Algeria launches Islamic finance to boost economy

ALGIERS, August 16 (online): In a bid to fix the country’s struggling economy, Algeria has turned to Islamic finance products to attract money from the informal market, but bankers are skeptical of the idea.

Falling oil prices and the coronavirus pandemic have battered the North African country, triggering alarm bells among officials and experts.

The International Monetary Fund (IMF) forecast that Algeria’s economy will shrink 5.2% this year.

Prime Minister Abdelaziz Djerad has warned of an “unprecedented economic situation”, and experts have estimated unemployment at nearing 15%.

In Algeria, Africa’s largest nation and home to 43 million people, most transactions are done in cash circulating outside the formal banking sector, said professor Mohamed Boudjelal, an expert on Islamic finance.

Many Algerians “turn their nose up” at conventional banking, Boudjelal said.

Some Muslims believe that the traditional banking system is incompatible with their faith.

Islamic finance — the provision of financial services in accordance with religious laws — is a fast growing sector that has been adopted in many Muslim countries.

The industry is based on shared profit and loss, while earning interest is banned as “usury”.