Algeria warily edges towards Islamic finance as energy income dives | Reuters

* Algeria under pressure to reform after oil price drop

* Government seeks new funding sources

* Islamic finance may help tap huge informal economy

* State banks plan to offer Islamic products in coming
months

* Interest-free loan announced but no details yet

By Hamid Ould Ahmed

ALGIERS, April 12 When experts in Islamic
banking gathered earlier this year at a state-run hotel in
Algiers to share their experiences on sharia-compliant finance,
no one from the government showed up.

But despite this hesitancy – government officials are
reluctant even to refer to Islamic finance by that name –
Algeria is edging slowly towards offering banking services to
suit more religiously conservative investors.

The object is to attract funds from a huge pool of cash held
outside the formal banking system as Algeria looks for more ways
to offset the sharp fall in oil prices and its energy revenues.

Finance Minister Hadji Baba Ammi has already announced plans
for the country’s first local bond that is interest-free,
complying with sharia law which forbids interest payments –
although he called the scheme “participative” rather than
Islamic.

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, banking and government sources told Reuters.

Algeria’s Islamic finance plan still faces huge barriers. It
lacks a legal framework and technical expertise, and officials
must navigate sensitivities over any perceived revival of
political Islam after a 1990s war with armed Islamist militants
in which 200,000 people died.

On top of such concerns, any kind of reform is often delayed
in Algeria by heavy bureaucracy and inertia, but bankers are
keen to push ahead with the idea.

“Financial institutions must be more dynamic and aggressive
in the market by allowing Islamic products to grow,” said Nasser
Haider, head of…

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