The symposium was attended by renowned national and international experts from nine countries: Tunisia, France, Morocco, United Arab Emirates, Malaysia, Bahrain, Senegal, Saudi Arabia and Greece. The first of its kind, this professional meeting brought together all stakeholders in the financial and insurance sector. For two days no fewer than 25 speakers, including two women (Algeria, Senegal), took turns to make their presentations at the podium. The aim was to devise a benchmark for countries by drawing on the relevant conclusions from different experiences, successes or failures, in the implementation of Islamic finance.
The numerous participants, from both the insurance and banking sector, had the opportunity to get grips with and master the concepts and tools of this branch of finance, the objective being to "capture more effectively the dormant capital and financial wealth outside of the conventional system". The other objective was to "meet the requirements in terms of compliance with the religious precepts". The two-day conference programme was divided into three parts: "Birth and development of Islamic finance in Algeria", which reviewed the situation at the level of banks and Takaful insurance and also the training aspect; "Issues", which dealt with legal aspects, the conditions for success and the challenges to be met; and, finally, "Opportunities" which examined experiences in the world and included a look at "banking products and participatory instruments" to attract new resources and help finance the real economy. It should be noted that the scientific direction of the symposium was entrusted to Professor Mohamed Boudjellal of the HIC.
SAAFI 2018 was jointly organised by the consulting firm SAAFI, specialised in the provision and conception of Takaful services and Islamic finance, and the event and travel agency MED VOYAGES. The first speaker was Mohamed Lahbib Goubi, Deputy Governor and Director of Credit and Banking Regulation at the Bank of Algeria (BA), who began his presentation by talking about the low level of financial intermediation, explaining the need to "capture some of the savings circulating outside the banking system in order to better finance economic activity". In turn, he described the diversification of this form of savings as a "strategic necessity for banks, and, hence, the national economy".
In his presentation, Mr. Goubi talked about the regulation of banks and financial institutions to carry out participatory finance operations using sharia-compliant financial products, as reviewed and approved by the Currency and Credit Council (CMC). Regulation 18/02 defines the rules applicable to so-called participatory products which do not entail the collection or payment of interest. These products in question are “Murabaha”, “Musharaka”, “Mudaraba”, “Ijara”, “Istisna'a” and “Salam” as well as investment account deposits. The relevant banking institutions, Mr. Goubi added, "need to have obtained, prior to any commercialization, the BA's notice of non-objection". In the meantime, he estimated that the national savings rate in circulation outside of banks "was roughly 31% of the money supply in Algeria", a fact which was met with great surprise by all participants. Koubi described this proportion as being "very high", advocating that these resources be channelled into banks so as to better "finance economic activity", particularly investment: "In a context characterised by a lack of conventional banking resources, the collection of funds through the diversification and adaptation of savings and financial products to meet the expectations of all operators and citizens is an urgent necessity for the national economy", he argued. He also referred to a "new regulation which will soon be published" in the Official Journal, a text defining the rules applicable to so-called participatory products, approved on 4 November by the Currency and Credit Council (CMC): "This system defines these products and their procedural framework, while distinguishing them from conventional banking activities", said Mr Goubi, who believed that this new text drafted by the Bank of Algeria "did not take into account all participative banking operations such as open market and interbank operations, meaning that more effort should be made in order to draft new texts which complement the legal arsenal and provide a framework for all participative financing". To this end, a method proposed by the BA was adopted, based on the principles of graduation in application, consultation in development, and the inclusion of all economic and social operators.
He also considered that the establishment of a complementary organizational and accounting framework covering this activity would "take more time and require a long term approach, more effort, patience and perseverance". The success of the participatory financing project will also depend, according to Mr. Goubi, on the effectiveness of qualified staff trained in a "sufficient and comprehensive" manner. During the symposium, bank representatives noted "an increase in demand" for this type of product, since the assets of Al Baraka and Salam banks - the only Islamic banks operating in Algeria – have reached 270 billion DA and 100 billion DA respectively.
Takaful Insurance : More work to be done
Concerning Takaful insurance, Mohamed Benarbia, director of Salama Assurances Algérie, the only company active in this field in Algeria, highlighted the lack of legal instruments to facilitate the growth of Islamic finance, since it is "currently regulated by laws intended for conventional insurance". Mr. Benarbia deplored the fact that the current regulations "require his company, like other insurance companies, to invest 50% of its assets in interest-bearing treasury bills even if they do not comply with Sharia law, owing to the absence of Sukuks on the Algerian financial market, meaning that returns on these investments are deducted from the company's financial results".
The manager drew attention to the absence of Takaful reinsurance companies and the fact that there were just two Islamic banks in the Algerian financial market, even though the regulation "requires the diversification of banks dealing with insurance companies in order to reduce risks". To fill this legislative gap, the National Insurance Council (NAC) recently proposed "a series of measures which could be introduced in the next revision of the insurance code to address these deficiencies", he said. The CEO of the Algerian Stock Exchange Management Company (SGBV), Yazid Benmouhoub, said that the Algiers Stock Exchange "is interested in launching a Sukuk, but the legislation currently in force does not allow it".
The exchange is currently working with a team at Sétif University to "develop a project on a new organizational approach which will be presented to the Commission for the Supervision of Stock Exchange Operations (COSOB) to argue for the possible launch of a Sukuk on to the market", he said. He then emphasised the role of the stock exchange in financing the economy, particularly in the context of the 75% decline in liquidity following the oil crisis in Algeria. In addition, he revealed that the Algiers Stock Exchange "will be fully digitized at the beginning of 2019 and that operators will be able to manage stock exchange transactions electronically".
Islamic finance is an integral part of Algerian national culture, as confirmed by the industry professionals who attended this 1st Symposium on Islamic Finance. Accordingly, CNEP Banque recorded a massive transfer from traditional accounts to interest-free accounts, i.e. 120,000 accounts. Other banks such as El Salam Bank are also taking big steps towards this type of finance. Islamic finance could reach up to 8% of Algeria’s financial market volume. What’s more, the migration from conventional to Islamic finance has not caused any "trauma" to the national financial system.
Mr. Nasser Hideur, Director of Salam Bank, considered it necessary that "the amendment of the Trade Act should make a legal provision allowing the issuance of a Sukuk for companies. Unlike sovereign Sukuks, they must be approved by the Commission for the Organization and Supervision of Stock Exchange Operations". Mr Hideur explained that the banks "circumvent the law by using profit participation certificates, as required by the Trade Act, and adapting them to comply with Shariah precepts". To go beyond what’s already been seen and one-off gains, such as those associated with the "rehabilitation of participatory financing" and "the growing interest in inclusive finance", Al Salam Bank plans to "bring genuine value-added", in order to "enable Islamic finance to be more innovative and better diversified". These regulations, he explained, will specify more clearly the organisational, procedural and accounting requirements, as well as those relating to the training and qualification of staff. He added that the introduction of counters dedicated to participatory finance "should be based on three fundamental principles: graduation in the application, consultation in the development and inclusion of all economic and social actors".
In addition to developing separate and adequate data, accountancy and management systems together with appropriate procedural mechanisms, Mr Goubi called on banks and financial institutions to employ qualified staff exclusively dedicated to this financial sector. As for the managers of banks, they presented their experience with Islamic finance. Boualem Djebbar said that the Algerian Bank for Rural Development (BADR), which he chairs, "is ready to endorse Islamic finance". From a marketing point of view, he said that "each branch will have its own counter dedicated to these alternative products before rolling out the operation to all branches".
Moreover, a central department oversees these operations together with an audit firm. The general manager of Salama Assurances Algérie, Mohamed Benarbia, also called for a legal framework which will "enable Takaful insurance to be properly practised” and mentioned, among other things, the absence of a re-insurance company for Takaful insurance.
Translated by James A. Pollard