Algeria, under pressure to find new sources of finance, set up a religious body in charge of Islamic finance on Tuesday in a final step towards launching sharia-compliant services.
OPEC member Algeria’s state finances have been badly hit by the sharp fall in global oil prices, with the coronavirus pandemic deepening the country’s financial crisis.
After slowness in implementing reforms, a further drop in energy earnings last month prompted President Adelmadjid Tebboune to order the government to speed up steps allowing banks to diversify their products.
The Supreme Islamic Council said on Tuesday it had created a body called the Sharia Board for Issuing Fatwas for the Islamic Finance Industry, which will oversee banks’ activities linked to the interest-free products.
“The board will give the sharia compliance certificate for banks and financial institutions,” it said in a statement.
The move is aimed mainly at attracting funds from outside the state banking system, which the government estimates to be worth billions of dinars.
The government is targeting local savers rather than foreign investors as many Algerians distrust the country’s state banks and prefer to keep large sums of money at home.
“Islamic banking will succeed in conditions including removing bureaucracy,” economics professor Abderrahmane Aya said. “There will also be a need for a political will.”