From Reliance to Leverage: Transforming Albania's Remittance Landscape for Economic Empowerment

June 16^th marked the International Day of Family Remittances, a topic of vital importance in the lives of millions across the globe. In honor of the occasion, the World Bank, in partnership with the Bank of Albania, organized the MONEY smART Exhibition to recognize the significance of remittances on the Albanian economy, as a lifeline for families, a macroeconomic stabilizer, and a gateway to financial inclusion. This event was organized as part of the Remittances and Payments Program (RPP), implemented across the Western Balkans with the financial support from the Swiss Secretariat of Economic Affairs.

The exhibition was designed to bolster financial literacy, a core competency in the quicky evolving financial landscape. The opening ceremony offered various interactive and educational activities for children aged 5-16, such as art workshops using shredded banknotes, quizzes with prizes, and social media engagement opportunities. The success of this exhibition is not the end but the beginning of a broader financial literacy campaign, as the materials and experiences will tour Albania to maximize the initiative's impact.

According to Bank of Albania research, remittances  play a pivotal role in Albania's economy, where 23% of families depend on remittances, which constitute about 18% of their total income and an average annual inflow of 2,000 euros per family. Remittances can be credited with an 8-percentage point decrease in poverty, particularly for families that solely depend on remittances, underscoring the critical nature of these financial flows for Albania's social and economic landscape.

Despite their importance, the remittances market in Albania is marked by high costs and significant inefficiencies. According to the World Bank’s Remittance Prices Worldwide database, the average cost of sending $200 to Albania is 8.7% in Q4 2023, almost three times in excess of the Sustainable Development Goal (SDG) target of 3%. The World Bank estimates that 37% of remittances are carried in cash, circumventing formal channels.

These inefficiencies reflect the current financial inclusion levels in the country, with only 44.17% of adults holding transaction accounts in 2021 according to the World Bank’s Global Findex, below the regional average for the Western Balkans. Although there has been a notable increase in the usage of digital payments and a significant shift towards gender parity in account ownership, still around two-thirds of Albanian adults do not use digital payments at all. Furthermore, low levels of financial literacy pose additional barriers for senders and receivers. Bank of Albania’s assessments reveal that around half the Albanians can be considered financially literate, while the global average is 63 percent. This shortfall is evident in the country's low levels of financial inclusion and knowledge of financial products. Additionally, financial well-being in Albania is rated at a low 7.7 out of 22, with financial insecurity affecting women, the young and elderly, the less educated, the unemployed, and low-income individuals the most.

The World Bank is collaborating with the Bank of Albania to improve the market for international remittances and enable the country to further leverage the development impact of remittances. Policy is focused on improving the enabling regulatory environment and financial infrastructure, as well as addressing access and usage challenges through technical assistance and the development of foundational strategies like the National Retail Payments Strategy and Bank of Albania’s Financial Education Strategy.

Recognizing the potential of digital payments to foster broader financial service adoption and more efficient remittance channels, the World Bank, the Bank of Albania and other stakeholders in the country will promote further reforms to advance financial inclusion and financial literacy, through the use of digital payments and remittances. Efforts will target women, youth and small merchants. The World Bank's role in the newly-established Financial Education Working Group demonstrates its commitment to the careful planning and management of these educational efforts, in line with best practices and international standards. Supporting Albania’s journey towards financial literacy and inclusion, RPP aims to ensure that these efforts translate into real-world benefits for all Albanians.