Bankieri 29 Anglish vizionim

FINANCIAL INCLUSION

THROUGH FINANCIAL EDUCATION

Publication No. 29 October 2018

Bankieri

The Albanian banking sector is, for the first time, included in “Banking in Europe; the 2018 Facts & Figures�, an annual update on the banking sector in Europe, published by the European Banking Federation (EBF).

AAB MEMBERS*

* From October 2018, the Albanian banking system consists of 13 commercial banks.

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CONTENT

Editorial Financial education - An organic part of overall education and a lever for a greater financial inclusion Prof. Asoc. Dr. Elvin MEKA

Bankieri No.29, October 2018

Bankieri

Publication No. 29 October 2018

Publication of Albanian Association of Banks

FINANCIAL INCLUSION

THROUGH FINANCIAL EDUCATION

EDITORIAL TEAM: Elvin Meka Editor-in-Chief Eftali Peçi Coordinator Junida Tafaj (Katroshi) Collaborator Dorina Zarka Photographer Design & Layout: FCB Afirma

Frontline Financial Inclusion & Financial Education - An Introduction Oya ARDIC, Edlira DASHI Financial education - Supporting informed and healthy decisions of the future Dr. Mimoza KAÇI From financial literacy to financial inclusion Giovanna PALADINO, PhD Sí dígame - An initiative to expand the financial education and awareness Beatriz MORILLA PIÑEIRO Economics education - An investment for young people Suela BALA

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Special

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Aktualitet The new fees for bailiff’s services Dr. Spiro BRUMBULLI

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Experts' Forum Market makers for the Albanian government papers and their secondary market Suela TOTOKOÇI (VOKO) Financial Education in Digital Age Fatmira KOLA, PhD SWIFT gpi: Transforming cross-border payments Judit BARACS The fast pace evolution of the Banking business model after the crisis Elvis ZIU, MBA, CPA, CA Economist Corner Issues regarding economic growth, employment, labor productivity and poverty in Albania Prof.Dr. Adrian CIVICI Sustainable Development Goals

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AAB: Activities - Trainings

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Printed by:

Bankieri is the official publication of the Albanian Association of Banks which mainly focuses on the Albanian banking industry. Bankieri provides readers with valuable information on the financial industry's developments in general, and of commercial banks in particular.

ALBANIAN ASSOCIATION OF BANKS Street "Ibrahim Rugova" SKY TOWER, 9/3, Tirana Tel: ‘+355 4 2280371/2 Fax: +355 4 2280 359 E-mail: bankieri@aab-al.org; www.aab.al

EDITORIAL BOARD: Silvio PEDRAZZI AAB Chairman & CEO of Intesa Sanpaolo Bank Albania

Dritan MUSTAFA AAB Executive Committee Member & CEO of Tirana Bank

Ervin KOÇI Chairman of Albanian Financial Supervision Authority

Adela LEKA AAB Vice Chairperson & Spokeperson of the Management Board, Procredit Bank

Andi BALLTA AAB Executive Committee Member & CEO of American Bank of Investments

Adrian CIVICI President of European University of Tirana

Maltin KORKUTI AAB Executive Committee Member & CEO of Credins Bank

Bozhidar TODOROV AAB Executive Committee Member & CEO of FIBank Albania

Hysen ÇELA Chairman of Albanian Institute of Authorized Chartered Auditors (IEKA) Spiro BRUMBULLI Secretary General, Albanian Association of Banks

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EDITORIAL

Financial education

an organic part of overall education and a lever for a greater financial inclusion Given our country’s characteristics, a greater financial inclusion requires more financial education and more sophisticated market infrastructure. In this regard, the financial education could turn into a useful lever for a greater financial inclusion.

Prof. Asoc. Dr. Elvin MEKA1 Editor in Chief

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inancial inclusion is a hotly debated and discussed topic, especially following the last financial and economic crises, due to its special role in any country’s economic and financial development.

As a component of the demand side of the financial market, its role and impact must be viewed as important as the other supply side components, like: banking & financial infrastructure, products and services, and regulatory framework.

Those components may be either compliments or substitutes of each other, given the stage of development of the financial system, and above all, the country characteristics, as Grohmann, Klühs and Menkhoff put in their discussion paper of 2017 . So, in simple words, improving financial literacy is always useful for improving financial inclusion.

When it comes to Albania, the financial inclusion is a multifaceted challenge, not only for the society, but also for the government and all relevant institutions in this regard, thanks to the development history of the Albanian financial system. We had to develop banking activity nearly from scratch, build expertise and know how, create financial infrastructure, while trying to educate the general public, who had a quite basic, or no financial literacy at all. Even nowdays, Albanian score well below average OECD countries in terms of financial literacy, notwithstanding continuous efforts made with regard to financial education.

Regarding the financial education in Albania, we can easily recall and hail industrious efforts of various stakeholders, ranging from banks, with their efforts in this regard as part of their social responsibility, the Bank of Albania, with regard to its continuous investment (not only in monetary terms) towards a massive financial education, various NGOs' endeavors and partnerships with the Ministry of Education, Youth and Sports to introduce specific elements of financial education in school curricula, etc. On the other hand, banks have been successful, so far, in creating a modern market infrastructure, thus creating a solid basis for a greater financial inclusion, within a relatively short time frame. However, given our country’s characteristics, a greater

financial inclusion requires more financial education and more sophisticated market infrastructure.

In this regard, the financial education could turn into a useful lever for a greater financial inclusion. This would, however, require that financial education to be an integral part of education in general, by treating it as a public good, as the education is, and should be considered, in reality, and furthermore, to put it in the context of a national strategy, for financial education in Albania. It should be noted also that the ultimate intention of financial education for financial inclusion is to support people’s behavior change, which is far more instrumental for their welfare, than other things. As Mr. Justin Trudeau, Canadian Prime Minister once said: "We need education to enable people to learn, think, and adapt. Our natural resources are important, and they always will be, but Canadians know that what it takes to grow and prosper isn't just what's under our feet, it's what between our ears!"

Lecturer, European University of Tirana, EUT - UET.

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Grohmann, A., Klühs, T., and Menkhoff, L. (2017) “Does Financial Literacy Improve Financial Inclusion? - Cross Country Evidence”

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FRONTLINE

Financial Inclusion & Financial Education An Introduction

Financial education enables the individual to access, choose and use the various types of financial services, but it also expands beyond the various transactions into the personal choices of the individual to save or invest.

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Oya ARDIC

Senior Financial Sector Specialist WORLD BANK

Edlira DASHI

Financial Education Specialist WORLD BANK

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hat is financial inclusion?

Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services– transactions, payments, savings, credit and insurance – that meet their needs, delivered in a responsible and sustainable way. Thanks to greater access to financial services, individuals can better manage their day-today needs, overcome unexpected events and engage in long-term planning, through savings and investment.

Thus, financial inclusion is a means to reducing poverty and enhancing shared prosperity.

Recognizing the importance of financial inclusion for development outcomes, the international development community has been putting more emphasis on ensuring financial inclusion in the past decade. For example, financial inclusion is recognized as a key enabler of the Sustainable Deve lopment Goals (SDGs), and is part of the agenda of G20 through its Global Partnership for Financial Inclusion. In 2013, the World Bank Group announced an ambitious vision of Universal Financial Access by 2020, wherein all adults will have access to a transactions account, as a stepping stone to

financial inclusion.

All these efforts have been paying off. Since 2011, some 1.2 billion adults have become new accountholders.

Today, approximately two out of three adults around the world (69 percent of the adult population) have a bank account. Despite this great progress, challenges remain. There are still an estimated 1.7 billion adults without an account. Additionally, progress has been uneven: Globally, 72 percent of men and 65 percent of women have an account—reflecting a persistent gender gap of 7 percentage points since 2011. Additionally, the gap between the richer 60 percent and the poorer 40 percent, in terms of account ownership, has remained the same in the past few years.

So, who are the unbanked?

To understand the challenge better and to develop informed strategies, we need to respond to this question first. According to the latest data available (from the World Bank’s Global Findex Database), the unbanked are: • Predominantly women1 • Predominantly poor 2 • Not well-educated 3 • Unemployed 4 Given this context, the challenge ahead of us is big: the unbanked

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are among the hard-to-reach groups, they live in rural areas, they belong to the traditionally disadvantaged groups. In addition to trying to reach the unbanked, the challenge also includes encouraging usage for those that already have access to financial services.

To whom does financial education matter and why?

At the same time, there is evidence5 that the poor need and use financial services— but not necessarily provided by the regulated financial service providers. They do have sophisticated financial lives, they save and borrow. In many cases, these transactions are done within social networks with the help of relatives and friends in a circle of trust. As part of the set of solutions proposed to overcome the challenge of bringing the traditionally disadvantaged groups in the regulated financial sector, financial education plays a pivotal role.

“Financial education is the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice develop the skills and confidence to become more aware of (financial) risks and opportunities to make informed choices, to know where to go for help, and take other effective actions to improve their financial well-being.” – OECD. Financial education has become a necessity for the average individual in an era of 1 2

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quickly evolving financial sector and the proliferation of innovative technologies with disruptive effects in the market. As the financial sector is expanding the variety of financial products, diversifying the delivery channels and new financial service providers are entering the market, a greater responsibility lies with the individual to make sound choices and take advantage of the broader options.

This requires greater financial aptitude from the individuals to maximize benefits, and also minimize potential risks related to their financial decisions.

Financial education enables the individual to access, choose and use the various types of financial services, but it also expands beyond the various transactions into the personal choices of the individual to save or invest.

In economies of transition like of Albania, the increasing urbanization has led to the erosion of family and community support that accompanies development, ultimately making the individual more reliant on the financial sector.

From a retail perspective, a financially educated individual means more opportunity stemming from increased demand, more competition and greater propensity for good service delivery. At the national level, financial literacy brings about greater government accountability, economic growth through investment and lower pressure on national budgets for social safety nets.

Enhancing financial education

requires a concerted and tailored effort to the needs and culture of the country. Given that financial education in many cases requires changing attitudes, perceptions and behaviours of individuals, it is important to demonstrate the value of education while also giving the individual the opportunity to learn by doing.

Best practices around the world suggest that financial education can be most effective if delivered through various channels and formats.

Financial inclusion landscape in Albania According to the 2017 Global Findex by the World Bank, Albania marks the lowest level of access to financial services in Southeast Europe and the highest level of social disparities among various categories in the region.

Overall 40 percent of the adult population in Albania has an account, compared to 65 percent in Europe & Central Asia (excluding high-income economies). Urban, educated and better-off individuals are more likely to be financially included.

Only 31 percent of those living in rural areas own an account, compared to 52 percent of the urban population.

Similarly, account ownership is significantly lower among the adult population with primary education or less (27 percent) compared to those with secondary education or higher (56 percent). In addition, 23 percent of the poorest 40 percent of the population own accounts compared to 52 percent of the richest 60 percent. There is a

56 percent of the unbanked are women as opposed to 44 percent of the unbanked being men AND Women are overrepresented among the unbanked in most economies.

Twice as many unbanked adults live in the poorest households in their economy as in the richest ones: i.e. on average, 27 percent of adults in the lowest income quintile in an economy is unbanked, in comparison to 13 percent in the highest income quintile AND in economies where a small share of adults remains unbanked, most of the unbanked are poor.

Most unbanked adults have a primary education or less.

Almost half of unbanked adults are out of the labor force.

E.g. Portfolios of the Poor by Collins, Morduch, Rutherford, and Ruthven (2009).

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gender gap of 4 percentage points in account ownership in Albania, one of the lowest in the region.

The unbanked adults in Albania reported not having accounts due to not having sufficient funds (77 percent of those who do not own an account) and due to high costs linked to an account (40 percent).

Other reasons cited include distance to access points and the lack of the necessary documentation to open an account.

Low financial access in Albania is also paired with low levels of usage of regulated financial services. To this end, Albania has the highest rate of account inactivity with 18 percent of account owners not using their accounts at all in the past year. On the other hand, the typical Albanian has a lively financial life outside of the regulated financial sector. Twentysix percent of Albanian adults received domestic remittances in the past year but only 4 percent did so using an account, and 24 percent borrowed some money from friends or relatives.

The World Bank’s work on financial inclusion in Albania The World Bank in Albania is focusing extensively on the diversification of the financial sector in Albania to allow for greater financial inclusion. In this context, the World Bank is currently implementing the

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Remittances and Payments Program (RPP) financed by the Swiss Secretariat of Economic Affairs (SECO). The RPP aims to increase the efficiency of

retail payments in selected countries, with a specific focus on international remittances.

The overall objective of the RPP in Albania is to increase access to and usage of transaction accounts and electronic payment

instruments, by improving the efficiency of domestic retail payments and international remittances.

Ultimately, this program seeks to create the conditions for the provision of cheaper and more easily accessible payment services for the migrants and their families, and for the overall population of Albania.

Payment services – under certain circumstances – can facilitate access to other financial services, thus advancing financial inclusion, and in many cases are critical to those services’ efficient provision.

In Albania, the RPP includes a component on Project Greenback 2.0, an initiative of the World Bank to engage migrant communities in selected cities to offer financial education and awareness raising.

The overall objective is to increase efficiency in the market for remittances through an innovative approach: promote change inspired by the real needs of the ultimate beneficiaries of international money transfers – i.e., the migrants and their families in the recipient countries.

Cooperation between migrants, remittance service providers, and public authorities is key for the achievement of the Project’s objective. In Albania, Project Greenback 2.0 is implemented in Berat.

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FRONTLINE

Financial education

Supporting informed and healthy decisions of the future AFSA is committed to building practical initiatives, with long-term impact, in cooperation with the Bank of Albania and other public and private institutions, to enhance financial education and inclusion in Albania.

retirement preparation, etc., can help anyone to enjoy life, in the longrun.

Being aware about the importance of increasing financial education, the Albanian Financial Supervisory Authority has approved “The Strategy to increase consumer and investor confidence in the

Dr. Mimoza KAÇI Deputy Executive Director ALBANIAN FINANCIAL SUPERVISORY AUTHORITY

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inancial education is an indicator that is deemed as supporting not only individual well-being, but also helps to a healthy economic development of the whole country.

This is so, because every individual with solid financial literacy is less vulnerable and affected from financial system risks, which may be even systemic. Thanks to financial information, it is easier for individuals to make decisions on choosing the right and proper financial products, thus avoiding the risk of being involved in dangerous, or misleading financial schemes.

Enhanced financial knowledge serves for a better financial planning, smart family budgeting which, through savings, disaster insurance,

The Authority attempts to increase financial inclusion is not limited to the need to increase financial literacy. Thanks to AFSA's engagement in 2017, Albania was selected as one of the four winning countries for a comprehensive voluntary insurance project, a project supported by local and international partners.

markets under supervision”, for the period 2017-2019. This strategy includes a number of initiatives related to increasing information and knowledge on non-bank financial markets. The basic objective of the Strategy is: "information, education, awareness raising and consumer protection in markets under AFSA supervision, which will also increase consumer/investor confidence in

these markets".

The strategy’s implementation has kickstarted with an information campaign, as well with open lecture sessions and classes, at several universities in the country. The survey conducted with students at these universities shows that their knowledge about non-bank financial markets, under AFSA supervision, is modest and insufficient form them to be involved in such areas. The level of knowledge is higher for the insurance market, but mainly related to compulsory insurance products, or products that connect students with enrollment procedures at school. On the other hand, there are indicators that show an interest of students to deepen their knowledge.

A student survey, conducted by the Albanian Financial Supervisory Authority during the period October 2017 – February 2018, shows that their knowledge about nonbank financial markets is modest and insufficient, with regard to securities, private pension funds, or even investment funds.

Also, the implementation of the strategy includes the cooperation with Ministry of Education, Sports and Youth, for adapting school curricula at pre-university education system, aiming at increasing the level of financial literacy, at an earlier age.

In May 2018, AMF organized the First National Conference on Financial Education, with focus on students, where the latter October 2018

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Figure. Level of understanding of investment funds, voluntary pensions, according to student survey (in %)

presented various works on markets under (AFSA) supervision and the importance of financial education for their respective development. The participating students showed high dedication and quality work. AFSA considers the conference as the first step toward initiating a joint dialogue with academic staff, experts of nonbank financial markets and marketbased organizations, to convey new ideas in addressing challenges, the markets under AFSA supervision, are currently faced with.

The authority will continue its endeavors with students and this is not only because they are very

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important to be active in the financial markets, but also because they are seen as supporters and further promoters of financial knowledge, a key factor for growth and inclusion in financial markets.

The Authority attempts to increase financial inclusion is not limited to the need to increase financial literacy.

Thanks to AFSA's engagement in 2017, Albania was selected as one of the four winning countries for a comprehensive voluntary insurance project, a project supported by local and international partners.

The project aims to promote and develop products suited to the needs

of low-income population and smallbusinesses, particularly in the field of agriculture, with a view to increasing the degree of inclusion of vulnerable groups in low-premium voluntary insurance schemes.

Microinsurance is important for developing countries. This is so, because it is estimated that about 60% of the population lives with less than US$ 8 per day. Some of companies involved in microinsurance in the world, are investing in financial education, so one of the other benefits of micro-insurance is the promotion of financial inclusion and insurance culture.

Various interest groups, such as: insurance companies, banks, financial institutions operating in the microfinance market, as well as other organizations operating in the financial and business area, have been included in this project, in order to sketch a full picture of the situation with views from their respective perspective. Valuable work has been done on several aspects for building trust, cooperative ties, creating a dialogue on voluntary insurances and finding forms, schemes and new products to increase the participation of a wider population in voluntary insurance schemes.

Financial education and increased confidence in financial markets do support a broader financial inclusion of the population. All activities undertaken aim at such objective.

AFSA is committed to building practical initiatives, with long-term impact, in cooperation with the Bank of Albania and other public and private institutions, to enhance financial education and inclusion in Albania.

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FRONTLINE

From financial literacy to financial inclusion Helping people to become financially literate is crucial for both the society and the banking system, as it strengthens the relationships with local communities and favors mutual understanding with customers and partners.

Giovanna PALADINO, PhD

Head of the Technical Secretariat of the Presidency Director and Curator of the Museum of Savings INTESA SANPAOLO BANK

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hould we have to worry about financial illiteracy and exclusion? The answer is, YES. Scores from the S&P and Gallup 2014 survey show that, on average, 67% of adults worldwide (48% in the EU) are financially illiterate, with a significant degree of dispersion across countries, gender, education and age, while 1.2 billion (26%) working – age adults do not have a basic bank account, according to the estimation released by Centre for Financial Inclusion in 2018.

Although clear cut definitions of financial literacy and financial inclusion are not obvious, what is for sure is that, having a BA in economics is neither a necessary nor a sufficient condition for being financially literate. Financial literacy, in fact, relates to the ability of

properly managing personal money, in order to reach our own economic targets. It implies a lot more than simply being acquainted with basic financial notions such as: saving, planning, investment and risk, i.e. with concepts of economic return and diversification.

The standard way to assess the degree of financial literacy - based on surveys about the notions of interest rate, inflation and diversification - is mainly coherent with a cognitive approach.

Therefore, the final score is used to

Indeed, to ensure a healthy and sustainable future, saving needs to be fruitfully and wisely invested. Diverting it from the economic circuit, i.e. hiding it under the mattress, because of the inability to make sound financial decisions, or of the lack of access to financial instruments, will deplete the growth potential of the next generations and will affect everybody’s living standard.

assess the presence of a gap, but is of no help in disentangling its origin, which could be either cognitive or

noncognitive. Risk attitude is a clear example of how personal, genetic, environmental factors can play a role that goes beyond the knowledge of probabilities and random distributions.

Indeed, field experience and evaluation assessments have shown that – in this specific domain – knowledge per se’, although important, is insufficient. Thus, developing the art of personal money management requires practice and a learning by doing process that includes experiencing mistakes and failures. From this perspective, helping people to develop this kind of skills requires to abandon traditional/frontal teaching methods, in favor of emotionally engaging approaches, able to trigger a pro-active learning attitude.

In the 21st century, financial literacy represents a major skill that is essential to embrace the opportunities offered by an increasingly complex economic environment. In fact, the recent succession of international economic and financial crises has shown the importance of knowing the basics about personal money management.

It is no by accident that the portion of population most affected by the turmoil was the one with fewer financial skills and lower economic resources: being familiar with the concepts of risk and diversification is especially useful during period of distress, when random positive returns are less likely, and losses are more frequent. Furthermore,

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DEPOZITA “SMILE” • Norma të larta interesi • Monedhat e hapjes së depozitës janë LEK, EUR, USD • Përfitoni interes për çdo shumë shtesë

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the recent trend in welfare reforms that transfers to common people the responsibility of making very difficult decisions on complex matters such as: the choice of the type of pension fund or health insurance requires all citizens to have a clear view about planning, probability and investment opportunities. Being aware of the meaning of probability, of the expected impact of national economic programs (or welfare reforms) and of the fact the all human manifestations - including the ones concerning financial transactions – are also driven by stochastic forces is increasingly more important to make sound financial decisions, both at personal and community level.

Consequently, being financially literate rises the likelihood of facing a safer future and improves citizens’ and community’s wellbeing. Planning for retirement is costly, in terms of information collection, but it is less so when we have proper interpretative tools; in the same way, the habit of planning expenses and comparing them to inflows may not be very attractive, but it is very useful since prevent over-indebtedness, bankruptcy and despair. Unfortunately, very few people are used to keep track of their money flows, behaving as if budget constraints were loose even when they aren’t.

Researchers have shown that there may be a positive relationship between financial education and financial inclusion, and if there exists a causality link this should run from education to inclusion1. In fact, being financially literate implies having a better understanding of financial products and services;

a deeper comprehension of their risks and advantages; a stronger self-protection attitude against unfair and discriminatory practices, such as predatory lending. With this background, having access to financial products is, without any reasonable doubt, an opportunity for increasing personal wellbeing and may foster a wiser approach to banking services.

Therefore, helping people to become financially literate is crucial for both the society and the banking system, as it strengthens the relationships with local communities and favors mutual understanding with customers and partners.

Banks may contribute to overcome the financial literacy gap providing financial support to existing nonprofit educational initiatives and/ or developing proprietary financial education programs and materials.

The development of these programs, in turn, requires a special mixture of skills, such as: a thorough knowledge of economics and finance, an ability to communicate in an easy and engaging manner and a command of the most advanced teaching methods.

On this basis, in 2012, the Museum of Saving, known in Italy as Museo del Risparmio, was set up by the Intesa Sanpaolo Group, as the first museum fully devoted to financial education. The ground rule was to convey complex financial concepts by means of enjoyable and aesthetically refined materials, so as to mitigate deep-rooted prejudices and involve visitors in proactive learning activities.

It was conceived as a unique place of edutainment where technology and

interactivity are used to surprise and entertain. Audio-visual materials, dramatic animations – which provide examples of contaminations with literature and cinema – video games are utilized to emotionally engage the public.

Video games, for example, are an effective way to experiment, as they provide freedom to evaluate and to understand the rules of wise money management, without experiencing the real pain of making mistakes.

After six years from the Museum’s opening, the game-based learning approach has fully proven its efficacy, as it has allowed the users to overcome the typical shortcomings of traditional educational programs, which tend to be centered on the acquisition of factual knowledge and neglect the complexity of arduous decision-making processes and behavioral traits2.

This is a century in which money should be neither a taboo nor a bare target, but an instrument that helps to realize personal and community projects. Thus, people need to acquire the ability to plan their future by foreseeing the path of their consumption expenditures and by making saving and investment decisions that are coherent with their goals. Indeed, to ensure a healthy and sustainable future, saving needs to be fruitfully and wisely invested. Diverting it from the economic circuit, i.e. hiding it under the mattress, because of the inability to make sound financial decisions, or of the lack of access to financial instruments, will deplete the growth potential of the next generations and will affect everybody’s living standard.

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Among others: Atkinson, Messy, 2013. Promoting Financial Inclusion through Financial Education: OECD/INFE Evidence, Policies and Practice, OECD Working Papers, No. 34.

Grohmann, Klühs, Menkhoff, 2017. Does Financial Literacy Improve Financial Inclusion? Cross Country Evidence, DIW Berlin Discussion Paper, No. 1682.

2 Aprea, Schultheis, Stolle, 2017. Instructional integration of digital learning games in financial literacy education to appear in Lucey & Cooter (Eds.), Financial Literacy for Children and Youth, 2018.

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FRONTLINE

Sí dígame

An initiative to expand the financial education and awareness

Beatriz MORILLA PIÑEIRO

Head of CSR, SPANISH BANKING ASSOCIATION Financial Education Committee Chairman, EUROPEAN BANKING FEDERATION

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hile you are enjoying your summer holidays it's normal to picture yourself after retiring, doing all those things you still want to do (or stop doing), as soon as you transfer your business to someone else, or for when you reach the age in which you can stop working every day, if you wish to. But, what we are really missing while dreaming is if our financial situation is going to be able to support those dreams.

The reality is that getting older does not always mean that we become wiser, at least, when managing our finances. The vast majority of people have never considered how much money will they need to have the quality of life that they expect, when their retirement comes. According to the latest statistics, the average retirement is said to constitute 20 years of our entire lives. But, do we really know how much public pension 14

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would correspond to us when we retire? How much our retirement savings will amount for? Do we know the vehicles of savings that exist and their differences? All the information needed to answer to these questions, is essential for making the right decisions, especially in Spain which is expected to become the world's second oldest country by 2050.

The financial sector is aware of the society´s lack of knowledge and the importance of creating a greater impact on critical social issues, by offering its resources in order to help citizens how to manage their personal finances. As the ex-Governor of the Bank of Albania said: “For each of us, financial literacy is key to living our daily lives with dignity. It is also a “gift” that each of us has to give to him or herself, in order to be a dignified citizen of the world”. Thus, effective financial education can equip citizens with the skills to take advantage of available financial services and to better assess the financial risks they confront. Financial education is also critical to restore trust and confidence in the financial system, promote financial stability and provide the necessary public backing to financial reforms.

Being conscious that financial education and financial inclusion have increasingly held a significant place in the working environment, the Banking Associations are designing and implementing numerous educational projects dedicated to different age groups, deepening their financial literacy and expanding their financial awareness.

In this sense, we, at the Spanish Banking Association, want older

people to have a space in our financial education projects. On the occasion of the upcoming Financial Education Day organized by the Bank of Spain and the National Securities Market Commission (CNMV) we are launching the project “Sí dígame” (Tell me), by being the response that Spanish people say while picking up the phone. The initiative involves two volunteer professors called Jaime and Julio (both with more than 25 years of banking experiences employees), who will solve doubts about different financial issues that may concern us on our daily basis. In a very short video format, Jaime and Julio will solve a variety of questions, ranging from the differences between a deposit and an investment fund, which products are suitable to prepare for our retirement how to get the hang of online banking… The idea is that the videos will circulate through social media and Whatsapp, being the social application used by most of the older people, as they feel comfortable, while interacting with it on a daily basis.

Older people play a fundamental role in our circles, as they transmit the knowledge, talent and experience they have been accumulating throughout their lives. They are key agents in our society, so it is in our hands, the so called “baby boomers” and their children, the “millennials”, to collaborate and seek to draw the attention of the elder citizens to the significance of personal finance and the impact of well-informed decisions on the personal success and self-realization to make sure that we all be able to dream our dreams but making them affordable.

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FRONTLINE

Economics education An investment for young people Junior Achievement strongly believes in young people and their boundless potential and we are determined to create necessary opportunities and spaces where they can conceive ideas, refine their skills and develop as responsible citizens and be prepared to face competition from local and global challenges as executives and experts of the future in a free market economy, for the good of our country. understand how markets function, make rational financial judgments and take sound decisions, establish and operate enterprises, as well as positively recognizing the importance of fair competition, innovation and knowledge as drivers for success, we can prepare and educate responsible citizens, excellent professionals and knowledgeable consumers.

Suela BALA

Chief Executive Officer (CEO) JUNIOR ACHIEVEMENT OF ALBANIA

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n the third decade of its opening to a free market economy, we are all aware that Albania faces a number of urgent challenges, both internal and external, such as: globalization, the dynamic changes of markets, the European integration process, the decrease of competitiveness in domestic, regional and global market, challenges that can be covered successfully, among others, by exploiting positively the greatest advantage the country has: youth.

For Junior Achievement in Albania, the preparation of Albanian youth with necessary knowledge and skills to be competitive, in the conditions of a free market economy, remains the absolute priority. We believe that by guiding the youth towards the concept of a free market economy, enabling them to

Junior Achievement aims to raise awareness and train the Albanian youth to know and understand market trends, to generate innovative ideas, so that they do not remain mere highly qualified job seekers, but they could also assume risks to become job generators through the construction of their enterprises.

Junior Achievement aims to raise awareness and train the Albanian youth to know and understand market trends, to generate innovative ideas, so that they do not remain mere highly qualified job seekers, but they could

also assume risks to become job generators through the construction of their enterprises.

Today, in the 99th year of its establishment, Junior Achievement program is implemented in 122 countries around the world with a sensitive impact, measurable in terms of employment and capital in economies of these countries. In comparison, JA program in Albania is still in its first steps. In its sixth year of implementation, it has extended in 194 secondary schools with its elective modules and starting from the 2018-2019 school - year it will span with financial literacy and entrepreneurship education modules throughout the entire pre - university system.

By and large, Junior Achievementbased economic education enjoys both political will and capital in Albania, EU and further globally. In fact, one of the core modules of the program, Company Program, delivered in high schools across Europe, has been recognized by Directorate General of Enterprise of the European Union as “best practice in entrepreneurial education”. Today, in Albania, Junior Achievement signature program: “Student’s Company” is delivered also as an elective subject across 194 high schools in Albania, encompassing 11,000+ students, age at 16-18, translated to a 45% of market share in public high school system.

The year 2015 presented a unique

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opportunity to introduce JA financial literacy and entrepreneurship education modules were accepted as integral part of civic education at pilot and full scale, as per education reform pace in primary education system in Albania. JA’s implementation in Albania is an investment of the Albanian–American Development Foundation (AADF) and thanks to this strategic support of AADF and institutional support of the Ministry of Education, Sports and Youth today, JA financial literacy and entrepreneurship education modules are fully integrated in the new official curricula of primary education, thus impacting directly 148.560 students & 7.704 teachers.

In December 2017, JAA, AADF

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and Ministry of Education Sports and Youth finalized their efforts to include the subject of economics as a core subject in the 12th grade of high school curriculum, by making economics education mandatory for all high school students. As a result, starting from this academic year, all 29,673 students in their last year of high school will get economics education, while 550 teachers across the country are and will be undergoing continuous subject level and methodological training by Junior Achievement of Albania experts, in close collaboration with Institute for Education Development.

Of course, we are aware that our achievements of the present and future

would not have had the desired impact without an active involvement and valuable contribution from business community in Albania. Supporting business with professional expertise is a valuable asset of JA program, which we are determined to consolidate further. Junior Achievement strongly believes in young people and their boundless potential and we are determined to create necessary opportunities and spaces where they can conceive ideas, refine their skills and develop as responsible citizens and be prepared to face competition from local and global challenges as executives and experts of the future in a free market economy, for the good of our country.

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SPECIAL

Banka Kombëtare Tregtare Financial Inclusion through Financial Education OECD (Organization for Economic Co-operation and Development) defines financial education as: “The process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.” (OECD, 2005) Banka Kombëtare Tregtare (BKT) sees financial education as a crucial part of its success. In general, financial products and services, can help every part of the society to prosper and have a better economy and life. With good and updated knowledge, every potential client will be aware of all the benefits that financial intermediaries can offer, especially banks.

The UFA (Universal Financial Access by 2020) goal is that by 2020, adults, who currently aren't part of the formal financial system, are able to have access to a transaction account to store money, send and receive payments as the basic building block to manage their financial lives. While there has been progress toward financial inclusion, an estimated 2 billion adults worldwide don’t have a basic account. Globally, 59% of adults without an account cite a lack of enough money as a key reason, which implies that financial services aren’t yet affordable or designed to fit low income users.

For this reason, a wide base of our customers are exactly these financially excluded persons that may find banking services as an extra expense to their tight monthly budget. BKT will keep on offering bank accounts and debit cards without charging any maintenance fees to help them better manage their finances and offer them the possibility to gain access to a wider range of products, in order to improve their economies. Part of this program is every retiree in Albania who chooses BKT to receive their monthly pension, everyone who gets any kind of economic aid from the government and every student who chooses to use a bank account to better manage their monthly expenses.

Furthermore, we proudly state that for several years BKT has taken care and will continue to take care of all those who are currently living in any Institution for the Execution of Criminal Decisions in the country. Since they do not have the possibility to receive current information, every Institution in Albania will constantly welcome BKT staff in their premises to present and keep them up-to-date about how banking products work. While they don’t have the possibility to visit any of our branches and have an informative conversation regarding the way of managing their finances, our branches staff goes to them.

Being the Best Bank in Albania comes with a lot of responsibilities, and for this reason our future website changes will not only serve as dedicated site for BKT products, but also as a trustworthy portal for everyone who seeks for accurate and precise information on banking and financial terms.

Despite all, our 24/7 online service and the Call Center unit, is always ready to give the best advice and fastest solution to our clients’ questions. Also, while considering our social media channels as a very fast way of communicating with our customers, we will keep on organizing different entertaining games. In this way, our followers can share with us their knowledge on finance, otherwise, they will have the chance to extend their information.

Nevertheless, we always welcome every student to have free internships in our premises to learn under the care of our banking experts, learn regarding banking products and how to give an excellent c to any stakeholder that schedules an appointment in of our branches to have a more detailed and personalized plan on making their dreams come true.

We as a bank always seek to present and promote banking products in different ways, as the digitalization is becoming more present in everyone’s life. To be successful in achieving financial inclusion, it’s essential for us to have a strong political commitment and coordination across all stakeholders.

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MIRËSEVINI NË BANKËN E EKSPERTËVE!

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Credins bank Financial Inclusion through Financial Education Financial education of clients in Credins Bank is an essential element of the everyday life and obviously a part of the philosophy for building a lasting and long-term relationship with them. A financially educated customer is the most valuable customer. In addition to our daily work and customer education with financial products, through promotional materials, business fairs’ attendance, documentation requirements, which contribute to increasing client's knowledge about financing, investment, national and international financial guarantees, domestic and international payment instruments, Credins Bank has also been a promoter of financial inclusion, through several initiatives: Mentoring: For more than three years, the management staff of Credins Bank branch network, not only in Tirana, but notably in other cities, such as: Vau i Dejës, Gjirokastër, Elbasan, Skrapar and Fier, is part of “Mentoring” program, launched by Junior Achievement in Albania. These programs, aimed at the financial inclusion of students of 11- and 12-grade, through the school curricula, interaction with business leaders, or institutions, creating schemes where young people become entrepreneurs, have the presence of a "banker", that explains financial definitions, helps to build financing schemes, or judges, as part of juries.

Farmer education: One of the sectors, the financial inclusion is focused on, are farmers. In this area, Credins Bank has been experimented with various forms to increase education and financial inclusion, such as: - partnerships with chambers of commerce for workshops, where Credins Bank's staff is engaged in explaining financing forms, access to grants, or merely building a reliable business plan that enables access to finance; - encouraging regularly paying creditors, by providing free insurance policies for property, life, or insurance for earthquakes. These practices have helped farmers not only to have access to the bank, but they have expanded their knowledge about the usefulness of other financial services, such as insurance; - partnership with Albanian Post, to expand geographic coverage and facilitate payments.

Education for students: Increasing student financial inclusion is one of key directions and Credins Bank has had different approaches and channels to facilitate students’ access to financial services. By introducing products for new audiences, such as: Prepaid card, current account without monthly expense, digital products, such as: Credins online, increasing communication with audiences through social networks, are typically some forms of facilitating familiarization of students with financial language. Part of the work at Credins Bank are also visits to Universities during the October – November period, together with a trained and qualified staff, powered by # CredinsPranëStudentëve, by informing and presenting to students a package of bank products, especially tailored around them.

Parents and Children Education: Part of Credins Bank's efforts for children’s financial education with savings is also a campaign with promotional materials, addressed to children and parents, where for every stage of a child life, the bank, based on international practice, directs the parent towards basic concepts that children should know about saving and managing money, and what is the simplest way to convey them to children.

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INTESA SANPAOLO BANK ALBANIA Financial education, a path toward financial inclusion, consumer protection and ultimately, toward a more sustainable future!

Financial education, a path toward financial inclusion, consumer protection and ultimately, toward a more sustainable future!.

Intesa Sanpaolo Bank Albania considers Financial Education as the corner stone to achieve Financial Inclusion.

Financial Education from several years is one of the key pillars of Intesa Sanpaolo Bank Albania CSR Strategy, aiming to raise awareness, especially among the youngsters, to become responsible future citizens, able to make well-informed financial decisions. QUALITY EDUCATION, the SDG no 4, is one of the most challenging Millennium Sustainable Development Goals: “ensure inclusive and quality education for all, while promoting lifelong learning”. Consequently, our Bank tries to increase efforts to develop well - designed financial education initiatives and adequate financial consumer protection measures, alongside supply-products for stimulating financial inclusion.

Mr. Ignacio Jaquotot, head of Intesa Sanpaolo International Subsidiary Banks Division, on this occasion said: “I am very happy that Intesa Sanpaolo is able to make a contribution towards the financial education of young people, in the countries where Group’s banks are present.

“Leading by Example”!

Financial Education, a commitment which falls within the realm of the Intesa Sanpaolo Group’s expertise, strongly relates to the dissemination of knowledge related to economic/financial issues, to make people more aware of their financial choices. Being part of the one of the largest and strongest banking groups in euro zone is naturally a big advantage, given the fact that we can transmit locally the international experience, but also to contribute in a sustainable way to the education of young generations. “THE ART OF SAVING”, a daily valuable know-how for all ages! - that was organized for the first time in October 2017, is one of the best examples of a very well - designed financial education initiative. It all started when Intesa Sanpaolo Bank Albania joined the initiative of INTESA SANPAOLO GROUP & Savings Museum (Museo del Risparmio), Gallerie d’Italia & the Historical Archive to celebrate “The World Savings Day!” on October 31, 2017. The activity was organized in collaboration with the Ministry of Education, Sport and Youth, but of course that success was achieved due to the commitment and enthusiasm of 50 colleagues last year and around 75 colleagues this year, that volunteered in many schools in several cities of Albania.

We shared all previous years’ experience and all multimedia labs with the Albanian Association of Banks, so we hope that this financial education initiative will be expanded and will be supported also by other banks!

Another good example was the special participation of Mrs. Giovanna Paladino, Director and curator of Museo del Risparmio of Intesa Sanpaolo, Italy, who shared her professional expertise in the forum: “Empowering Financial Inclusion through Financial Education”. This forum, organized by AAB for the first time in our country, marked a significant milestone in developing a common approach, but also in addressing several issues related to the progress, challenges and opportunities related to Financial Education and Financial Literacy.

Mr. Pedrazzi, in its welcoming speech on the Forum, highlighted: “…

Improved financial education, involving the whole civil society, is a precondition to increase the level of Financial Inclusion. An effective

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Financial Inclusion contributes to the economic development of the emerging countries, improving the standards of living of their citizens. All stakeholders, from public and private sectors, bear the responsibility to take concrete steps in this direction! In Albania, now, it’s time for actions!”

During recent years, Intesa Sanpaolo Bank Albania has organized a wide range of activities, regarding Financial Education, to be mentioned: “A Banker in my University!” Several open lessons from Intesa Sanpaolo Bank Albania first – line managers were delivered in different universities, covering topics, like: Techniques of Performance measurement for employees, HR planning & Organization; Internal Audit in Banking Sector & Future Challenges; Financial Statements, Preparation & Analysis; Role of banks in communicating the monetary policy & the use of domestic currency; Role of a systemic bank to ensure stability in the financial sector etc.

Mr. Silvio Pedrazzi, (our CEO & AAB Chairman) is always personally engaged in the financial education activities. Together with Mr. Grassani, our Deputy CEO, he delivered an open lesson to Master “When people are able to get students of New York University of Tirana, on the topic: “Budgeting and quality education they can break Monitoring Cycle”. from the cycle of poverty” stated in the subsection “Quality EESTech Challenge Tirana – Our Bank, pays special attention toward Education” on UN-SDG web! innovation, innovative solutions and ideas of students, so it supported the EESTech Challenge Tirana project in the field of “Big Data Analysis”.

The winning teams, managed to create their own projects, solving a concrete task, assigned by ISBA ICT experts. The 5 of these students were hired from IT Applications Office in our IT Division! This was a clear example of creating synergies between the innovation & digital systems and financial education for young generations.

Volunteer mentoring! - For the third consecutive year, the bank, in collaboration with Junior Achievement in Albania, offered volunteer mentoring in 13 classes of high schools in Tirana. This initiative aims to educate and empower young people, in order to help them position better in the labor market as skilled entrepreneurialminded workers.

November, “The Month of Entrepreneurship”! - Last year, our CEO, as a supporter of financial education and youth development initiatives, shared his experience with students of “Sami Frashëri” High School, taking about the "Entrepreneur Guide", following the "National Month of Entrepreneurship", organized by Junior Achievement - Albania. This initiative aimed at sharing the experience of successful entrepreneurs with youths.

Leader for 1 day! – ISBA, in collaboration with J.A, also supported in the last 3 years the “Leader for 1 Day” activity. This year a student of excellence from “Harry Fultz” High-School, shadowed our Deputy CEO, gaining practical experience and acting as a leader during the whole business day.

Women in Business & Agro Farmers Seminars - Financial education is a continuous process targeting also business categories, such as: Agri – businesses, farmers, women entrepreneurs, start-ups, etc. In the frame of ISBA-EBRD cooperation on Women in Business empowerment, we have organized seminars in Tirana, Durrës, Shkodra, Vlora, Elbasan and Berat with a particular focus on women's entrepreneurship, as a factor of economic growth, sharing knowledge on financial management, new products and services for this specific target and the best ways to access them.

Intesa Sanpaolo Bank Albania will continue to support the financial education in the country, since we believe that the ultimate intention of financial education for financial inclusion is to support behavioral change and to stimulate wise decisions.

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AKTUALITET

The new fees for bailiff’s services The fees for bailiff’s services, approved without a consulting process and without transparency in June 2017, have been reviewed and corrected.

Dr. Spiro BRUMBULLI

Secretary General ALBANIAN ASSOCIATION OF BANKS, AAB

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t took more than 14 months correcting a guideline which, although formally correct from a legal point of view, was a guideline to the detriment of the public interest, in substance and in practice, which increased the fees

of bailiff’s service without any reason, argument, international practice and a transparent process. Unfortunately, the adoption of two common guidelines No.385/6, dated 26.06.2017 and No.385/7, dated 28.6.2017, transferred the whole discussion from introducing and accommodating the success fee, as part of the fixed bailiff’s fee, as foreseen by instruction No.1240/5, dated 15.09.2009, toward a completely absurd and unnecessary situation, created with the guidelines of 2017.

The changes of end-August 2018 to the 2017 guideline have brought some benefits for general public and, consequently, for creditors. Fixed fees are corrected relatively better than the level of 2009, by abolishing quite unjustifiable increased fees, with the guidance of 2017 (see Table 1). The debtor is generally in an improved position; the increased cost goes to the creditor. The creditor makes the payment (of success fee) to increase the efficiency of the bailiff (the success fee depends on the amount being executed).

Table 1: The history of fixed fee changes

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Fixed and success fees are the same, both for private and state bailiff service.

The expenses’ bills to be presented to the creditor and the debtor by the bailiff is put under fiscal discipline and a set of other expenses that cannot be justified, or that cannot even be considered an organic part of the bailiff process, are therefore eliminated.

AAB was one of the main opponents of Guidelines No. 385/6 and 385/7 of 2017, not because it protected vested interests, but because they were to the detriment of the debtor, they distorted the market and were, ultimately, even to the detriment of creditor. It was not alone in this endeavor. The new government, following the elections of 25 June 2017, accepted the remake of such guidelines and the Ministry of Finance & Economy conducted with transparency and professionalism this review process. Even other national institutions, such as: Bank of Albania and the international ones, such as: IMF and the World Bank, have strongly raised their voice against market

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Table 2: Examples of calculations for bailiff’s fees

deformation.

In these efforts there is no winners and losers; it is the market that is being regulated. All other actors have to adapt to the regulated market and the opposite can’t be true! First, if we compare it to the situation created by the 2017 guideline, the achievement is significant, more than significant (see Table 2). Second, if compared to the 2009 guideline, this achievement is comparable only to the fixed fee, as the success fee was not foreseen. What it is really missing in this regard is the reason why the discussion about the introduction of the success fee was launched.

The success fee was the conclusion of the working group on reducing non-performing loans. The objective was that fees, according to the 2009 guideline, could accommodate the success fee. In short, the entire fee could not change substantially, so

the debtor would pay less, and the creditor would pay the bailiff for the success, against the target, set in this regard. At the end, such process would result in a higher payment, in favor of the bailiff. Specifically, if we look at the fees according to August 2018 guidelines, the total cost of the bailiff’s service increases with the increase of executed amount, where, regardless of the amount in execution, the total fee paid does not exceed ALL 12.5 million – a figure higher than the one paid with the 2009 fees, where the success fee is missing, but lower than the one calculated according to the 2017 fees. The adoption of the guidelines in 2017, without any consultation and transparency process, created a trap to avoid the strategy of the working group on reducing non-performing loans, as the discussion was no longer done upon the 2009 guideline, but with the one of 2017, where fees experienced a

frightening increase.

Of course, current fees, according to the new Guideline, are not at a level comparable to the best international practices. Specifically, fixed fees remain high and unjustified, several times higher than in the countries of the region and those of EU (for more practical cases, the reader can see Jos Uitdehaag: Enforcement fees: clear, transparent and reasonable.)

This will soon require a comprehensive reform in the enforcement field, to bring best experiences and the most advanced standards. In this respect, our efforts have not been completed, but under current conditions, when the implementation of this Guideline has been suspended by the Administrative Court of Appeal, efforts to protect the public right and interest should rejoice the market, hoping that the best standards will show up soon.

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SEGMENTI “ELITË”

Merrni vëmendjen që meritoni në segmentin “Elitë”, në CREDINS bank.

0000

MONTH / YEAR VALID THRU

04 53 53 000 www.bankacredins.com

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EXPERTS FORUM

Market makers for the Albanian government papers and their secondary market What is essential, given the purpose of establishing Market Makers, is that, immediately after the first auction, volumes in the secondary market were immediately generated, which confirms the initial success towards the ultimate goal: "Creating a Secondary Market".

Suela TOTOKOÇI (VOKO)

Head of Treasury and ALM Department INTESA SANPAOLO BANK - ALBANIA

T

he lack of a secondary market for Albanian Government paper, issued in the primary market through auctions organized by the Bank of Albania, has been for a long time one of the main concerns, not only for the Ministry of Finance and Economy, Bank Albania, banking system etc., but also for international institutions, such as: IMF, World Bank, EBRD, etc.

But what are the reasons that the lack of a secondary market poses a problem for all stakeholders in the capital market?

Albanian government debt in the domestic currency has historically been held and is currently held mainly by commercial banks (60% in the

second quarter of 2018), except the share held by individuals (15.88%), Bank of Albania (8.02%), and other financial institutions (14.63%).

Such big share of government debt kept by commercial banks is due to the low level of loan-todeposit ratio in local currency.

Such a situation forces banks to move towards investing their idle funds in alternative investments in ALL, a liquidity created through deposits, purchasing Albanian Government papers with different maturities.

At the “Primary Dealers System” auction, only Market Makers banks are entitled to put bids and it is a multi-price auction, without caps in the number of bids. In these auctions, the participation of other market players, is handled by putting an Order with Market Makers Banks, only, by specifying the required amount, as well as the bid price.

Given such situation, where banks have a high exposure to Albanian government securities in their balance sheets, the existence of a secondary liquid market is more than necessary for them to make a quality liquidity management. Banks can, through

this market, trade such papers freely, in a liquid market, at any moment they need to it so. The same principle applies to all holders of these securities that want liquidity at the time they need, at a pre-announced price.

Another reason why the secondary market is indispensable is to absorb or expand the base of government debt holders with foreign (portfolio) investors, who are interested in diversifying their portfolio of securities with a significant yield, especially in conditions when investments in Euro have been and remain not so very attractive. For this to happen, it is quite necessary, or better say, indispensable, the presence of a secondary market, which enables these securities to be liquid first, and secondly to offer the possibility of materialization of the so-called capital gains, due to positive movements in the price of security, as quoted in the secondary market.

As per above, the project to establish a secondary market started with a workshop, organized by the World Bank in July 2017, with a broad attendance and representation from the Bank of Albania, World Bank, Ministry of Finance, Albanian Financial Supervisory Authority, the banking system, etc. His goal was to find ways that could lead to the development of the secondary market. One of the conclusions October 2018

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reached in the workshop, a result produced even out from a survey organized by Bank of Albania, was that the creation of the Primary Dealer system, which are only entities entitled to buy a security in the primary market, would lead to the development of the secondary market for Albanian government papers. Upon this idea, the second phase of the project, called the pilot phase, began where banks that decided to join such initiative were called the Market Makers, and each of which independently decided to play this role for the 5-year bond that would to be listed as a benchmark bond, with the following features: Issue date: July 19, 2018 Maturity date: 19 July, 2023 First auction: July 17, 2023 The following auctions: August, September, October, November, December 2018 Coupon: 5.30% Total amount: ALL 13 billion Amount for each auction: ALL 3 billion in July, ALL 2 billion in August, ALL 2 billion in September, ALL 2 billion in October, ALL 2 billion in November, ALL 2 billion in December.

At this auction, unlike other auctions, only Market Makers banks are entitled to put bids, and it is a multi-price auction, without caps in the number of bids. In these auctions, the participation of other market players, such as: Non-Market Makers banks, Financial Institutions, Business Organizations, or Individuals, is handled by putting an Order with Market Makers Banks, only, by specifying the required amount, as well as the bid price. Through this change, individuals who have until now bought a 5-year title

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through a non-competitive bid, for up to ALL 50 million, now can only participate in the auction with a competitive bid, only. The alternative way to purchase such bond is to buy it from banks that hold this title in their for trading portfolio, for example: Market Maker Banks, but not only.

The agreement signed between the Market Makers and the Ministry of Finance & Economy contains definitions regarding the indicated two-way price quotations for reference bonds, in the Thomson Reuters Eikon system by Market Makers, as well as their obligation to quote prices/yields for executable transactions in reference bonds for 30 minutes, from 14:00 to 14:30, for each trading day, for ALL 50 million, with a bid/ask spread of no more than 30 basis points. It is precisely the indicated quotations, and particularly, the executable transaction quotations and the execution of transactions with these purchase or sale prices between Market Makers, which will make this security tradable and which will lead to the creation of the yield curve, which contributes to the assessment of investment portfolio for the entire investor base. It is the existence of a market value for securities, that will enable banks to classify such securities as “Tradeable�, unlike what happens, in most cases, today.

At the beginning, the (yield) curve will determine the 5-year point and then, with the time lapse, and gradually, it will show the 4.5, 4, 3.5 year-point and so on, until we will get a full interest rate curve, determined by benchmark title(s). Reference titles are mentioned, because given the pilot phase progress (first auction and

re-open auctions up to December 2018, until the target amount of ALL 13 billion is sold), the Ministry of Finance & Economy will decide which will be the next bond to receive the benchmark feature, until all Albanian Government papers will be issued in the same way, through Market Makers, only.

As for auctions’ course, the first auction was announced in July 2018 and was successfully finalized, by a broad participation, where the amount offered by the market amounted to ALL 6 billion, compared to ALL 3 billion offered by the Albanian government. Even the two subsequent auctions had also a good performance, where the September auction was the most balanced one, regarding the ratio of bid amount to the amount offered. It is important to note that the August and September auctions yields were in line with the daily fixing, calculated on daily quotations, which means that the fixing had practically reflected the market performance. It was noted that the percentage of individuals buying such title at the auction was in a low percentage, compared to previous auctions, where they were free to participate with competitive bids. What is essential, given the purpose of establishing Market Makers, is that, immediately after the first auction, volumes in the secondary market were immediately generated, which confirms the initial success towards the ultimate goal: "Creating a Secondary Market".

To close, it should be emphasized that it is very important for such trend to continue and to receive due attention from all stakeholders, thus achieving the goal of providing an active secondary market.

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EXPERTS FORUM

Financial Education in Digital Age As the development of financial culture evolves, there will be more and more individuals and businesses that carry out financial operations through smartphones, that will avoid rows in bank branches and by forcing banks to lower fixed costs thus offering their services and products at lower costs.

consumers to plan and maintain their financial resources, and also helps in avoiding excessive debt, as an educated civil society is capable of making better choices in terms of choosing accurate and conscientious investment, thus minimizing risk and optimizing

Fatmira KOLA, PhD

Expert in International Finance and Risk Management CREDINS BANK

F

inancial education has become of special importance internationally, as it affects economic growth, financial market stability and the growth of individual well-being. The main objective of financial education is to support citizens in planning their economic activity, so that they could become proactive activists of the future, aware of managing their financial resources, while defending themselves for speculation. Financial education is an essential tool to combat forms of economic and social exclusion, as a financial culture, accessible to all categories, is a benefit to the society as a whole, because it reduces the exclusion risks and encourages

Financial culture is not only useful to those who have liquidity to invest, instead it is an important tool, especially for those who are the most disadvantaged and often incapable of any form of financial planning. The process of individuals’ financial education does not only mean knowing how to invest savings, or make financial calculations, but includes a number of decisions and actions, learnt since school time until retirement, and is closely related to the concept of financial inclusion.

services’ timeliness.

Nowadays financial education asks for the cooperation of both private and public entities.

The effective delivery for all age groups, by content and methodology, requires financial resources, multiple professional skills and infrastructure, that are not always available within a single organization. In Albania,

it is rather easier for students to convey information, than adults who still face a challenge, as we are dealing with a heterogeneous and non-localized audience, where in addition to general education, an adaptation to the specific needs of each stakeholder is really needed, be they entrepreneurs, employees, retirees, etc.

Investing in financial culture means investing for the future.

This is because children and youngsters are the economic actors of the near future and their financial decisions will shape the future of the economy, itself.

Public and private institutions should allocate special funds and attention to inform and prepare young people about the economic and social context and to provide them with means of financial competence, which will help them make an important investment in their lives.

Financial culture is not only useful to those who have liquidity to invest, instead it is an important tool, especially for those who are the most disadvantaged and often incapable of any form of financial planning. The process of individuals’ financial education does not only mean knowing how to invest savings, or make financial calculations, but includes a number of decisions and actions, learnt since school time until retirement, and is closely related to the concept October 2018

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of financial inclusion. This is so, because the life of an individual is characterized by quite different stages of income and expenditure and the continuity of financial decisions of great importance, which guarantee income at an older age, especially in a context where the insecurity for public pensions is increasing.

Currently, the financial culture is experiencing a strong shift towards digitalization of products and manufacturing processes, which require not only knowledge, but above all, protection. The use of electronic payments reduces costs and fights the currency falsification phenomenon, where over 380,000 forged coins are identified annually by the European Central Bank. Consumption in the digital age is characterized by automation, proximity and lower cost services. The information on product features, technological uses, privacy settings, and mitigation of data theft remains essential. Through apps and realtime notifications, even parents can also control the savings and expenses of their children, depending on their age, financial ability, data protection rights and regulations applied by national or international institutions, thus avoiding falling prey of inappropriate information.

Electronic payments and digital finance are transforming the way people pay, provide access to financial markets, and educate their children. A financially educated society finds

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it easier to better understand and interpret policies and decisions of public and financial institutions, by increasing the confidence in them.

Digital signature forms the basis of processes; digitalization, which needs to take priority in today’s Albania, because it reduces costs, ranging from minimizing card usage, increasing the efficiency and speed of processes, since it can be used by all, regardless of distance.

In Albania, financial markets still have a lot of potential to exploit from digitalization. The relatively young population and average age is a priority for Albania, which gives the possibility for financial education to be easier to convey.

The young population presents a potential for financial and public sectors, both in terms of mortgage loans and alternative investments, as well as spending on pensions.

Financial culture is not at the same pace as the progress made with financial products. In Albania, individuals continue to show up at bank outlets even for basic financial operations, thus devoting time and paying higher costs. In this way, financial digitalization should be promoted, through the provision of educating programs for the entire population, such as: awareness raising campaigns, websites, programs for specific audiences, and by offering lower cost products for digital operations.

As the development of financial culture evolves, there will be more and more individuals and

businesses that carry out financial operations through smartphones, that will avoid rows in bank branches and by forcing banks to lower fixed costs thus offering their services and products at lower costs. This does not mean that we will have a growing unemployment, instead we will have a service and technologyoriented market. Bank employees will be oriented towards new job processes, which will also require their training with a new financial culture. The increasing skills to make better investments will also affect the choice of education profiles, where young people will choose the study profile not only by depending on the jobs they offer, but above all, on the basis of their skills and passions, because when skill is combined with passion it develops creativity, to shape and develop new professions. The future of the financial system will depend on market forces and consumer preferences, but also on the ability of financial intermediaries to choose the best investments.

Consumer preferences are affected by financial culture; our country’s past experience proves that a poor financial culture can lead to bad results for consumers and markets, thus causing a country's economic and political instability.

Public and private institutions and regulators should co-operate and invest in the financial education of the society, because the future will be the investment product that is being developed today.

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EXPERTS FORUM

SWIFT gpi: Transforming cross-border payments Gpi ultimately improves processes between corporates and their banks, between correspondent banks in the cross-border payment chain, and between the ordering party and their end-beneficiary — creating a far more efficient international payments ecosystem. the challenges are many, there are signs that the industry is facing them head-on and developing a new, more innovative and dynamic payments landscape.

Judit BARACS

Senior Account Director, Payments Markets CEE SWIFT

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he payments industry faces immense pressure on multiple fronts. Waves of technological advances, regulatory scrutiny, and changes in consumer and client behaviors and expectations, are having a significant impact on what was once a staid and relatively unchanging business. Consumers want their retail experience to be replicated in the banking world; this means instant, frictionless services. At the same time, corporate clients want to reduce payment costs and are entering new trade corridors; they also want transparency, predictability and timeliness of payments. While

The industry response for cross-border payments Historically, cross-border payments have been relatively slow, lacking in transparency and suffered unpredictable fees.

The need to improve customer service in the cross-border space

As of November 2018, all payment messages on the SWIFT network will be required to include the gpi unique end-to-end transaction reference. This enables gpi banks to track all their gpi payment instructions, at all times, regardless of whether or not other banks in the process are gpi members.

brought leading banks, together with SWIFT, to create the global payments innovation initiative – SWIFT gpi.

Gpi addresses key corporate treasury concerns, including lack of transparency. The gpi Tracker gives the status of cross-border

payments in real time and enables banks to review information about each bank in its path, and any fees that have been deducted.

This information is then passed on to clients, offering a data-rich experience with greater levels of visibility into each payment and their overall liquidity. The Tracker is accessible via application programming interfaces (APIs), which enable banks to embed the Tracker information into their payment flow applications and front-end platforms. As a result, corporate treasurers can track gpi payments in real time.

Rapid adoption Adoption of SWIFT gpi has been rapid and continual, since its launch in January 2017. As at the end of August 2018, SWIFT gpi has more than 200 financial institutions (including 49 of the top 50 banks on SWIFT) signed up to provide their customers with a faster service, transparency of fees, and end-toend payments’ tracking, similar to international parcel shipping companies. Some 72 banks are already live, with more than 140 banks in the implementation phase, and more than 55 payment market infrastructures are already exchanging gpi payments. More than 100 billion USD in SWIFT gpi messages are being sent every day, in over 120 currencies, across October 2018

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more than 600 country corridors.

SWIFT gpi payments are fast, with nearly half credited on the beneficiary’s account in less than 30 minutes, many in seconds. The initiating bank receives credit confirmation in real time. Over 90 per cent of gpi payments are credited within 24 hours, except for those requiring additional documentation checks, or subject to foreign exchange controls. The fastest gpi payment credited to date is eight seconds - between two banks across two continents.

This increase in payment speed is a critical evolution for crossborder payments. The banking community’s support of SWIFT gpi is testament to it meeting industry needs the right solution at the right time.

An agreed set of rules for all gpi member banks Through gpi, SWIFT is relieving pain points and challenges associated with cross-border payments and thus addressing the needs of banks and their corporate customers. SWIFT gpi member banks commit to follow an agreed set of business rules: - make funds available within the same business day, provided the payment is received before the cut-off time of the gpi bank in the destination country; - allow the monitoring of a payment’s status in real time and confirm when funds have been credited on the end beneficiary’s account; - provide transparency of fees; and pass on remittance information unaltered.

Adhering to these principles benefits both banks and their corporate customers. Banks are able to provide their customers with a superior service level, by ensuring timeliness, tracking, fee transparency and unaltered remittance information.

Furthermore, in order to guarantee service excellence, banks need to work together, in accordance with the agreed guidelines. Increased operational efficiency and cost savings are another advantage for banks. Banks using gpi have consistently reported a drop in investigations of around 50–60 per cent. On the payments received side, this is because the bank now receives far fewer claims about the beneficiary not having received the funds. On the payments sent side, the instructing bank can see in real time where the payment is without having to contact an intermediary bank. The advantages for corporates are even greater.

By using SWIFT gpi, banks enable their corporate customers to: - pay for goods and services internationally, in a fraction of the time it took previously; - shorten their supply cycles and reduce their exposure to fluctuating foreign exchange rates; - track their payments from end to end and in real time; - improve their cash management; and - receive a confirmation notice when the money reaches the recipient’s account.

In this way, gpi ultimately improves processes between corporates and their banks, between correspondent banks in the cross-border payment chain,

and between the ordering party and their end-beneficiary — creating a far more efficient international payments ecosystem.

Building on solid foundations The gpi journey does not stop here. There is a strategic roadmap of enhancements and additional services, developed with the gpi member community. Services scheduled for 2018 include: - gpi Cover (based on MT 202/205COV) to further increase the timely processing of gpi payment messages, when there is no direct account relationship between the sender and receiver; - gpi Stop and Recall, to allow for a quicker response to suspected fraud or errors and ability to immediately stop or recall a sent payment; and - extended tracking of gpi payments, to enable gpi banks to track gpi payments along the full payments chain, even if the banks handling the transaction have not yet adopted gpi.

The extended tracking is particularly important. As of November 2018, all payment messages on the SWIFT network will be required to include the gpi unique end-to-end transaction reference. This enables gpi banks to track all their gpi payment instructions, at all times, regardless of whether or not other banks in the process are gpi members. By giving gpi members full end-to-end visibility on all of their payments activity, these banks and their customers benefit from even greater transparency October 2018

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and efficiency gains. Together with gpi banks, representatives of their corporate clients and FinTech partners, SWIFT is also exploring a number of other opportunities to improve the international payments experience.

Finally, as part of gpi, a pilot program has been initiated with a group of 21 leading banks and corporates. The aim is to define and implement gpi standards that multi-banked corporates can integrate into their treasury processes, eliminating the need to consult a different type of tracker for each one of their banks. SWIFT gpi is set to be the standard for all cross-border payments by the end of 2020. In today’s evolving payments landscape, collaborative solutions such as gpi, help banks to transform their processes and meet their own needs, as well as those of their customers, much more effectively.

“Time is value” and it must be considered by all stakeholders in the market Now it’s time when banks must have a closer look on the development of their systems, analyze the opportunities and embrace the best possible alternatives offered; just as business is at a time when its requirements may become reality and consumers could benefit from these developments.

Najada Xhaxha

Manager, Back Office Services TIRANA BANK SA SWIFT NU/NM Group Chairperson for Albania

Building a modern infrastructure for payment services has always been the focus of the banking system in Albania. All market factors have contributed in their way, for a functioning and the smooth running of such service. However, technological developments and innovations in banking services have increased the business or retail clients’ requirements for different improvements and priorities, which have placed the banking system in front of a real challenge.

Now it’s time when banks must have a closer look on the development of their systems, analyze the opportunities and embrace the best possible alternatives offered; just as business is at a time when its requirements may become reality and consumers could benefit from these developments.

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If banks would give value at the time, by way of gpi implementation, they would enable a win-win situation for all stakeholders, in terms of increasing the quality of payment service, lowering operating costs, especially those related to modifications, or informative ones; whereas clients will receive the required, fast, transparent and well-informed service.

Gpi is a novelty in the payment industry and the inclusion of many banks in such user network increases the capabilities of a quality community service.

Money requirements in real time, lower costs, transparency, being informed, etc., are already a reality in Albania, so it is the duty of the banking system to implement them.

This would be an added value to our system!

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EXPERTS FORUM

The fast pace evolution of the Banking business model after the crisis The evolution of the banking system has now entered a new and very competitive stage, so banks are to focus and accelerate their transformation processes, with a clear vision about a future that reserves many challenges and a focus on a consumer that is ever more demanding.

Elvis ZIU, MBA, CPA, CA

Partner DELOITTE ALBANIA AND KOSOVA

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n these 7 centuries of banking, the industry has seen a constant growth and has been a crucial component of economic systems’ development. However, the last financial crisis not only shook the financial foundations of the banking system, but also had multiple effects on its business model.

Firstly, after the crisis, lending slowed down. The loans-to-deposit ratio in Europe went from above 140% in 2008 to something above 100% in 2017.

This slowdown had two main effects: - It changed the revenue model for banks, by lowering interest income and having an increasing share in revenue from transactions (according to McKinsey that revenue is now

more than 1/3), - A gap was created that was there to be filled from other market players, such as: P2P schemes, cryptocurrency financing, or other asset - backed financial instruments.

The second effect of the crisis was a significant increase in regulatory requirements. These requirements hit the banks’ performance in three ways: - Increase in risk reserves, - Increase of operating costs (e.g. Deutsche Bank incurred additional USD 1.8 billion), - Increase in non-compliance pena-lties (reported as 45 times increase in the US).

Another effect of this was taking the focus of top management out of business model advancement.

Thirdly, following reviews of operations after the crisis many banks has initiated processes with aim to increase efficiency,

or improve quality. Some of the common types of projects were: - Reorganization of managerial and operational structures, - Re-engineering of critical processes, - Digitalization of data and automatization of work processes, - Enhancement of data analytics, - Improvement of CRM systems, etc.

More recently, we see added investments in new technologies, e.g. 91% of banks in Europe are reported to have invested in Blockchain and 77% in AI systems.

Fourthly, and possibly the most impactful force, is the drastic increase in the last decade of technology adoption from customers. In Europe, the number of banking clients using online banking is now more than half (with some countries such as Denmark, Netherlands etc. going as high as 90%)

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In an analysis done on the US market last year, on the frequency of monthly use of banking channels, the following resulted: It is clear that the frequency of use of branches is significantly lower, as compared to online channels.

Also, one can see the tendency of the new generation (millennials) in two areas: 1. A further increase in online channels, 2. A preference for the mobile.

As the new generation takes over, it is also expected a decrease in bank loyalty, a feature very much present in older generations.

The need for an accelerated evolution All of the above have had a major impact on banking business, pushing transformation of processes that were unchanged for decades. Banks have surely started to evolve. You can see data that indicate just that in the latest facts and figures published by the European Banking Federation which reports significant decrease in number of branches and personnel: - Decrease of staff in years 2009 to 2017 of about 400 thousand (13%) - Decrease of branches in the same period of 50 thousand (21%) However, some challenges should clearly be addressed in the short term: 1. Competition in service quality: In recent years FinTech companies, thanks to their technology DNA, have developed innovative products capable of outperforming banking products, in terms of speed or cost.

Banks must get back to develop

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an innovation edge and address the lack of efficiency, especially in processes that are connected to products and services offered to clients. They must become more competitive, in terms of service quality.

2. New intermediation models: Innovative intermediation models, such as: p2P, cryptocurrencies, etc., have seen a fast development (cryptocurrencies estimated to have exceeded USD 500 billion).

Such schemes represent a challenge for the banking sector, and regulators as well, as for the stability of the financial markets.

Nevertheless, these attempts demonstrate an increasing demand for new forms of intermediation. It is necessary that banks adapt to this market need and find ways to treat risk and financing under new models, that are more flexible in connecting economic expectations with financial resources.

3. Consumer experience and multi-channeling: In almost every industry, nowadays, we see a fundamental change in consumer behavior, in two aspects: - Increasingly so, consumers create a connection with the company or their product, as a result of a positive interaction experience. This is composed also of real economic benefit that derive from the product but goes beyond to a personalized interaction.

- Consumers want freedom of choice, when it comes to channels.

They do not want the providers to impose or limit channels where they can acquire products and services.

Moreover, channels need to be effective and constantly available.

Banks must operate under the same principle, in order to be able

to effectively follow clients’ needs.

4. The fall of the industry competition barriers With evolution in technology the competitive advantage is created especially through the ability to understand and to create a meaningful relationship with the customer. This type of advantage transcends industry barriers.

Technology and communication conglomerates, such as: Amazon, Apple, Facebook etc., compete now in markets that go beyond their industry limits, such as: production, financial services, consulting, advertising, transportation, information media, etc.

These companies, through the data and channels they possess are starting to develop a new financial sector player, lately defined as: TechFin. TechFins are not after the exploitation of shortterm inefficiencies of the banking sector. Instead they want to change the entire business model by competing with banks with assets they already possess, such as: - credibility and powerful brands, - massive and effective distribution channels, - ownership and control over a large number of transactions, - intermediary role they already play between buyers and sellers, - large amount of data on consumer behavior, that can be leveraged for risk profiling, or pricing of financial products and services, etc.

All these challenges stand to demonstrate that the evolution of the banking system has now entered a new and very competitive stage.

Banks, are to focus and accelerate their transformation processes, with a clear vision about a future that reserves many challenges and a focus on a consumer that is ever more demanding.

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ECONOMST CORNER

Issues regarding economic growth, employment, labor productivity and poverty in Albania A challenge for Albania and the entire Western Balkans region remains the fact that average labor productivity is less than half of the levels of the other 7 small transition countries that are already in EU (Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovakia and Slovenia), where the indicator scored over USD 30,000.

Prof.Dr. Adrian CIVICI

President EUROPEAN UNIVERSITY OF TIRANA, EUT-UET

T

he economic growth, expressed by the Gross Domestic Product Index, is the key to explain the health of any economy in general, its financial health, employment opportunities and unemployment reduction, social policies and consumer growth, public investment policies, business climate, etc. Main international institutions, such as: IMF, World Bank, OECD, EBRD, and any government, measure their pride and success, or confront the criticism with the economic growth figures they produce.

Many indicators, like: public debt, budget deficit, fiscal indicators, public investments, foreign direct investments, credit and banking

activity as a whole are calculated against the GDP indicator.

What is the situation of economic growth in Albania and how we must read its current performance and sustainability?

Looking back through years, the GDP performance has marked a positive trend: 1.4% in 2012, 1% in 2013, 1.8% in 2014, 2.2% in 2015, 3.4% in 2016, 3.8% in 2017, 4.4% in the first half of 2018, as well as a forecasted 4.5% for 2018. The biggest contributors to economic growth continue

The upward trend in GDP, for the period 2013 – 2018 has positively impacted the poverty reduction, but it continues to be problematic, in its magnitude and range, through various social groups and territorial distribution.

to be: "Agriculture, Forestry and Fishing" with 23%, "Trade, Transport, Accomodation" with 18.2, "Extracting & Processing Industry, Energy, Water" with 14%," Public Administration, Education, Healthcare" with 12.5%, "Construction" with 10%, "Real estate activities" with 6.6%, "Information and communication"

with 3.5%, "Financial and Insurance Activities" with 2.8%, etc. The economic growth basis has been broadeding with the time. It is supported by an increased consumption and private investments, as well as by expanding exports.

Albania's GDP "Landscape" reflects the following trends and characteristics: 1. following a downward trend during 2009 - 2013, GDP has entered a steady growth cycle, with a potential of 4.3 to 4.6% in the next 2 – 3 years; 2. GDP sustainability may be affected by the change in the contribution of different sectors, particularly the FDI sustainability and the speed of guaranteeing the replacement of some major projects with large impact on GDP (TAP and Devoll Cascade Hydropower), or the contribution of a conjunctural nature of electricity production (the World Bank warns about the risk of a fall in foreign investments in Albania, during the coming years). In a recent projection for Albania, FDIs are projected in a downward trajectory over the next two years, falling by 7 and 5.5% of GDP, respectively. Remittances and foreign investments continue to finance the major part of imports, while the key challenge asks for the October 2018

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implementation of structural reforms, aiming at reinforcing the newly commenced rebalancing process from new domestic sources of economic growth to external ones, with a greater support from investments.

3. the economic growth has produced a disparity in the regional, territorial and social development.

Economic growth displays clear features of "exclusive growth" and "extensive growth", while "inclusive growth" and "intensive growth" characteristics would be preferable. Statistics show that only 6 districts of the country (Tirana 40%, Fieri 11%, Durrësi 10%, Elbasani 7%, Vlora 6%, Korça 6%) contribute with about 80% of GDP, while districts like: Kukësi, Berati, Lezha, Gjirokastra, Dibra, etc., contribute with only 1.7- 3.4% to the country’s GDP; 4. the economic growth has started to reflect a positive trend in its effects on employment. Unlike a weak causal-consequent link between the economic growth and unemployment reduction, verified in the 2000 – 2014 period, the 2014 – 2018 period marks a greater approximation to the "Okun law", i.e. a fair correlation between GDP growth and employment levels; 5. over a long period of almost 20 years, the economic growth has mainly relied on consumption, imports and remittances, while in the last 4 – 5 years there is a modest improvement trend towards relying upon domestic production, investments and exports; 6. the economic growth continues to be sensitive to public investments and bank loans.

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It is worth noting that the economic growth and fiscal sustainability are substantially dependent on the realization of public investments and bank credit. Over 90% of financing for the economy and consumption comes mainly from the banking system. The capital market continues to be in its rudimentary stage, and this explains why the sluggish loan growth, or non-performing loans, have a direct impact on the economic growth pace.

The indicators of employment performance and unemployment rate appear to be positive during the 2017 – 2018 period. At national level, during the second quarter of 2018, the unemployment rate for 15-64 year-old age group stands at 12.9 %, by reflecting a downward trend of 1.3 – 1.5 %, compared to the last two years.

The official unemployment rate for the 15 years + working age group, was 12.4%, during the second quarter of 2018. An important component in this downward trend in unemployment is a reduction in the number of "discouraged workers".

The analysis of job creation structure in recent years confirms the fact that major employment is evidenced in services with low quality and modest standards, at contract manufacturing, call centers, and so on. When talking about capital or the amount of investment needed for a new job, we are talking about a minimum of EUR 2,000 – 5,000 per job, while he efficient employment – which asks for similarly efficient human resources – fluctuates between EUR 20,000 – 30,000 per job, which, of course, has the highest paid salaries.

As per the World Bank, there is a fact that in Albania "productivity

has a little impact on economic growth: total factor productivity, labor and human capital, or capital stock per unit, has come down."

Actually, about 85% of job seekers in Albania have completed the 9-year education only, or general secondary education, which shows a close correlation between lack of vocational qualification and employment, while only 10% of them have a vocational school diploma, and 5% a tertiary diploma. In Albania, the level of labor productivity is lower than in any other country in Central and Eastern Europe. According to the World Bank, labor productivity in Albania, measured by GDP/ employee ratio, is estimated at around USD 31,000, in 2016, while the US labor productivity is USD 60,000 per employee; in Lithuania at USD 57,000, in Estonia and Romania USD 48,000, while such figure may deteriorate even further in the coming years, as a consequence of demographic pressure, related to population aging and migratory movements, which continue to be intensive.

The World Bank underlines that immigration has become an important employment strategy, but this could negatively impact the productivity growth in Albania, in the long run. Large immigration movements imply that part of productive labor force has left the country. The number of Albanian immigrants increased more than threefold, over the past decade: from 0.2 million in 1990 to 1.05 million in 2017, representing almost 40% of its resident population (UN Statistics 2018). Albania experienced a considerable flight of skilled workers (about 40% of the educated workforce has migrated to OECD countries). In the apparent labor productivity index, measured by the Gross

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Value Added/Employee, Albania ranks last in the region, with the indicator at USD 10,000 (2015), away from USD 15,000, which is the average for all Western Balkans.

The highest productivity is scored in Kosovo, with almost USD 18,000, followed by Montenegro, Bosnia, Serbia, Macedonia, with Albania closing the ranks.

A challenge for Albania and the entire Western Balkans region remains the fact that average labor productivity is less than half of the levels of the other 7 small transition countries that are already in EU (Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovakia and Slovenia), where the indicator scored over USD 30,000.

Meanwhile, in EU countries, productivity figures per employee are much higher, reaching over USD 100,000 for particular sectors (energy, gas, information technology) and an EU average of approx. USD 70,000.

The employment - poverty relationship seems to be more positive. Studies show a positive correlation between economic growth and poverty reduction, so a growth with an all-inclusive trend. For example, in the period of 2002 – 2008, in which economic

growth went ranged from 4.2% to 7.5%, the poverty fell from 25.4% to 12.5%, while the economic growth deceleration to 1.3% in 2012 affected the relative increase of poverty. The upward trend in GDP, for the period 2013 – 2018 has positively impacted the poverty reduction, but it continues to be problematic, in its magnitude and range, through various social groups and territorial distribution.

The expansion of economic activity has led to a more complete use of producing capacities. According to business activity surveys, the rate of capacity utilization has fluctuated around the average level of 72%, following a rising trend, compared to the average level of 2017.

The labor market continues to play a limited role in reducing poverty, as the wage counts for only 50% of total family income.

The labor market continues a lack of optimal flexibility and absorbing ability, thus reflecting the structural defects of the Albanian economy. There is little demand for jobs and qualitative jobs, which require a high level of qualification and education, while thousands of job vacancies belong to "craftsmen" category,

that require simply "modest professional training". Another issue for Albania remains the high rate of "voluntary unemployment", which is mostly due to the very low wages offered by businesses, or various sectors of the economy, which discourage jobseekers in these jobs.

Albania is the country with the highest rate of poverty in the Western Balkans. According to the World Bank (2016), nearly half of population in Albania lives in moderate poverty. Statistically, 45.5% of Albanians live with less than USD 5 per day, while other countries in the region, such as: Montenegro, Macedonia and Serbia, have lower levels of poverty. However, the poverty rate has shown a slight downward trend during recent years, down with 1.7% in the last three years, from the 47.2% level in 2013.

The decline is even stronger, if compared with 2009, the year when this figure stood at 60% of Albanian households, with only USD 5 a day per capita income, as a result of two strong shocks, family budgets received from the high prices crisis in 2008 and then the global crisis.

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SUSTAINABLE DEVELOPMENT GOALS

OBJECTIVE 3 The bank supports health centers of Durrës, where along with the medical staff and 18 nursing students from University of Durrës, were present throughout the summer season to assist tourists at the city of Durrës with the first aid and advice. About 26 health centers were active during the summer season, in tourist areas with 24 hour service.

OBJECTIVE 9 On 18 September, the three-day Innovation Festival was organized by Chamber of Commerce & Industry, Tirana, in cooperation with Tirana Municipality, and with the support from ABI Bank. This event coincided with the World Festival Summit in Toronto, Canada, designed as the "Festival of Future in the World", organized by Trend Hunter.

OBJECTIVE 10 On 23 August, on the European Day of Remembrance for Victims of Totalitarian Regimes, was organized at the Palace of Culture, Tepelenë: "As if the Memo", a memorial event at the premises of the former notorious internment camp in Tepelenë. The bank was a partner of this initiative, not only by way of financial support, but also by making a voice, through an ABI Bank’s representative.

OBJECTIVE 11 The bank supported: - Concert tour: "Cinema Sounds", which was also present in the cities of Pogradec and Vlora.

- The ninth edition of "Shkodra Jazz Festival", organized in the city of Shkodra. During the same week, Rock Academy was organized for the second time, with artists'

masterclasses for the talented young people of the city.

- "International Music in Korça" Festival, for a full 5 days of inclusive activity that promotes art and culture.

Just 5 Art Nights, 5 inspirational and warm “Korçar” nights, brought to Korça some internationally renowned musicians.

OBJECTIVE 17 For third year in a row, the American Bank of Investments was the main partner of the American Chamber of Commerce, Tirana, in organizing the ceremony on the occasion of US Independence Day. The celebrations also included the ABI Bank’s staff.

The American Bank of Investments was the Platinum Sponsor of the American Chamber of Commerce for the 4th consecutive year.

ART, SPORT, CULTURE "Wine and Oranges", the biggest touring spectacle from Top Channel's "Orange" troupe, gave its last performance in Tirana, following its tour in many cities of Albania, with the support of ABI Bank.

The latest project supported by ABI Bank, Jonida Podcast is a library of interviews, where stories, talks, exclusive and interesting interviews will be heard.

On July 23, the hall of the Orthodox Cathedral welcomed the summer concert of Youth Orchestra and Choir of Tirana. The American Bank of Investments supported this event, which promotes new talents.

The bank supported th poetry evening with Mirush Kabashi, “Honor of the Nation", in the interpretation of the Poetic Recital Concert: "Pogradec o Enkelana", as part of activities on the occasion of tourist season opening in Pogradec October 2018

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OBJECTIVE 9 Banka Kombëtare Tregtare continues to support different institutions to promote development-oriented policies, which support decent jobs and developing quality, reliable and sustainable working conditions.

That’s why the donations of multifunctional machines Print/ Scan/Copy for State Inspectorate of Environment, Forestry, Water and Tourism – Kukës Region and Agency for Legalization Urbanization and Integration of Informal Zones/Buildings, were part of this initiative to improve the quality of services given to our community.

OBJECTIVE 4 During September, Credins Bank, in the frame of financial education and childcare, has chosen to be close to the children who start the new school year. Under the motto: "I know how to save", the bank has drafted a guide for parents and children of elementary schools. Credins Bank encourages and advises students towards a culture of saving and financial awareness, in the form of a trip, from the first to the ninth grade.

Credins Bank supported the youth team that represented Albania at Robotics Olympics, in Mexico.

Credins Bank, supported Tirana Business University with the initiative: "Tomorrow's Entrepreneurs" and "Lawyers of Tomorrow", a TBU tradition, in fostering new ideas, which contribute to the country’s development.

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OBJECTIVE 9 The bank supported Trauma University Hospital, Shkodër Regional Hospital, Health Center of Specialties No.1 and the Health Center No.4, with restorations and by donating equipment to improve conditions and internal premises of these institutions.

The bank donated office equipment to improve physical conditions of the following institutions: General Directorate of Road Transport Services, Kamza Education Office, Registration Office for Immovable Properties in Mallakastra and Administrative Unit No.2, Tirana.

Credins has started the use of elecric machines in the capital, by making a step closer to innovation and digitization, thanks to the intelligent systems they operate, but above all, reducing the negative impact on environment.

OBJECTIVE 11 Credins Bank supported "Come in the Theater" Association, by covering the production cost of the show: "The Comedy That Goes to Hell", thus supporting art and artists in Albania.

OBJECTIVE 17 As a partner institution with local businesses and institutions, Credins Bank sponsored the activity for Drenova Prison staff, during July.

CULTURE, ART AND SPORT Credins Bank is an important player in building an active community and cities with sustainable development, by investing in cultural, sports and promotional arts events, throughout the country. Credins Bank sponsored the Albanian Snooker Federation, by organizing the 2018 Snooker Championship.

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OBJECTIVE 2 On July 2d, Intesa Sanpaolo Bank Albania signed: "Cooperation Agreement" with the Ministry of Agriculture and Rural Development, which will assist farmers and agro-processing industry with loans. Agrotourism also has a tremendous support this year, where the bank offers special funding for investments in agro-tourism facilities, investments in machinery that promote the production of Bio products, opening and restoring restaurants serving as agritourism, financing temporary needs with liquidity and working capital.

OBJECTIVE 8 Intesa Sanpaolo Bank Albania enabled the participation of sports teams, women's volleyball and men's football, in Intesa Sanpaolo's largest international sports event. The 2018 sports event took place in Ljubljana, Slovenia, where many teams from various group’s banks played with each other, spending time together, but also competing with one another.

OBJECTIVE 2 In the framework of IPARD II program, ProCredit Bank signed a "Cooperation Agreement" with the Ministry of Agriculture and Rural Development. This project is funded by EU and the Albanian Government, as well as the National Support Schemes in Agriculture. For

the Government, the IPARD II program is the biggest challenge facing Albanian agriculture and the difficulty lies in the absorption of funds from this program, which requires human resources and funding.

OBJECTIVE 13 ProCredit Bank completed the installation of electricity generation unit, through photovoltaic panels, at the office building. In this regard, an inauguration ceremony was organized, where partners and clients were invited, as well as Tirana Municipality. The energy produced by the photovoltaic system is estimated to be approx.

25,500 kWh/year and will bring CO2 level down by about 15.4 tonnes per year and, according to the methodology developed by the US Environmental Protection Agency, is equivalent to 395 trees planted for a year in urban areas. All the energy produced will be used to meet the needs of office building, which is owned

by ProCredit Bank.

The bank invested in 3 electric cars for staff mobility, to reduce outdoor carbon dioxide emissions. The number of "Green" cars, which work with alternative energy sources, now goes to 5 units.

OBJECTIVE 3 ProCredit Bank supported Tirana Municipality in facilitating the revitalization of 6 green “small talks” booth. These are dedicated facilities along Tirana Artificial Lake Park and are dedicated for citizens of ever y age group who will visit the park. In this way, ProCredit Bank contributes to October 2018

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growing green areas, as well as to increasing opportunities for more recreation of citizens that use this park.

OBJECTIVE 9 On September 18-20, the bank joined the Innovation Festival, with innovations in the field of technology, such as: DirectBanking platform, 24/7 Zone and others, with an essence of providing a unique banking experience.

OBJECTIVE 3 Inauguration of Fier Hospital Raiffeisen Invest supported once again the health sector, with the project: "Partial funding of reconstruction of Fier Hospital Cardiology Department".

OBJECTIVE 11 From 2 to 7 July 2018, the ArtIm-Pulse Association, with the support of Raiffesien Invest, organized the 8th Edition of Balkan Film and Culinary Festival (B3F), the only inter-Balkan cultural event in Albania, at the cinema of Pogradec. Hundreds of artists from all Balkan countries participated with their creations. During this edition, some 75 films of different genres were displayed: long, short, experimental, animated, etc.

Nearly a quarter of the films were creations form young people of film schools in Romania, Serbia, Albania, Macedonia, etc.

For the fifth consecutive year, Raiffesien INVEST supported "Multi-cultural Festival Berat" in mid-July, under the rhythms of 42

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folk music and traces of ancient history.

"Butrint 2000" International Theater Festival has been seen as a symbol of culture and freedom of artistic creation. It is the arena of dramaturgy of great masters, who come and actualize from the bearers of a contemporary reality. During its editions many theatrical troupes from Italy, France, USA, England, Greece, Russia, Kosovo, Switzerland, Czech Republic, Macedonia, Croatia, Serbia, Romania, Spain, Bulgaria, Ukraine, Sweden, Poland and Albania have participated. The "Butrinti 2000" International Theater Festival has been described as a symbol of meeting with various cultures and freedom of artistic creation.

ART, SPORTS, CULTURE Union Bank and the Albanian Football Federation (FSHF) renewed the sponsorship agreement for the Albanian National Football Team. The signed agreement covers the period 2018-2020 and is a continuation to the new level of the multi-year tradition of bank’s support for the Albanian National Football Team. During this long partnership, which started in 2010, Union Bank has been close to the "Red and Black" team in every event, victory and challenge. The agreement renewal once again shows the bank's dedication to sport and football, in particular, by always remaining a loyal partner of the heart of every Albanian. We will continue together, for another two years, supporting our team with dedication, passion and pride.

www.aab.al

AAB ACTIVITIES Dealing with technical issues During August – September, the AAB Secretariat coordinated many projects, which included the Ministry of Finance and Economy, the Bank of Albania, the General Directorate of Anti Money Laundering, the Tax Directorate. Several meetings were organized, focusing on regulations under review process, with the aim that the proposals from member banks, for necessary changes, to be considered, as well. Typically, the initiatives to be mentioned: - the law on tax procedures and bylaws issued based on it; - prevention of money laundering and terrorism financing; - for automatic exchange of information.

- draft-law “On payment services”; - proposals regarding the fiscal package 2019; - fiscal effects of implementation of IFRS 9; - amendment of the guideline: “On Bank Regulatory Capital”; - on capital adequacy ratio; - on the liquidity coverage ratio - on credit risk management by banks and branches of foreign banks

TRAININGS

AAB organizes trainings September 2018 On September 18-19, AAB collaborated with PWC and organized the training: “Fraud Management”, which was attended by 15 participants from member banks. The main topic covered principal types of fraud, common myths related to fraud, who commits fraud and what drives fraud acts, fraudster profile, consequences of fraud – financial losses, legal consequences and reputational damage.

AAB, in collaboration with AIIA, organized on September 24-25 a training course on risk-based management, entitled: “COSO – ERM Framework - Risk Assessment Process”. The training program included the Role of Internal Auditing, Risk and Control Frameworks, Risk Management, Risk Assessment Techniques & Risk Based Audit Engagement.

On September 26, AAB in collaboration with the Banking Association for Central and Eastern Europe (BACEE) organized a PSD 2 Workshop.

The activity was facilitated by Online Business Technologies. The workshop covered issues, such as: latest news on API initiatives in Europe, API standard as the best choice for banks, and business opportunities and services that could be built on the top of PSD2 APIs opened under RTS SCA.

In addition, AAB and member banks are involved in the consultation process for Tirana Approach and especially on extrajudicial treatment by banks of the borrowers in financial difficulties, the new project for large non-performing borrowers, which have exposures in several banks that operate in the system.

Farewell Reception On 3 July 2018, AAB hosted a farewell reception in honor of Mr. Ioannis Agathos, on the occasion of completion of his mission as the CEO of NBG Bank – Albania.

The event was attended by members of AAB General Assembly, representatives from Bank of Albania and the Albanian Deposit Insurance Agency.

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