IslamicFinance.de

Algeria is edging slowly towards Islamic banking services to suit more religiously conservative investors. Finance Minister Hadji Baba Ammi has already announced plans for the country's first local bond. Now six state-run banks plan to start Islamic financial services by the end of the year or in early 2018 and a national sharia board that would oversee Islamic banking is also planned by the end of 2017. Algeria's Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance. The country is targetting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home in Algerian and foreign currency.

Algeria plans to raise money from an interest-free local bond in order to offset the huge fall in its energy earnings. The North African OPEC member has already cut public spending, introduced new taxes and reduced government subsidies on fuel. Finance Minister Hadji Baba Ammi said the new bond would not bear interest, which may help attract a greater number of Algerian buyers. The minister said bondholders would receive a share in projects that the issue would finance as an incentive. The government launched its first local bond last April, but it was harshly criticised by the religious community. While neighbours Morocco and Tunisia are developing laws for Islamic finance, Islamic banks and sukuk bonds, Algeria still has no legal framework for such operations.