenues).
Estimates suggest that the shadow economy, a part of the economy that is not recorded in official statistics, accounts for between 29 and 50 percent of gross domestic product.
Spiro Brumbuli, secretary general of the Albanian Banking Association, told Politiko that the government and institutions will prepare a plan for the gradual elimination of cash. The next steps include setting limits for cash purchases, integration with the European SEPA payment system by October, and the introduction of SEPA instant payments shortly thereafter.
Overcoming banking trauma
One of the problems is that Albanians simply don't like banks. A recent survey by the Albanian Banking Association found that only 34 percent of the population trusts them. The World Bank reported that less than half of Albanians have a bank account.
The Central Bank of Albania states that 78 percent of people "have access" to a bank account, which is lower than the European average of 96 percent.
Not everyone is convinced that the plan makes sense. Genc Polo, co-founder of the opposition Democratic Party and former deputy prime minister, told Politiko that trying to shut down the shadow economy by banning cash "is like killing a chicken with a cannon." He called the move "an attack on the personal freedom of legitimate banknote owners."
While he acknowledged that Albanian banks may be "clumsy and expensive," smarter regulation and more competition from the online payments and crypto sectors would be a better path than a cash ban. He has high hopes that a cashless society would reduce money laundering.
Erald Kapri, a newly elected MP from the center-right Prilika party, told Politiko that he suspects this is a political game. "It's just another one of Rama's ideas to divert attention and focus from the real problems in the country, like corruption or the high cost of living," he said.
Post-communist trauma
Many developed countries, such as Sweden, Estonia, and Ireland, are working on a gradual transition to cashless payments. Albania is a different story, and public skepticism is understandable.
After the fall of communism in the early 1990s, banks and financial institutions began to spring up, along with "investment companies," promising incredibly high interest rates of up to 19 percent on savings deposits.
A few companies soon grew into more than 25, and at the height of the madness, one in six Albanians had invested money, often their entire life savings, in pyramid schemes. Those who invested early received generous payouts, but these became smaller and more infrequent as the system began to collapse.
Many developed countries, such as Sweden, Estonia and Ireland, are working on a gradual transition to cashless payments.
By January 1997, the first companies began to fail, triggering massive withdrawals of funds and creating a vicious cycle of collapse. By March, the country was already in chaos, and the uprising had begun. Soldiers and police were deserting their posts, and masses of angry and robbed Albanians accused the government of failing to prevent the fraud, and even of profiting from it.
About 2.000 people were killed in clashes between citizens and the authorities, as well as by gangs armed with weapons looted from state warehouses - more than a million pieces. In total, about 1,2 billion dollars were lost, which was equal to half of the GDP at the time.
This period caused waves of migration, set the country back years in terms of development, and destroyed citizens' trust in banks and the state.
Expensive banking service
Over the nearly three decades that followed, banks failed to rebuild trust.
Part of the problem, says Professor Dzepa, is that banks offer few benefits and are expensive to use. This discourages people from opening accounts, using cards and making digital transfers.
Most banks, he says, "have maintained discriminatory interest rates." "High for loans and very low for savings. International transfers also have high fees, which discourages emigrants from sending money," he added.
Domestic digital transfers between Albanian banks are also expensive (sending 500 euros cost up to 50 euros for this Politika journalist), while the costs of other types of transactions can be equally unaffordable.
The exchange rates for converting lek to euros offered by banks are also extremely unfavorable.
Even in commerce itself, businesses are complaining about fees of up to 3,5 percent per transaction for card processing.
Brumbuli from the banking association said some businesses even charge extra when customers pay by card.
This is how they avoid taxes, because cash transactions are often not recorded through fiscal cash registers.
The Governor of the Central Bank of Albania, Gent Sejko, declined to comment.
The ambition to eliminate cash by 2030 is bold, but success still depends on the introduction of a cheap, easily accessible digital payments infrastructure, potentially including a central bank digital currency or a national instant payments platform.
Although the Central Bank of Albania has been studying such currencies and "stablecoins" (a form of cryptocurrency) as potential assets, there is still no official strategy. Without a clearly defined plan for such mechanisms, Rama's idea risks remaining just an ambition.
Prepared by: A. Š.
Bonus video:
