Restructuring Albania’s antiquated banking system has been no easy task, but a 20 percent return in the last two years shows promise

“As in other transition economies, banking reforms in Albania were implemented as an integral part of the structural reforms undertaken to transform the Albanian economy into a market-oriented one”, says Mr. Ardian Fullani, Governor of the Bank of Albania, at the Fifth International Banking Forum held in Athens in December of last year.

No other nation from the former Soviet bloc had such an underdeveloped banking system - the legacy of living in extreme isolation for 45 years. Today, however, Albania has an increasingly solid sector with 17 financial institutions, a growing lending market and more sophisticated services than ever.

“Transition economies of the region are lucrative markets,” Mr. Fullani said. “They are growing substantially faster than traditional European markets and offer impressive prospects for high profits and significant growth. The return on banking activity in Albania during these last two years has been 20 percent.”

One example of a successful foreign institution in Albania is the American Bank of Albania (ABA). Wholly-owned by the Albanian-American Enterprise Fund (AAEF) and established pursuant to the 1989 U.S. Government Act for the support of East European Democracy, the AAEF established ABA through a $30 million American government grant. The bank’s primary purpose is to promote private sector development in Albania, and to do so it invests in a wide range of private enterprises while disseminating Western business expertise.

Today, ABA is the third largest bank in Albania, making a name for itself by providing clients with a state-of-the-art IT platform. Lorenzo Roncari, President and CEO of the bank, says, “Albania is on the map. There is progress happening here. It’s not the same country it used to be in 1992 or 1997, it’s a completely different place. New rules are being established and they’re working.”

Another key player is Banco Italo Albanese (BIA). As of 2005, the bank registered a net capital of $20 million and a net income of $3.2 million. It is currently undergoing privatization by Italy’s Banco Sao Paolo di Torino, reinforcing its position as a bank of choice for Italian business. Administrator and Delegate of BIA Giovanni Bogani says, “The banking sector is going to accompany the development of the Albanian economy. We have been and will be one of the most active partners in the market.”

The insurance sector has likewise benefited from reform policy. INSIG is Albania’s leading insurer, providing property and casualty coverage (P&C), life insurance and P&C business accounting products. With branches in Kosovo and Macedonia, INSIG opened in Albania in 1991 and faced the challenge of introducing the concept of insurance.

Today INSIG is growing into one of the nation’s biggest companies with a substantial financial capacity. While it is currently undergoing a privatization process, set to be completed by the end of this year, General Manager Mr. Piranjani says that this will “provide further opportunities for developments in INSIG while helping the whole insurance industry in Albania and the region.” The company also plays a key role in the development of non-banking businesses and demonstrates the government’s commitment to the wider financial sector.