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WorldOctober 1 2014

Algeria’s private banks feel the state’s squeeze

Algeria’s banking sector is one of the biggest in Africa, but it is also one of the most opaque and is dominated by state banks. Yet private lenders, all of which are foreign-owned, still find ways to operate profitably and many are wanting to expand.
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Private banks in Algeria outnumber public banks by 14 to six, but by every other metric the hydrocarbon-rich north African country’s banking sector is dominated by the state. Public banks accounted for 86% of banking assets at the end of June 2013. Their AD8300bn ($102bn) of assets compares to a total of AD1350bn among private banks, all of which are foreign owned, according to the International Monetary Fund (IMF). Combined annual private sector banking revenues amount to not much more than $1bn, according to a senior executive at one international bank operating in the country.

The imbalance is largely due to the fact that the Algerian economy is dominated by public sector investment, and state-owned firms are obliged to borrow from state-owned banks. After the collapse of a major local private bank, Khalifa Group, in 2003, the government introduced a ruling that public companies could only use state-owned banks. This stipulation was lifted in 2007, but in practice little has changed.

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