Algeria’s government is widening the use of Islamic financial instruments in an attempt to revive sluggish investment levels and absorb the large amount of unbanked domestic liquidity circulating outside the formal financial system.
In a government meeting led by Prime Minister Sifi Ghrieb, ministers examined a draft decree that would broaden the existing interest-subsidy mechanism so that it also covers Islamic finance products. Officials say the purpose is to put Islamic and conventional financing on an equal footing, while encouraging investment in priority sectors through targeted state support.
The policy comes as the country faces chronic underinvestment and the ongoing challenge of channeling household savings into the economy. Authorities hope this step will help attract a segment of the population that avoids conventional banking for religious reasons.
For now, the scale remains limited. According to official figures, Islamic finance in Algeria counted just under 300 specialized branches by the end of 2022, with around 594 billion dinars (roughly €4 billion) in assets—small compared to the financing needs of infrastructure, industrial projects, and diversification away from hydrocarbons.
Analysts say the new push reflects more of a tactical pivot than a structural overhaul. Algeria’s financial system continues to be dominated by public banks, suffers from administrative rigidity, and faces persistent credibility problems with both foreign and local investors. Expanding Islamic finance products, alongside plans for sovereign sukuk and financial digitization, may improve optics—but does not directly address bureaucratic barriers or regulatory unpredictability.
The government’s move also has a political dimension: in a context of social frustration, limited job creation, and mistrust in formal institutions, Islamic finance is seen as a tool to respond to public sensitivities in a predominantly Muslim society.
While other North African countries—including Morocco, Tunisia, and Egypt—have already integrated Islamic finance into more market-friendly frameworks, Algeria’s adoption is unfolding within a system still marked by tight state intervention and weak global financial integration.
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Source:Africa Publicity
