Dedicated banks, public windows and sukuk: the Algerian model

Islamic finance in Algeria refers to interest-free banking operations regulated by the Bank of Algeria since 2020, offered by dedicated banks and windows of public banks, and complemented by takaful insurance and sukuk issued by the state.

A banking framework set by Regulation 20-02

Regulation 20-02 of 15 March 2020 issued by the Bank of Algeria covers operations that involve neither receiving nor paying interest. It lists six products, murabaha, musharaka, mudaraba, ijara, salam and istisna, together with deposit accounts and investment accounts.

Mandatory clearance by the National Sharia Authority

Before applying to the central bank, each institution must obtain a certificate of conformity from the National Sharia Fatwa Authority for the Islamic finance industry, a body attached to the High Islamic Council. This clearance is given product by product.

A compliance committee of at least three members

The regulation requires every bank offering these products to set up a Sharia supervisory committee of at least three members appointed by the general assembly. It checks that operations follow the opinions issued and can report deviations observed in day-to-day practice.

Keeping windows apart from conventional business

Conventional banks that open a window must separate it financially and administratively: distinct accounting, dedicated staff and segregated customer accounts. The aim is to ensure that deposits collected through the window never fund interest-bearing loans made by the parent bank.

Who offers Islamic products to Algerians?

Two banks are fully Islamic, Al Baraka Bank Algeria and Al Salam Bank Algeria. State-owned banks have opened windows, including BNA, CPA, BEA, BDL and BADR, which has spread the offer across the country through their extensive branch networks.

Public windows that draw hoarded savings back

One stated objective is to bring back into the banking system savings that households kept outside banks because they reject interest. Investment accounts based on mudaraba reward depositors through a share of profits rather than a guaranteed rate fixed in advance.

Murabaha for cars, equipment and housing

The bank buys the asset, becomes its owner and then resells it to the customer at a disclosed margin payable in fixed instalments. Islamic home financing was clarified by rules adopted in 2024, which set out how housing may be acquired under these structures.

Ijara and istisna for companies

A company can lease equipment through ijara, with the bank remaining owner and bearing the risks attached to the asset, plus an option to buy at the end. Istisna finances the manufacture or construction of an asset delivered later, such as an industrial building.

Takaful governed by Executive Decree 21-81

Takaful rests on a mutual fund fed by participants' contributions, with the operator acting as a paid manager. Executive Decree 21-81 of 2021 sets the conditions for this activity, and the first family and general takaful operators were licensed from 2022 onwards.

The first sovereign ijara sukuk

The state has launched its first sovereign sukuk, with a seven-year maturity, backed by the usufruct of public real estate transferred to subscribers. Open to resident and non-resident Algerians, they pay an annual return derived from rent rather than conventional interest.

Why are prices sometimes higher?

A murabaha involves two successive sales, temporary ownership of the asset by the bank and compliance reviews, all of which add costs. Competition between public windows and dedicated banks tends to narrow margins, yet comparing the total cost remains essential.

What an Algerian borrower should check

Ask for the product's certificate of conformity, the names of the Sharia committee, the total margin expressed in dinars, the processing fees, how late-payment penalties are used, often given to charity, and the early repayment terms written into the contract.