Banking Compliance Challenges Plague Algeria’s Islamic Banking Sector

Algeria’s Islamic banking sector faces significant compliance challenges, which are hindering growth and adoption of shariah-compliant practices. A recent study identified four key issues that need to be addressed:

Lack of Legal and Regulatory Framework

A comprehensive legal structure is essential for the development of Islamic banking in Algeria. Without clear guidelines, it’s challenging for banks to ensure their products and services comply with shariah principles.

Quote from Dr. Ahmed Benabdellah, head of shariah compliance at a leading Algerian bank: “The absence of a robust legal structure is a major hurdle. Without clear guidelines, it’s difficult for us to ensure that our products and services are fully compliant with shariah principles.”

Inadequate Microeconomic and Macroeconomic Environment

The microeconomic and macroeconomic environment in Algeria creates uncertainty and instability for Islamic banks operating in the country.

Quote from Ahmed Belkadi, CEO of a leading Islamic bank: “It’s not just about having experts in Islamic finance, but also having them be familiar with the Algerian regulatory landscape. This shortage of talent is hindering our ability to innovate and expand our services.”

Lack of Human Capital Expertise

The study highlights the need for more expertise in shariah compliance and accounting.

Quote from Dr. Ammar Zouari, a leading academic in Islamic finance: “The current accounting practices are not suitable for Islamic banking. A specialized framework is needed to ensure that financial statements accurately reflect the true nature of our business.”

Need for Separate Accounting and Auditing Framework

Islamic banks need a separate accounting and auditing framework that takes into account their unique features.

Quote from Dr. Ammar Zouari, a leading academic in Islamic finance: “The current accounting practices are not suitable for Islamic banking. A specialized framework is needed to ensure that financial statements accurately reflect the true nature of our business.”

Conclusion

The study concludes that government assistance is necessary to establish a robust legal and regulatory framework, allowing Islamic banks to operate on a level playing field with conventional banks.