As the price of oil per barrel continues to drop, and the trade deficit plummeting, the Algerian government is seeking to develop the Islamic Finance sector with Sharia-compliant solutions for state banks. They are forecasting a launch by the end of this year while there is a plan launch for Sukuk Islamic bonds between 2018 and 2022.
To some extent, due to religious reasons, a lot of funds to the tune of US$23.97 billion has been kept out of Algeria’s banking system. Serious efforts are being put in place to attract these funds. In a recent parliamentary vote, 341 out 462 deputies representing 73.8% of lawmakers adopted the action plan which empowers only two state owned banks to start offering Islamic products by next December. The remaining four state banks are waiting for approval to start offering Islamic products sometimes next year.
Prime Minister Ahmed Ouyahia recently addressed the National assembly while presenting a financial bill seeking the issuance of the first Sukuk product next year as a means of attracting new funding into the economy. “We are living a hell of a situation, we do not have money” said Ahmed as he explained that the unconventional funding will go directly to finance productive investment projects as well as paying for the Public Treasury’s internal indebtedness. He added that this is why the government has made amendments to the law on money and credit to allow the implementation of Islamic Finance.
Why The Tilt To Sharia Compliant Financing Now?
Sharia complaint financial instruments were banned in the country as a result of the bloody Algerian war more than two decades ago. ‘The dirty war’ (la sale guerre) was fought between The Algerian government and Islamist groups which left an estimated 200,000 people dead. The war began in 1991 following a military coup after the FIS (Islamic Salvation Front) party was poised to win the national parliamentary elections. As a result of the violence that followed in the subsequent years, The North African country rejected all sharia-based financing options. However, now that the country is under a lot of financial constraints, they are forced to speed up the process to get the economy off the brink and to wean the economy from its dependence on oil.
OPEC member’s finances suffered massive losses due to the over 50% plunge in crude oil prices since mid-2014. Businesses have since faced lot of hurdles. Algeria has got its rude awakening that nations need to diversify and not rely on the trade of one commodity alone.
The country is also now realizing that one of the most important assets a nation could have is its youth force. The government of Prime Minister Ouyahia is making huge investments in the youths of the country. The government is betting on the youths hoping that monies spent on them will not not only help grow the economy but also safe the country from the senseless terrorist epidemic plaguing North Africa.
The government is hoping that such investments will further diversify the economy and open up other productive sectors of the economy especially the technology sector thus creating employment opportunities for millions of unemployed youth. The new thinking is on looking into developing possible alternate sources of income, boosting employment, encouraging creativity within the country’s workforce so as to attract substantial investments. With such assets on the ground, the government is optimistic of the endless possibilities that the country stand to gain.