Following the decision from the government to boost the development of Islamic finance with the aim of plugging its budget deficit as well as attracting funds, Algeria is currently building from scratch a regulatory framework including a national Shariah board within the High Islamic Council (HIC). IFN can exclusively disclose the project in the pipeline. MARC ROUSSOT writes.
To address the absence of a dedicated set of rules on Islamic finance, Algeria’s regulators are currently developing a holistic legal framework including the setting-up of a national Shariah board expected to be established by the end of the year.
Similar to the Higher Council of Ulemas in Morocco, Algeria’s Shariah board will be the only institution regulating the different segments of the industry: Islamic finance, banking, insurance, asset management, Waqf and Zakat.
This model has been preferred to Malaysia’s more complex structure where the central bank’s Shariah board oversees Islamic banking and Takaful while the Securities Commission takes charge of Islamic finance and asset management.
According to the draft proposal, 11 Shariah scholars will sit on the committee to be established under the supervision of the HIC. Market players, including banks, insurances, securities companies and asset managers will then select five of them. The HIC will choose four Shariah scholars while its president, Bouabdallah Ghlamallah, will suggest two independent specialists.
IFN understands that precise requirements in terms of qualifications, experience and the solid understanding of Islamic finance will be needed for a Shariah scholar to sit on the national Shariah board.
“Bank of Algeria, the country’s central bank, is open to this initiative and has agreed in principle that the national Shariah board will be established within the HIC,” affirms Dr Mohammed Boudjelal, a professor of Islamic banking and finance and a member of the HIC in charge of drafting the proposal for the creation of Algeria’s national Shariah board.
The HIC is currently seeking approval from Algeria’s apex bank to authorize the HIC to sign an agreement with the Professional Association of Banks and Financial Institutions (ABEF), a professional organization comprising all banks, financial institutions and leasing companies. Under this agreement, all ABEF members would recognize the HIC as the highest and only body delivering Shariah compliance authorization on financial products.