In developing and emerging market economies, the share of the population with access to basic financial services tends to lag significantly behind that of advanced economies. This can be chalked up to the relatively smaller size and sophistication of the banking sector, lower incomes, a higher degree of informal employment and patchy identification records prevalent in less developed countries. As financial inclusion is key to broader economic development, stakeholders are encouraging officials to continue growing the number of Algerians included in the formal financial system, especially as banks face higher costs and lower returns from serving an unbanked population.


According to the most recent data from the World Bank, the proportion of Algerian adults with a bank account had increased from one-third in 2011 to one-half in 2014, while the share of the adult population with a debit card increased from 13.5% to 21.6% over the same period. To compare, the bank penetration rate in neighbouring Tunisia was 27%, with the number of adults with debit cards at 12% in 2014.

While this represents impressive progress over a short time frame, account penetration levels in Algeria still fall short of the upper-middle-income country average (70.5%). The large and growing quantity of cash circulating outside the formal financial system also poses a problem for authorities. Bank of Algeria, the central bank, estimates that the level of cash in circulation had increased from AD3.2trn (€23.2bn), or 19.5% of GDP in 2013, to AD4.8trn (€34.9bn), or 29.6% of GDP in 2017. Of this, some AD2trn (€14.5bn) was estimated to consist of household savings.

Meeting the Challenge

In February 2018 Mohamed Loukal, governor of the central bank, wrote to Algerian banks encouraging them to do more to boost financial inclusion, while recalling efforts undertaken by the authorities to tackle the problem in recent years. Notably, he pointed to the 2012 declaration that all citizens had the right to a bank account and to Article 43 of the 2015 Finance Law, which permitted new actors to enter the financial sector. He went on to suggest that the arbitrary application of procedures by the banks to tackle money laundering and the financing of terrorism was undermining financial inclusion. He called on banks henceforward to halt requiring documentary proof of, for example, a source of funds beyond the regulatory requirement for proof of identity. In June 2018 the governor followed up with a similar direction to the banks, urging them not to require additional documentation from clients setting up or making transactions with foreign currency accounts beyond what is explicitly required by law.

Speaking to OBG, Nadir Idir, CEO at Bahrain-based Arab Banking Corporation noted that “the central bank is making great efforts to boost financial inclusion, while the government decision to restrict imports to support local industry should lead to domestic producers entering the banking system and asking for loans”.

Looking Ahead

These measures should make procedures for bank clients less onerous and more coherent at the margin, and could succeed in reining in some of the cash circulating in the informal financial system. However, they are not expected to significantly increase financial inclusion on their own, and they could see Algeria face challenges at the international level with respect to its commitments regarding money laundering and the financing of terrorism.

Progress in extending bank account access to the adult population in the three years to 2014 demonstrated the possibility of rapidly boost financial inclusion in Algeria. Based on the experiences of many other African and Arab countries, the inherent potential in digital and Islamic banking also has the scope to move the country even closer to universal bank access. Further efforts are likely to be necessary to overcome the cultural preference in Algeria to save and transact in cash, however, including improving financial literacy and increasing confidence in formal financial institutions.