Financial Services
From The Report: Algeria 2017
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Algeria’s banking sector has held up relatively well. Credit growth remained in positive territory through the first three quarters of 2017, albeit having slowed from the double-digit rates seen prior to 2016. Lenders are capitalised well in excess of Basel III norms, while profitability remains high, particularly among private sector banks. Internet and mobile banking are still in the early stages of development, but market observers see these technologies as having great potential to improve financial inclusion if the relevant legal, regulatory and logistical frameworks are put in place. As bank borrowing becomes increasingly expensive, capital markets are emerging as a financing alternative for a range of domestic firms. The stock market will simultaneously provide non-inflationary financing means to economic agents and have better savings yields. With only a few new entrants to the market, the structure of Algeria’s insurance sector has remained relatively stable, with the four largest state-run insurers continuing to dominate. Purely private sector insurers capture less than one-quarter of the market, despite making modest gains of late. While the life insurance segment accounts for just 10% of total premiums, its growth has been outperforming the non-life segment – a trend that looks set to continue.

This chapter contains interviews with Mohamed Loukal, Governor, Bank of Algeria; Nafa Abrous, CEO, Maghreb Leasing Algérie; Lazhar Sahbani, Partner, PwC Algeria; and Mohamed Benarbia, General Manager, Salama Assurances Algeria.

Articles from this Chapter

Overview

Imminent changes: Financial system anticipates privatisation, new products and regulatory improvements
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Algeria’s banking sector has held up relatively well despite recent macroeconomic weakness. Credit growth remained in positive territory through the first three quarters of 2017, albeit having slowed from the double-digit rates seen prior to 2016. Lenders are capitalised well in excess of Basel III norms, while profitability remains high, particularly among private sector banks. However, a sharp reduction in liquidity has been one of the biggest challenges facing Algerian banks in recent…

Viewpoint

The path of stability: Mohamed Loukal, Governor, Bank of Algeria (BoA), on the role of banks in financing the economy and boosting diversification
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Since the oil price drop in 2014, Algeria has faced the challenge of maintaining the essentials of its economic and social systems in the context of drying liquidity. Our strategy is to boost resilience against external shocks, with a key focus of 2017 being to stabilise the Algerian dinar. A flexible currency rate has enabled us to absorb the shock of the oil price drop. In July the country’s central bank, BoA, devalued the dinar by 20% against the US dollar, which remains our first line…

Analysis

Modern money: The rollout of the first e-payment service is reshaping the sector
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Internet and mobile banking in Algeria are still in the early stages of development, but market observers see these technologies as having great potential to improve financial inclusion if the relevant legal, regulatory and logistical frameworks are put in place. E-Payments In October 2016, 11 banks and nine companies participated in the launch of Algeria’s first e-payment service. In addition to the six public banks, five private banks participated: Trust Bank, Natixis, Société…

Interview

To the letter: Nafa Abrous, CEO, Maghreb Leasing Algérie, on the advantages of leasing and avenues for future growth
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What role has leasing historically played? ABROUS: Leasing is the forgotten segment of the domestic financing services industry. It represents less than 1% of the total banking system, while in Tunisia or Morocco this represents up to 20%. The segment is still emerging, with only two private players leading the market, and four subsidiaries of public banks. Awareness about leasing among small and medium-sized enterprises (SMEs) is very low, although it offers competitive advantages, allowing…

Analysis

Religious rules: Sharia-compliant finance works to make its presence felt in a traditionally underserved market
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The shadow of Algeria’s civil conflict in the 1990s and the authorities’ subsequent reluctance to be seen as empowering political Islam has delayed domestic growth in sharia-compliant finance. Further, the economic slowdown brought on by weak oil prices has been a big factor behind the drying up of liquidity in the banking system. In turn, this has encouraged the government to explore alternative sources of funding, both for the banking system and its own operations. Much of Algeria’s…

Overview

On the cusp: More listings and the introduction of new financial products are expected to jump start the markets
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As bank borrowing becomes increasingly expensive, capital markets are emerging as a financing alternative for a range of domestic firms. This is true of the government as well, as large fiscal deficits mean financing needs are likely to remain significant. Before hydrocarbons prices fell in 2014 – and the resulting economic headwinds occurred – banks benefitted from plentiful liquidity, which allowed them to lend to the public and private sectors at competitive rates (see Banking overview).…

Interview

Untapped potential: Lazhar Sahbani, Partner, PwC Algeria, on attracting more businesses to partake in the country’s capital markets
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How would you assess the existing level of maturity of capital markets in Algeria? SAHBANI: The market’s current grade of maturity reflects the volume of business opportunities that the country has to offer: an abundance of untapped potential. Capital markets are an emerging financing option that is currently stimulated by the government, representing many possible upsides for the country’s economy. First of all, it is an important means of financing for companies seeking liquidity.…

Analysis

Incentivising investment: The stock market can provide promising financing alternatives, but requires further supporting regulations
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Capital markets represent a financing alternative for Algerian companies, especially considering the current economic trend marked by a decrease in liquidity and foreign currency reserves. The stock market will simultaneously provide non-inflationary financing means to economic agents and have better savings yields. Currently, the Algerian stock market faces difficulties with development despite favourable conditions and an attractive tax framework. For instance, the government has created…

Overview

Work in progress: Young residents and low penetration set the foundation for future growth
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Welcoming only a few new entrants to the market, the structure of Algeria’s insurance sector has remained relatively stable in recent years, with the four largest state-run insurers continuing to dominate. Purely private sector insurers capture less than one-quarter of the market, despite making modest gains of late. While the life insurance segment accounts for just 10% of total premiums, its growth has been outperforming the non-life segment – a trend that looks set to continue. The…

Interview

Covering all angles: Mohamed Benarbia, General Manager, Salama Assurances Algeria, on the growing role of insurance in the country
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What opportunities does the diversification of the Algerian economy present for the sector? BENARBIA: It implies a growing role for the non-hydrocarbons sector, especially in agro-industry, industry, services and agriculture. There are many steps on the way to achieving this diversification. We need new plants, production units, and infrastructure such as roads, railways and ports. This dynamic creates risks that need to be covered by insurers in sectors such as construction and transport.…