The Activity of Pyramid Schemes in Albania (1992 - 1997) and the Effects of Their Decline

Abstract

Political transition in Albania during the last 10 years of the past century brought about the collapse of communist system and opened the way to democratic developments for the country. The transition towards democracy was accompanied with new social, economic and political events which brought with them a lot of issues however. The transition from a centralized economy to free market economy progressed rapidly, but these processes did not comply with the right banking legislation. The National Bank of Albania dominated the banking market;. This was one of the main reasons for the establishment and expansion of pyramid schemes in Albania. They operated largely from 1992 – 1997. This descriptive - analytical study reviews the activity of pyramid schemes in Albania, their expansion dimensions; the survey analyzes the reasons for their expansion, the attitude of the Government toward the event and the causes of their decline. In conducting this study, reports and analyses from the World Bank, International Monetary Fund, Bank of Albania, several media reports and studies from national and international researchers have been taken into consideration. Through this study we aim to explore the reasons for pyramid schemes’ expansion and the mutual relation between the financial and political crisis in Albania.