Financial Services
From The Report: Algeria 2018
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The decision by authorities to embark on a programme of monetary financing towards the end of 2017 marked somewhat of a turnaround in a difficult year for Algeria’s banks. A competitive dynamic has remained in recent years, with no new entrants, exits, mergers, acquisitions or privatisations of note. Efforts to improve financial inclusion are under way, however, attempts to grow the banking sector through the mobilisation of domestic resources have been dampened by Algerians’ strong cultural preference for cash and a certain distrust of financial intermediaries. Over the medium term, the end of the monetary financing programme has the potential to add impetus to capital market development, as it is likely to be accompanied by a tightening of bank liquidity and a need for public and private sectors alike to explore alternative sources of funding to bank lending. This chapter contains interviews with Mohamed Loukal, Governor, Bank of Algeria; Brahim Semid, CEO, Banque Extérieure d’Algérie; and Lazhar Sahbani, Partner, PwC Algeria.

Articles from this Chapter

Overview

Mindful leadership: Fundamentals remain sound as the authorities tackle new issues
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The decision by authorities to embark on a programme of monetary financing towards the end of 2017 marked somewhat of a turnaround in a difficult year for Algeria’s banks. A competitive dynamic has remained in recent years, with no new entrants, exits, mergers, acquisitions or privatisations of note. In fact, early 2018 saw the government announce that it was backtracking on plans to float one or more of the state-run banks on the local stock exchange (see Capital Markets overview). The state’s…

Interview

Strong and stable: Mohamed Loukal, Governor, Bank of Algeria, on the goals of unconventional financing and new regulations
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Interview :Mohamed Loukal What objectives has unconventional financing addressed since it was put in place in late 2017? MOHAMED LOUKAL: The dramatic fall of hydrocarbon prices has had a considerable impact on the economy. It has generated high fiscal and external deficits. Since 2016, the country has showed great resilience in facing the challenges, thanks to the prior accumulation of net budget saving in the Revenue Regulation Fund and international reserves. Looking forward, the 2018-23…

Analysis

Card bargain: Despite legal changes, e-payments struggle to gain foothold
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Advances in financial technology (fintech) have been slow to arrive to Algeria. A low bank penetration rate remains a significant challenge, notwithstanding substantial progress in recent years (see analysis), as do a cultural preference for cash and the dominance of state-run banks that have little incentive to innovate. Framework In June 2017 the government announced that Algérie Poste would roll out 50,000 mobile terminals by October 2017. To further cooperation in this area, it was announced…

Analysis

Extending access: Recognising the role of financial inclusion in development
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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…

Interview

Meeting demand: Brahim Semid, CEO, Banque Extérieure d’Algérie (BEA), on the role of public banks in creating new financing tools
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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…

Overview

Ready and willing: The bourse upgrades infrastructure and rules while it awaits the introduction of new listings and financial instruments
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Stability has been the order of the day in Algeria’s capital markets of late, with little in the way of new products, listings or other impetus for significant evolution. The authorities’ decision to embark on a programme of non-conventional monetary financing in late 2017 has restored liquidity to the banking system, increasing the availability and reducing the cost of bank lending (see Banking overview). Thus, for the moment, much of the pressure has been lifted from the public and private…

Interview

Investing in synergies: Lazhar Sahbani, Partner, PwC Algeria, on the possibilities that private equity investments present
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Interview :Lazhar Sahbani To what extent can listings of private companies restore trust in the capital markets? LAZHAR SAHBANI: Considering the current market’s status, with only five registered companies, the involvement of large private companies in the Algiers Stock Exchange (ASE) could restore trust in the capital market, enhancing the attractiveness of initial public offerings (IPOs) from smaller entities. In such a scenario, that listing will improve the governance model of private…

Analysis

Funds and gains: Private equity investments have a role to play in deepening and diversifying the economy, but some obstacles remain
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Investment funds are smart financing tools that encourage private investment by providing shortand medium-term capital resources to companies. Private equity financing supports companies looking to finance their foundation, growth and in some cases recovery and maintenance. Furthermore, in an economic context in which financing needs are steadily increasing, they represent a real operational solution to enhancing the national economy, which is still largely dependent on hydrocarbons. Strategic Support This…

Overview

On the up: More favourable economic conditions support stronger growth
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Following a muted performance in 2017 on the back of sluggish growth in the wider economy, market players in Algeria’s insurance industry anticipated that improved conditions in 2018 would support a sector recovery, a view partially borne out by the sector’s performance in the first half of 2018. A particular bright spot is the life segment. Although it accounts for just 10% of the overall sector and witnessed a dip in premium growth in the first half of 2018, the value of written life premium…

Overview

Reassuring trend: New reinsurance programmes are bolstering coverage against natural disasters in emerging markets – Algeria
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While advanced economies generate the vast majority of insurance and reinsurance business, emerging markets are posting higher rates of growth. Complementing this underlying trend is a strong and expanding interest in catastrophic risk, which by nature tends to pertain to emerging markets. This is coming alongside fast-paced, sector-transforming innovation, which could provide a major boost to industries in less-developed economies. “You have nothing but opportunity: big populations and tonnes of risks,” Tom Johansmeyer, assistant vice-president of property claim services at ISO Claims Analytics, a division of Verisk Insurance Solutions,…