Algeria exasperates with lack of consistency
Options for excess billions
Bogged down by petrobucks
What we lack most, say Algerians, is technological capacity. This was hardly helped, as far as the banks are concerned, with the calling off of the privatization of the third-biggest bank, Crédit Populaire d’Algérie, at the end of 2007.
Because of the scandal surrounding the 2003 collapse of Khalifa Bank, there are no longer any indigenous privately owned banks in Algeria. State banks control 90% of banking assets. But they hardly ever lend to the foreign banks in Algeria. State corporates are also discouraged from using the foreign banks.
Finance minister Karim Djoudi tells Euromoney that Algerian state banks are extremely liquid: the average loan-to-deposit ratio is about 60%. The government has progressively increased their capital in recent years. Djoudi says their return on equity last year was 25%, up from 3% in 2003. Banque Extérieure d’Algérie has benefited especially from the rise in the international oil price.
In a world credit crisis, foreign investors may find it convenient that public-private partnerships are encouraged to find financing in Algeria with the state banks. This is especially so given that foreign exchange controls limit the ability to hedge against the local currency.
However, Algeria’s banking sector, as one banker put it, is prehistoric. The inter-bank market is almost non-existent. The use of banking cards is particularly undeveloped. This might have changed had the privatization of Crédit Populaire d’Algérie gone ahead, as the frontrunners were all global brands such as Citi and BNP Paribas. The situation might also be improved were state banks and corporates less wary of using foreign banks in Algeria, which could then lend more.
It is ironic that there is hope in one banker’s belief that state banks will have difficulty funding Algeria’s massive state development programmes. But for some the continuing dominance of state banks is an example of how growing oil and gas revenue has given less impetus to the creation of a more active and diverse, technologically advanced private sector, and a lighter and more modern state. Indeed, according to research from EFG Hermes, private-sector credit in Algeria is only about 15% of GDP.
