A growing number of Algerians are demanding Islamic banking products in order to avoid riba and the turmoil of the financial markets.
"The law on money and credit permits Islamic banking transactions and products, including mortgages, because these products don't constitute any breach of the Algerian law, and not because these financial institutions are compliant with the principles of Sharia," said Zoubir Ben Terdeyet of Isla Invest Consulting, which helped organise the conference.
Ben Terdeyet confirmed that this financial concept is deemed an important alternative solution, as it includes measures that can curb inflation and avoid financial crises that lead to bankruptcy.
Al-Baraka Bank chief Nacer Haidar highlighted the importance of the Islamic banking system in solving the problem financing private-sector businesses. He also emphasised the need to expand the scope of Islamic financing system in Algeria, calling for implementing murabaha (sale on profit) at the level of banks and for using funds to expand production and providing means of work.
Algerian authorities need to "enact special laws for some Islamic banking products, as was the case with financing through musharaka (joint venture), which complies with the laws and procedures related to investment capital," Haidar said.
"In Algeria, 99% of the real estate loans that are granted by banks are based on interest rates," said Abdelkader Beltas, general manager of the Mortgage Refinancing Company. "Although this formula is prohibited in Islam, people continue to borrow money to buy housing units in the absence of alternative formulas."
During the discussion of the Bank of Algeria governor's report last October, some lawmakers representing Islamic parties in the parliament raised the question of poor Islamic financing options.
One of these MPs, Mohammed Hadibi of the Ennahda Movement, criticised the pressures exerted on banks that operate according to sharia rules in Algeria, compared to the complete freedom given to European banks that operate in country. He also called for implementing the Bank of Algeria governor's obligation by opening Islamic windows at public banks.
The government responded to these demands by amending the Law on Money and Credit, after consulting experts in Islamic banking and specialists in the fighs of Islamic sharia. Passed in May 2010, the amendment will take effect next January. It aims to reconcile the current financial system in Algeria and get it closer to the rules of Islamic transactions, especially with regards to interest payments at traditional banks.
By Walid Ramzi
© Magharebia.com 2010
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