Interview : Brahim Semid

How would you assess the current levels of liquidity and credit to the economy?

BRAHIM SEMID: Due to the dynamism recorded in some sectors, there is currently an offset between the resources of national banks and the demand for financing in the national economy. Mega-projects run by public operators, for instance by hydrocarbons company Sonatrach, and private operators active in a range of industries, including cement plants and steel mills, require a significant amount of credit raised from Algerian banks. This trend is the main factor that drives the increase of the total amount of credit to the economy, which reached AD9.4trn (€68.2bn) as of June 2018. However, the credit capacities of the different public banks differ widely from one to another, as do their levels of liquidity, depending mostly on the sector they are related to.

Credit from banks remains the main way for local companies to finance investments. As a result, there is a need for more options and demand is high for new financing tools. The authorities have asked banking institutions to diversify their offer, in areas including leasing, sharia-compliant products and private equity.

The BEA and another public bank are also in the process of creating a private equity firm with shared capital of AD11bn (€79.9m) to address this demand. Since these financial instruments are relatively new in Algeria, their management will be conferred to a US investment fund in order to take advantage of their expertise and knowledge. Together with the investment funds of each wilaya (province) and the private players joining this market, we can hope to see a boost in this segment in the medium term.

What role are local banks playing in order to accompany the national strategy for financial inclusion?

SEMID: The government and the Bank of Algeria (BA) have identified financial inclusion as a top priority for the banking sector. This strategy implies the collection of dinars as well as foreign currency. To this end, the BA has used the new banking measures implemented in June 2018 to offer two new incentives: a lift on restrictions on opening accounts using foreign currency and a lift of the requirement to justify the origin of foreign currency reserves that individuals wish to put into these bank accounts. As a result of these policies, the amount of dinars collected by public banks through saving accounts reached more than AD15bn (€108.9m) between January and November 2018. Beyond these incentives, it is also the role of the public banks themselves to offer attractive products and develop marketing campaigns to convince individuals to open accounts. For instance, the BEA launched a campaign to provide Algerians living abroad and travelling to Algeria, or making pilgrimage to Mecca, with free Mastercard payment cards if they open a deposit account. With such measures that offer a concrete benefit to customers, local banks are able to move forward on financial inclusion as well as on the extension of their use of electronic payment.

To what extent could the internationalisation of Algeria’s public banks further boost the sector?

SEMID: The internationalisation of Algeria’s banks has become necessary to strengthen the sector, as well as to further assist Algerian companies in exporting to other countries. Banks would be able to act as a facilitator for processes and payments, as well as providing their knowledge on these markets to their clients. However, there are some requirements that need to be fulfilled before Algerian banks can engage in this strategy. Firstly, they need to increase their capital and second, they must consolidate their equity ratio to be able to show consistent performance indicators. Participating in these new markets can be done through creating partnerships with local banks that can support socio-economic development for both nations. In this regard, BEA aims to reinforce its deployment internationally, beyond its subsidiaries already in operation.