Funds, Investment Portfolios For The Success Of Islamic Banking
By August, four years have passed since the launch of Islamic financial banking in Algeria, which seized 5% of the financial market shares, and achieved deposits worth DZD 422.6 billion, with financing equivalent to DZD 46 Million, awaiting the issuance of new regulations before the end of the year, creating the legal framework for Islamic instruments, and strengthening investment funds and portfolios that represent the real challenge in this type of finance.
The chairman of the Islamic Banking Committee at the level of the Professional Association of Banks and Financial Institutions, Sofiane Mazari, said in a statement to “Echorouk” that the development of Islamic finance in Algeria after 4 years of activity, that is, since August 2020, and the issuance of bylaws by the Bank of Algeria specifying the activity of Islamic offices, and other measures, has realized important achievements and significant numbers suggesting the success of this new type of financial industry in the Algerian market, as only three banks were proposing these products. The number of their agencies did not exceed 50 across the country, rising to 12 banks and 700 agencies and offices.
With the launch of the Islamic offices in 2020, significant achievements were realised, Mazari added, as there was a transition from two banks to 12 banks proposing financial products that comply with Sharia, including 6 public banks, 4 private banks, and two Islamic banks. As for the network of banks and agencies, there was a transition from 50 to 700 agencies and offices offering Islamic services, including agencies dedicated exclusively to Islamic banking and agencies mixed between Sharia-compliant and classical, distributed across the country, while the market share of Islamic banking, which used to be no more than 1.5%, has risen today, according to the figures of the Bank of Algeria, to 5%, thanks to a diversity of offers that did not exist before 2020.
Furthermore, public and private banks have begun to invest by diversifying products for financing and to mobilize savings during the last stage. As for the challenges facing Islamic banking during the next stage, the speaker confirmed: “The time has come for a broader framework for this banking, and this comes after the approval of the monetary law and the Banking Code, issued in 2023, as it is expected before the end of the year that some regulations will be issued to strengthen the supervisory and framing system for the financial industry, to allow banks to expand and develop their activity, and it is also expected that the legal and regulatory framework for issuing Islamic instruments, whether governmental or institutional, will be issued”.
In this context, the representative of Islamic banking at the Professional Association of Banks stressed the existence of a legal vacuum in this area, as even institutions that are active in the economic field do not have the right to issue instruments to finance their projects, in the absence of a law regulating the process, knowing that this point will contribute in developing the financial system for Islamic banking and the financial industry in compliance with Sharia, and creating solutions for financing projects and facilities, as the state will be able to finance road projects, ports, and desalination plants through Islamic instruments, in coordination with mutual insurance institutions. Even the general public will benefit from the financing of these projects, and they will have returns and opportunities to enable them to invest their money and strengthen the Islamic financial system more largely.
In the same context, Islamic financial banking contributes to facilitating the entry of parallel market funds into known official channels such as banks and attracting savings, a process that has succeeded resoundingly over the past years, although the numbers achieved in the financing part remain insufficient, as Islamic finance requires the presence of investment funds and the opening of investment accounts in banks to achieve returns after exploiting them and earning profits, and this will not be effective without the presence of financing and diversified investment portfolios, which is the biggest challenge for the Islamic finance sector during the next stage.
