Islamic banking: the case of Algeria

Abstract

Purpose

The purpose of this paper is to provide a detailed analysis of the Islamic banking in Algeria following the financial liberalisation initiated in the 1990 s. It seeks to examine the performance of the sole bank offering Islamic financial products in Algeria, Banque Al Baraka d'Algérie. The study also aims to analyse the methods adopted by the bank to improve the allocation of its financial resources and to boost its earnings.

Design/methodology/approach

Interviews were conducted to learn about the performance and risks associated with Banque Al Baraka d'Algérie operations. All interviews were held one‐to‐one with each respondent in Algeria. Statistical data and financial ratio analyses are also used to support the arguments made in this study. Analyses are carried out on major factors affecting the bank operations.

Findings

The study reveals four key findings: Banque Al Baraka d'Algérie offers only a few Islamic financial products to its customers; most of the instruments are geared towards short‐term financing; the bank's overall performance has improved since its operations in Algeria; and credit risk remains the main obstacle facing the bank.

Research limitations/implications

This research uses a single country case study. The study also refers to the case of one Islamic bank with no competition from other Islamic finance providers.

Practical implications

The analyses presented in this research can be used by policymakers and managers as a guide to developing the existing Islamic banking practices in Algeria.

Originality/value

The study makes a contribution to the literature on Islamic banking in Algeria. It is the first study to particularly investigate the issue of Islamic banking performance in Algeria. The findings achieved in this research will be of interest for practitioners and academics concerned with developments of the Algerian banking industry.

Citation

Benamraoui, A. (2008), "Islamic banking: the case of Algeria", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 1 No. 2, pp. 113-131. https://doi.org/10.1108/17538390810880973