Bourse d’Alger works on proposal for Sukuk regulation

Leveraging the current momentum following the release of an Islamic banking framework by Banque d’Algerie, Bourse d’Alger intends to submit by the end of the year a proposal on regulating Sukuk. MARC ROUSSOT writes.

Islamic banking has finally been accommodated by the Central Bank of Algeria (Banque d’Algerie), offering Al Baraka Bank Algeria and Al Salam Bank, the two fully-fledged Islamic banks operating in the country, the possibility to thrive in a regulatory-friendly environment after almost 30 years of development in a grey area.

The next step is to broaden the remit beyond banking. The legal framework, including a few articles of the trade law, needs to be tweaked to introduce Sukuk. Although, no clear timeline has been mentioned by the authorities, the amendments are expected to be passed in the near future as the 2018 Finance Law paved the way for the government to print sovereign Sukuk.

The High Islamic Council has already made some suggestions while Bourse d’Alger expects to share its ideas with the Commission d’Organisation et de Surveillance des Operations de Bourse, the regulator, by the end of the year.

Algeria’s stock exchange has been looking at Islamic finance since 2016 when it asked the Setif University’s economy and management faculty to work on a project, to ease the issuance and the listing of Sukuk.

“We launched this initiative as we wanted to have a thorough analysis of the legal framework in other countries where Islamic finance has been accommodated. We also needed a study on the different products that could be introduced in Algeria, estimates on the demand for Islamic finance tools, and suggestions on reforms that should be done to introduce Islamic finance in the country,” details Yazid Benmouboub, the managing director of Bourse d’Alger.

Targeting a market capitalization of EUR10 billion (US$11.27 billion) in the next five years from EUR420 million (US$473.34 million) currently, the development of Islamic finance would be a boon for Algeria’s stock exchange, which recently welcomed Al Baraka Bank Algeria and Al Salam Bank as new trading and brokerage players after securing a license from the regulator.

Bourse d’Alger is relatively small in comparison with the stock exchanges of Morocco and Tunisia which has a market capitalization of MAD561.2 billion (US$58.31 billion) and TND25.91 billion (US$8.86 billion), respectively.

“We need innovation with the introduction of Sukuk to deepen the market,” says Yazid.

This article first appeared in IFN Volume 15 Issue 47 on the 21st of November 2018

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