Huge losses in Albania savings fraud

Almost everybody in Albania has queued up in recent months in the hope of gaining a share of the goodies. Now, however, huge numbers - one in seven families, according to some estimates - faces financial ruin, pending the collapse of the country's plethora of pyramid-savings scams.

Already one company is on the verge of collapse, with thousands of desperate people besieging its office in central Tirana and demanding their promised interest returns. When no payouts were forthcoming, angry crowds smashed the windows of the company's office before they were dispersed by police.

Albania has been in the grip of investment fever, with companies borrowing money from people and paying them extraordinary high monthly interest rates, ranging from 8 per cent to a literally unbelievable 35 per cent. The pyramid schemes rely on a stream of new deposits to pay out interest on the old ones, and this requires an ever-increasing flow of cash.

The World Bank and the IMF have called on the government to exert strict control over the pyramid schemes. Meanwhile, however, almost every Albanian family has invested some money in one pyramid scheme or another. Over the last few months, gullible investors have queued from the early hours of the morning to deposit their savings. Many have even sold their homes to invest as large a sum as possible.

The schemes are a powerful magnet, providing a glimmer of hope in a country with an average monthly wage of only pounds 55 and high unemployment.

"It is worth taking the risk," said one stallholder, Arben Shekriu, whose brother has sold his flat and moved his family back into the parental home. "We will all be able to share the money earned from my brother's deposit," he said hopefully.

In the centre of Tirana, the office of Vefa Holdings, the largest and most powerful of the money-lending schemes, shoots beams of white light over the rooftops, a symbol of the brash new capitalism pervading Albania's post-communist society. Vefa, which is thought to have attracted around pounds 50m, offers investors monthly interest rates of 8 per cent on six-month deposits.

Interest rates jumped sharply following a statement by the Finance Minister, Ridvan Bode, warning of the potential catastrophe facing Albania should the schemes collapse. He cast doubt on the ability of the pyramid firms to return the sums deposited with them and to continue to pay out such high interest rates.

The statement, however, only fuelled the various schemes' competitiveness, and several firms immediately increased their interest rates. One firm reduced the permitted withdrawal period from seven to three months and trebled the rate of return, another announced that all deposits lodged with it would earn 32 per cent in just 55 days.

Despite growing speculation that these money schemes will not be able to pay out to savers, Albanians continue to stand patiently, awaiting their turn to lodge their precious savings.

"We are like lambs to the slaughter," said economic analyst Albert Marku, despondently watching yet another queue.