|Definition: Private lottery scheme / collective savings scheme|
|Keywords: Albania – Balkans – Scheme – Lottery – Saving – Credit – Mutual help – ROSCA|
|Clusters: Market – Functional ambivalence – System made me do it – Survival – Informal welfare|
|Author: Drini Imami, Abel Polese and Klodjan Rama|
|Affiliation: Faculty of Economics and Agribusiness, Agricultural University of Tirana, Albania; School of Law & Government, Dublin City University, Ireland; Leibniz Institute of Agricultural Development in Transition Economies (IAMO), Germany|
|Website: Profile page at Researchgate, Profile page at DCU, Profile page at Researchgate|
By Drini Imami, Faculty of Economics and Agribusiness, Agricultural University of Tirana, Albania; Abel Polese, School of Law & Government, Dublin City University, Ireland; and Klodjan Rama, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), Germany
|In addition to state lotteries, in Albania loteria refers to a private lottery scheme through which money is poured into a common pool and is then awarded to one member of the community each month by drawing lots. It works in a way that is similar to the tanda scheme in Mexico.
The scheme originated in communist Albania. Although no written reference to the scheme exists that allows the start of the practice to be located chronologically, it is possible to place the practice in the 1970s, as this the period to which most informants refer and was also the period when many of the industrial complexes and large factories started operating in Albania (Kovacs et al 2016).
The lottery scheme was conceived as a solution to several issues. Firstly, the lack of private banks and the scarcity of loans from state banks made it difficult to borrow large sums of money. This situation was exacerbated by the fact that savings deposits in the state banks were poorly rewarded with low annual interest rates of 1-2 per cent. Secondly, average salaries were low: in agriculture cooperatives, earnings were in the region of 150 - 250 Albanian Lek (ALL) a month; factory workers could earn 400 – 500 ALL a month, while teachers, professors, and engineers were paid a monthly salary of 700 – 900 ALL. (For comparison purposes, at that time the price of a large loaf of bread was around 5 ALL and a kilo of meat cost 15 ALL; one US dollar was converted at 8 ALL in the late 1980s). It is interesting to note that these sums did not change substantially during the last two decades of communism (1970-1990), thanks to government measures to control inflation.
As in other socialist countries, the housing policy was dictated by a state monopoly. Citizens had to apply for accommodation by signing up to a waiting list. Depending on the family situation, the city and location where the family were living, (in addition to the possible strings the family was able to pull), applicants had to wait a number of months or years for a home. However, furniture and other household equipment were rarely, if ever, provided with the accommodation; rather it was generally sold through state-owned retails chains.
Items such as televisions and washing machines were allocated according to existing supplies. An applicant would make an order and wait, sometimes years, until stocks became available, regardless of the fact that they might have the money available for the purchase at the time that the order was made. As in other communist states, active party members and those with large personal networks advanced up the queue faster than common people with no resources or connections.
However, not everyone was in a position to pay for a desired item. For instance, people working in agricultural cooperatives could save so little that it might take them ten years to save sufficient funds. Meanwhile, although people on higher salaries were able to save some money, they still faced an unknown waiting time for the supply of each of the items they wanted.
In larger employment institutions, employees commonly established an autonomous informal savings network. Collective saving meant agreeing on a fixed amount to be deposited every month (eg. 50 or 100 ALL) into a common pool that would grow more rapidly than an individual savings pool. For example, a pool of 10-12 participants, (which was the common group size), each saving 100 ALL per month, were able to save a total of 1000 – 1200 ALL in the first month alone - a sum sufficient to buy a television or a washing machine. To determine the winner, at the end of the month the organiser of the scheme would allocate loteria tickets to all the participants and draw a winning number. The winning number, or ticket, would secure the owner the total money required to purchase the equipment. However, the lucky ticket holder was not obliged to purchase a particular item. In some instances families used the money to cover an unexpected or extraordinary expense, such as a wedding ceremony. Whatever their decision, once a participant had won, they were then obliged to continue contributing to the pool every month until each of its participants had received the same amount of money.
The situation was a win-win for everyone. The ‘winners’, that is those awarded the money at the very beginning, gained by having the available sum of money they required much more quickly than if they had saved money individually. The ‘losers’, that is those who received the money after a period of a few months or a year (the usual lottery cycle would be up to one year), would still have the money at a similar time as they would have had if they had continued to save individually. The scheme could also be seen as a way of saving money, obliging a participant to put money aside every month, de facto forcing them into some saving habits; an opportunity that did not exist for all.
Finally, these schemes enhanced social solidarity among participants and created a bond between them that could then be used on other occasions. For instance, participants could decide to allocate the money in a given month not by lottery, but according to need. If it was known that one participant needed money urgently for a wedding or to remedy an emergency situation, then by consensus, the money could be awarded to the needy person, without a lottery draw taking place.
Because salaries were all paid on the same day, there was no need to store the money anywhere. On payday each participant gave their contribution to the savings pool accountant, who might also be the person in charge of paying out the salaries. After the draw had taken place the accountant would then pay the money directly to the winner.
In spite of the high level of regulation and control present in socialist Albania, these lottery schemes were never formally banned. In fact, it is possible that they were boosted by the low rate of geographical and job mobility, allowing people to consolidate and trust one another over time. At the same time this was accompanied by peer pressure and a desire or necessity to create dependency relations in order to have people to rely upon.
Interestingly, this informal practice has survived and can be found in present day Albania, albeit in different forms and in spite of the fact that commercial loans are available and interest rates on deposits have increased.
The modern version of the loteria still rests on cash-only contributions (bank transfers are rarely, if ever, used) made by a group of people into a common pool that is smaller than that used in socialist times. One explanation for the smaller groups may be the desire to compensate for the higher risk associated with the scheme, as participants no longer always come from the same neighbourhood or workplace. They might not know one another well and may be dependent on the loteria organiser knowing and trusting them all individually.
The goal is no longer the purchase of household equipment, but rather having an available sum of money that would allow an extraordinary purchase. The money might be used for a variety of items ranging from the purchase of a mobile phone or an ipad, to paying for a holiday. Because salaries are now paid at different times, and participants may come from different environments, they need to agree on a specific payday and a draw day. They might also on occasions decide not to apply the lottery scheme at all, but simply agree consensually on when each participant will receive their money. Should they fail to agree, if for instance too many people want the money in the same month, then they would revert to drawing tickets and get back to the lottery-like method of allocating the savings.
- Boka, M., & Torluccio,G. 2013. ‘Informal economy in Albania’, Academic Journal of Interdisciplinary Studies, MCSER Publishing: Rome-Italy, 2(8): 212-221.
- Gërxhani, K., & Van de Werfhorst, H. G. 2013. ‘The effect of education on informal sector participation in a post-communist country’, European Sociological Review, 29 (3): 464-476.
- King, R., & Vullnetari, J. 2016. ‘From shortage economy to second economy: An historical ethnography of rural life in communist Albania’, Journal of Rural Studies, 44, 198-207.
- Muceku, H., & Muça, A. 2014. ‘Informal Economy In Albania–Its Costs in the Country Development’, Mediterranean Journal of Social Sciences, 5(9): 642 – 649.