Albania - Services

Albania's banking system under communism was state-run and underdeveloped. By the early 1990s, the 3 major state banks were cash-strapped due to irrecoverable loans to loss-making industries. Since then, almost all banks (except the largest one, the Savings Bank) have been privatized, most in the form of joint ventures with foreign partners, including the Italian Albanian Bank (IAB), the Arab Albanian Islamic Bank (AAIB), and the Dardania Bank (DB). The sector has been plagued by a lack of capitalization and a lack of experience and technology. Little long-term investment credit is available, and debt collection is uncertain. The 1997 financial pyramids collapse annihilated US$1 billion in savings and only US$50 million seemed recoverable by 2000. To relieve the situation, the Bank of Albania (the central bank) imposed restrictions on banks (including credit limits and minimum interest rates) that additionally contracted the credit market. Albanians became extremely cautious in depositing money in the banks, and private sector investment started to rely on financing through family, friends, and partners. Larger companies transferred funds abroad and Albanian banks came to rely on short-term deposits and lending to selected customers for short-term trade financing. The privatization of the remaining state-owned bank, the Savings Bank (SB), was delayed in 2000 due to improperly audited accounts and was rescheduled for June 2001.

Albania's tourist industry is in an embryonic stage. There are few foreign visitors to its picturesque Mediterranean shore because of the lack of adequate infrastructure and fears for personal safety. A few modern hotels appeared in 2000, backed by foreign investment, but revenues were weak. With the privatization of retail businesses in the early 1990s, the sector was characterized by a large number of small family retailers. The quality of service was still rather poor because of the low household income and the subsistence farming of the majority of the rural population. In 1999 and 2000, the retail and hotel industry had a modest boom due to the presence of foreign troops involved in the Kosovo war.