Banking & Financial Services
From The Report: Algeria 2015
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Algeria’s banking sector is characterised by low intermediation and penetration rates, although both have increased dramatically in recent years thanks primarily to ample liquidity stemming from abundant hydrocarbons revenues. In light of the rapid decline in hydrocarbons receipts in late 2014, the authorities have accelerated implementation of planned reforms and announced new measures to empower the sector to finance broad-based economic development. In 2015 important steps were taken to integrate the very large informal economy into the formal financial system. Today Algeria’s banks are seeking new revenue streams as they adapt to the demands of an evolving macroeconomic climate. Algeria’s capital markets offer considerable potential in light of the size of the country’s economy, but have historically been fairly shallow. Few corporate stocks and bonds have traded on the market since it opened in 1998, and the last initial public offering (IPO) was in 2013. Trading has been comparatively light in recent years as investors await the listing of several state-owned companies to increase capitalisation and breathe life back in the markets. The insurance sector has grown more than five-fold since the 1990s, but it still remains small relative to the size of the economy. The market is characterised by low penetration and density of coverage, and is dominated by non-life coverage, representing some 93% of premiums, with automotive lines alone accounting for half the sector’s revenues. Better efforts to raise public awareness, coupled with expanding networks of sales channels, can help the industry navigate the expected risks and challenges precipitated by the drop in oil prices and state spending. This chapter contains interviews with Mohammed Laksaci, Governor, Bank of Algeria; Boualem Djebbar, President, Professional Association of Banks and Financial Institutions, and President, Economic Interest Group; Mohamed Krim, Banque de Developpement Local; and Brahim Djamel Kassali, President, Algerian Union of Insurance and Reinsurance Companies; as well as a viewpoint from Adel Si-Bouekaz, Managing Director, Nomad Capital.

Articles from this Chapter

Overview

A greater role: Regulatory reforms across the sector seek to drive development across the wider economy
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Algeria’s banking sector is characterised by low intermediation and penetration rates, although both have increased dramatically in recent years thanks primarily to ample liquidity stemming from abundant hydrocarbons revenues. The sector’s regulator, the Bank of Algeria (BoA), has licensed 20 banks – including six public banks that essentially dominate the sector. There have been no new entrants to the market since 2008. In light of the rapid decline in hydrocarbons receipts in late 2014,…

Interview

Stable regulation: OBG talks to Mohammed Laksaci, Governor, Bank of Algeria
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Interview: Mohammed Laksaci How is the implementation of the regulations on large exposures proceeding? MOHAMMED LAKSACI: The regulations on large exposures have existed since the early 1990s. They cover the maximum level of risk that a bank or financial institution may incur on a given beneficiary or group, in relation to its total regulatory capital. They also cover the overall allowable level of risk. The new regulations enacted in February 2014 have tightened the definition of large exposures:…

Analysis

The cashless society: Electronic financial services still have a long way to grow
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Cash has long reigned supreme in the Algerian marketplace. While businesses in the formal sector make use of cheques and bank transfers, most Algerians exclusively use cash for their day-to-day spending and household purchases – a status quo the government aims to change through a series of initiatives. “Algeria is working hard to reduce the informal sector, through measures such as requiring check payments for large transactions, although card payment would help this even further,” Société…

Analysis

Untapped potential: Islamic financial products are rolling out into the market
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As Algerian authorities look to empower an underdeveloped banking sector to drive broader economic growth, Islamic banking is among the areas that appears poised for expansion. Islamic finance is currently dominated almost entirely, by Algeria’s oldest private bank, Al Baraka Bank, a subsidiary of Bahraini Al Baraka Banking Group, with Algeria’s state-owned Banque de l’Agriculture et du Dé veloppement Rural holding a minority stake. Since its establishment in 1991, Al Baraka has grown to…

Interview

Access for all: OBG talks to Boualem Djebbar, President, Association of Banks and Financial Institutions; and President, Economic Interest Group
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Interview:Boualem Djebbar How can banks increase engagement with small and medium-sized enterprises (SMEs)? BOUALEM DJEBBAR: SMEs represent a large component of our economy and, as a result, remain at the heart of the strategy for many banks. They retain a significant role as job creators, for example. The government has therefore sought to increase banking penetration in this particular customer segment and banks have followed suit. Central to this strategy is improving the uptake of bank…

Interview

Across society: OBG talks to Mohamed Krim, Banque de Developpement Local (BDL)
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Interview: Mohamed Krim What strategies is the banking sector employing to encourage the growth of small and medium-sized enterprises (SMEs) in Algeria? MOHAMED KRIM: The government has established favourable conditions for the development of SMEs, notably through financial incentives. Nevertheless, banks’ relationships with SMEs should no longer be limited to just financial relations. Instead, there should be an increased role for financial institutions to act as guides for companies by offering…

Overview

Deepening interest: Regulatory reforms are under way as Algeria explores capital financing options
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Algeria’s capital markets offer considerable potential in light of the size of the country’s economy but have historically been fairly shallow. Few corporate stocks and bonds have traded on the market since it opened in 1998, and the last initial public offering (IPO) was in 2013. Trading has been comparatively light in recent years as investors await the listing of several state-owned companies to increase capitalisation and breathe life back in the markets. Regulators are working alongside…

Viewpoint

Alternative thinking: Adel Si-Bouekaz, Managing Director, Nomad Capital, on the role of capital markets in furthering economic development
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We were expecting initial public offerings (IPOs) to be among the key priorities for the development of Algeria’s financial sector over the past year, and we have finally begun to see notable progress on that front: currently four state-owned companies are finalising the process and will likely be joined by a highly reputable private pharmaceuticals company. If all goes well, all five should be heading to IPOs in January 2016. A number of reforms have helped make this happen, and more are on the…

Analysis

SAIDAL: Pharmaceuticals
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Company Overview SAIDAL was first created in 1982 after the restructuring of the Central Pharmacy of Algeria, when the company acquired existing factories in El Harrach, Dar El Beïda and Gué de Constantine. Later, in 1988, SAIDAL was further allocated an antibiotic complex designed by the National Company of Chemical Industries. In 1989 SAIDAL became a public company, with economic autonomy and management, and in 1993 it was allowed to take stakes in existing or new businesses. In 1997 Saidal was restructured as an industrial group with three subsidiaries (Pharmal, Antibiotical and Biotic); however, in January 2014 these were merged back into…

Analysis

NCA Rouiba: Food & beverage
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Company Overview NCA Rouiba was established in 1966 and first started operations in the production of canned food. Twenty years later the company also began producing fruit-based beverages, and in 2004 it moved into ultra-high-temperature milk. The following year saw NCA Rouiba open its capital to a foreign investment fund, AfricInvest, and the company also underwent an upgrade and development programme. In 2007, NCA Rouiba received funding from the European Investment Bank as part of the company’s financial restructuring programme, and in 2013 NCA Rouiba decided to launch a public offering to allow the partial exit of AfricInvest NCA Rouiba…

Analysis

EGH El Aurassi: Hospitality
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Company Overview The Entreprise de Gestion Hôtelière El Aurassi (EGH El Aurassi) is a hotel management company that includes four hotels within its current portfolio. These include the five-star Hôtel El Aurassi in Algiers and three accommodations in southern Algeria: Hôtel Rym in Beni Abbès; Hôtel El Mehri in Ouargla; and Hôtel El Boustene in Ménéa. The three southern hotels were included under the umbrella of EGH El Aurassi following a government decision in January 2010. Hôtel El Aurassi was inaugurated in 1975, and in 1991 the hotel became a joint stock company with a capital of AD40m (€368,000), the entirety of which was retained…

Overview

Unlocking the sector: Market penetration and density are increasing as established players expand and new products are launched
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The insurance sector in Algeria has grown more than five-fold since the 1990s, but it still remains small relative to the size of the economy. The market is characterised by low penetration and density of coverage, and is dominated by non-life coverage, representing some 93% of premiums, with automotive coverage alone accounting for half the sector’s revenues. However, the life segment has grown rapidly since being partitioned from the non-life segment in 2011. Product diversification and intense…

Interview

Generating assurance: OBG talks to Brahim Djamel Kassali, President, Algerian Union of Insurance and Reinsurance Companies (UAR)
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Interview:Brahim Djamel Kassali What has been the impact of bancassurance on the insurance penetration rate? BRAHIM DJAMEL KASSALI: Bancassurance is relatively new in Algeria. Bancassurance activities really started in 2010. Overall, 28 distribution agreements were signed by insurance companies with banks. Over five years we have seen a steady increase in sales achieved by this distribution channel, but is not yet significant enough to have an impact on the penetration rate of insurance. The…