Islamic finance in Algeria: what the regulation actually covers, and what changed in 2025
📌 In short: Islamic finance in Algeria rests on a precise regulatory framework, not on custom. Regulation No. 20-02 of 15 March 2020 defines the banking operations that fall within it and the conditions under which they may be carried out; it succeeded Regulation No. 2018-02 of 4 November 2018 on participatory banking. 2025 was the decisive year: three regulations gave the sector its missing infrastructure — recognition and measurement rules (25-09), a dedicated chart of accounts (25-10) and an Islamic interbank money market (25-13). For a company, that means a clearer, better-equipped offering with room to grow.
Keywords in this article
1. 1. Where does Islamic finance in Algeria actually stand?
The question is usually framed in terms of religious compliance. From the standpoint of a business owner looking to finance an investment, it is framed differently: is this framework stable, and do the banks have the means to apply it? The answer lies in the regulatory sequence published by the Bank of Algeria.
| Text | Date | Subject | Publication |
|---|---|---|---|
| Regulation No. 2018-02 | 4 November 2018 | Conditions for carrying out participatory banking operations | OJ No. 73, 9 December 2018 |
| Regulation No. 20-02 | 15 March 2020 | Definition of Islamic banking operations and the conditions for carrying them out | OJ No. 16, 24 March 2020 |
| Regulation No. 25-09 | 24 July 2025 | Recognition and measurement rules for those operations | OJ No. 65, 30 September 2025 |
| Regulation No. 25-10 | 24 July 2025 | Chart of accounts for banks carrying out those operations | OJ No. 66, 7 October 2025 |
| Regulation No. 25-13 | 24 September 2025 | Interbank money market for Islamic finance | OJ No. 68, 14 October 2025 |
Three things stand out. First, the official vocabulary has shifted: the 2018 text spoke of participatory finance, the 2020 text speaks of Islamic finance. Second, the founding text in force is Regulation No. 20-02 of 15 March 2020, published in Official Journal No. 16 of 24 March 2020 — in the same issue as three other major regulations adopted that day (banking conditions, deposit guarantee, interbank foreign exchange market).
The development nobody comments on. Between July and September 2025, the Bank of Algeria issued three regulations in four months devoted to Islamic finance. This is not a technical adjustment: it is the construction of the missing infrastructure — dedicated accounting, a dedicated chart of accounts, and a dedicated interbank market. No banking segment grows sustainably without those three.
2. 2. Which products does the regulation recognise, and what are they for?
Regulation No. 20-02 defines the banking operations falling under Islamic finance and sets the conditions under which banks and financial institutions may carry them out. The families of operations it covers are those found in Algerian banks' commercial offerings: murabaha, ijara, musharaka, mudaraba, salam and istisna'a, together with deposit accounts and investment account deposits.
The table below gives the financial reading — the one that matters when choosing. The uses described come from practice observed in our engagements, not from the regulatory text itself.
| Operation | Economic logic | Most common corporate use |
|---|---|---|
| Murabaha | Purchase by the bank, resale to the client at a margin agreed in advance | Raw materials, goods, standard equipment |
| Ijara | Asset made available against rentals, with or without final transfer | Heavy equipment, vehicles, premises |
| Musharaka | Capital contribution, sharing of profits and losses | Projects with heavy equity needs |
| Mudaraba | Funding by one party, management by the other, profit shared | One-off operations with delegated management |
| Salam | Immediate payment against deferred delivery | Production cycles requiring early cash out |
| Istisna'a | Financing of an asset to be manufactured or built | Works, construction, made-to-order manufacturing |
The most common confusion. An "Islamic bank" and an "Islamic finance window" are not the same thing. Regulation No. 20-02 governs the operations, and allows universal banks to offer them alongside conventional products. Being told "we do murabaha" by a public bank is therefore entirely normal. What matters for a company is knowing which products the branch is actually equipped to handle — a question to ask directly, from our engagements, before assembling any file.
3. 3. Why the three 2025 regulations change the picture for companies
These texts are addressed to banks, not to companies. Their effects, however, show up at the counter.
Recognition and measurement (Regulation No. 25-09)
A murabaha is not booked like an interest-bearing loan: there is a purchase, a temporary holding, a resale and a margin. As long as recognition and measurement rules are not standardised, each bank builds its own reading and the product stays marginal in its financial statements. Regulation No. 25-09 of 24 July 2025 ends that.
A dedicated chart of accounts (Regulation No. 25-10)
A chart of accounts specific to Islamic banking operations makes it possible to track, audit and steer that segment separately. From our engagements, this is the practical condition for a board to set commercial targets for the segment: what is not measured is not managed.
An Islamic interbank money market (Regulation No. 25-13)
This is the most important of the three, and the least commented on. A bank collecting Islamic deposits cannot place its surpluses on the conventional interbank market without stepping outside the framework. With no dedicated market, it is condemned to hold idle liquidity — which raises the cost of its products and constrains its offering. By creating this segment on 24 September 2025, the Bank of Algeria removes the sector's main structural brake.
Expected consequence, to be monitored. On our reading, which is an expectation and not an established fact: a dedicated interbank market should, over time, widen the amounts and maturities offered to companies under Islamic financing. We would encourage checking the actual state of your bank's offering rather than treating this development as a given.
Islamic or conventional financing — which costs less for your project?
We cost both structures on the same schedule, collateral included, and hand you a written comparison showing total cash out for each option.
Compare both structures →4. 4. How do you compare a murabaha with a conventional loan without going wrong?
This is the most frequently asked question, and the one where reasoning errors are costliest. A murabaha margin is not an interest rate, but it has a cost, and that cost is comparable.
The method we apply in our engagements — professional practice, not a regulatory standard:
Reduce everything to total cash out
For each offer, add up everything that will leave your treasury: price or principal, margin or interest, arrangement fees, insurance, valuation fees, registration duties. One figure per offer.
Place those outflows on a timeline
Two offers with the same total cost but different schedules do not weigh the same on cash. It is the outflow profile, not the total, that puts a company in difficulty — see our article on cash flow and working capital requirement.
Compare the collateral required
The headline cost is only part of the price. An offer requiring a mortgage is not comparable to one covered by an institutional guarantee — covered in our article on alternatives to mortgage collateral.
Check the tax and accounting treatment
The legal structure differs: purchase-and-resale for a murabaha, leasing for an ijara. Accounting and tax treatment follow that structure, and the effect on profit is not neutral. Settle this point with your adviser, file in hand.
The same method applies when choosing between conventional financing and a lease: we set it out in our comparison of investment loan versus leasing.
5. 5. What does the bank actually require for Islamic financing?
Field observation, not a regulatory rule: the business file required for a murabaha or an ijara is, in our engagements, of the same nature as for a conventional loan. Counterparty risk analysis does not change in nature because the bank's remuneration changes in form.
In practice the documents expected cover the same ground: the company's legal documents, financial statements for recent years, current banking commitments, the project's economic study, the pro forma invoice or quotation for the asset to be financed, and the collateral offered. The specific feature concerns the asset itself: since the bank buys or holds it, its description, price and supplier become central elements of the file rather than mere annexes.
The single biggest time-waster. From our engagements: an incomplete or undated pro forma invoice, or one whose supplier cannot be identified. In a purchase-and-resale transaction that document is not one administrative item among others — it is the object of the contract. Having it checked before filing saves weeks.
On preparing the file itself, two articles complete this one: what regulation obliges your bank to calculate about you and the diagnostic to run after a refusal.
6. 6. The four most common mistakes
- Choosing the product before defining the need. A cash need, an equipment need and an equity need do not call for the same operation. The product follows from the need, never the reverse.
- Comparing a margin to a rate. The two do not read the same way. Only total cash out, placed on a timeline, is comparable.
- Assuming every branch handles every product. From our engagements, what is actually available varies from branch to branch. Ask early.
- Neglecting documentation of the financed asset. In a purchase-and-resale or leasing transaction, the asset is at the heart of the contract. Its documentation governs release of funds.
Disclaimer. This article is informational. It is not legal, tax or investment advice, nor an opinion on religious compliance — sharia compliance of a product is a matter for the competent bodies, not for a financial advisory firm. It guarantees no financing outcome. The texts cited are those referenced by the Bank of Algeria at the verification date shown below; their article-by-article content should be consulted in the Official Journal before any binding decision.
FAQ — Frequently asked questions
🔎 Sources and references
- Regulation No. 20-02 of 15 March 2020 defining Islamic banking operations and the conditions under which banks and financial institutions may carry them out (Official Journal No. 16 of 24 March 2020) — Bank of Algeria — Legislative and regulatory framework, "Islamic finance" section · Verified on 03/08/2026
- Regulation No. 25-09 of 24 July 2025 setting the recognition and measurement rules for Islamic banking operations (OJ No. 65 of 30 September 2025) ; Regulation No. 25-10 of 24 July 2025 establishing the chart of accounts applicable to banks and financial institutions carrying out those operations (OJ No. 66 of 7 October 2025) ; Regulation No. 25-13 of 24 September 2025 on the Islamic interbank money market (OJ No. 68 of 14 October 2025) — Bank of Algeria — Legislative and regulatory framework, "Islamic finance" section · Verified on 03/08/2026
- Regulation No. 2018-02 of 4 November 2018 on the conditions for carrying out participatory banking operations by banks and financial institutions (OJ No. 73 of 9 December 2018, p. 18) — Bank of Algeria — Legislative and regulatory framework, "Islamic finance" section · Verified on 03/08/2026
- Official Journal of Algeria No. 16 of 24 March 2020 — contents of the "Bank of Algeria" section (Regulations Nos. 20-01 to 20-04 of 15 March 2020) — Official Journal of the People's Democratic Republic of Algeria · Verified on 03/08/2026
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