With 80% of Algeria’s banking sector still under state control, reform has been ponderous to say the least, and Islamic finance is still a long way away.
Patrick Abi Habib an analyst for ABC Islamic Bank gave his personal opinion to The Islamic Globe: “The banks are popular because they are seen as the safest [in the region] but they are generally slow in introducing change.” This lethargy has repeatedly prompted the industry to call for intervention to help speed up regulation and stimulate the adoption of Islamic finance. Currently less than 1.5% of assets in Algeria are Shari’ah compliant.
The government has lately heeded the call for action and is undertaking a review of the current banking regulations to avoid double taxation in cases of temporary transfer of ownership under Islamic finance contracts. Currently three banks offer Islamic services: Al Baraka, which has operated since 1991, Al Salam, operating since 2006, and the Algerian Gulf Bank, which established an Islamic window in 2004.
Algeria is a fertile market for Islamic finance, according to Abi Habib. There is a low penetration rate for bank branches, with one branch serving 23,090 compared with one branch serving 7,773 people in Tunisia and one branch per 8,745 people in Morocco. He said the country needed to establish a central Shari’ah board to advise on products and regulations and ease foreign exchange restrictions to allow products like Tawarruq for working capital finance to become easy to sell.
“Growth will remain unimpressive until the main players introduce Islamic products. Because [the banking sector is so heavily] state controlled, a political decision will have to be made in favor of promoting Islamic finance,” he said.
source: The Islamic Globe