Financial and Banking System

Modes Of Financing

Conventional Loans
  • Operating Loans: These finance the day-to-day activities of the company according to its needs.
  • Signature Loans: Indirect operating loans that include deposits, guarantees, customs bonds, and letters of credit.
  • Investment Loans: Medium- and long-term loans used to finance the company’s capital assets and facilitate investment financing (intangible, tangible, and financial assets such as equity investments and subsidiary acquisitions).
Islamic Loans

Islamic finance adheres to Sharia principles, avoiding predetermined interest (Riba) and following specific guidelines to be considered “Halal.” Islamic Banking offers products and services compliant with Sharia law, focusing on profit and risk-sharing:

  • Musharaka: A contract between a bank or financial institution and one or more parties to jointly participate in the capital of an enterprise, project, or commercial operation to realize profits.
  • Mudaraba: A contract where the bank provides capital to an entrepreneur, who contributes labor to a project to generate profits. It’s a partnership between an investor (Rab-al-Maal) and an entrepreneur (Mudarib), who brings expertise.

Other products include Murabaha, Istisna, Ijarah, and Salam, based on marginal costing:

  • Murabaha: The bank sells a specific property to a client at a cost plus an agreed profit margin, with payment terms set in advance.
  • Istisna: The bank undertakes to deliver a good to the client, or buy from a manufacturer, according to agreed characteristics and at a fixed price, with predefined payment methods. Istisna may involve two parallel contracts: one between the financier and the builder, and the other between the financier and the client. In this case, the financier cannot enter into a contract with a manufacturer whose capital is held 33% or more by the client.
  • Ijara: This is a lease contract where the bank or financial institution, known as the lessor, provides a movable or immovable property to a client (lessee) for rental purposes for a specified period. The lessee pays a fixed rent as per the contract.
  • Salam: In this contract, the bank or financial institution purchases goods from a client, with the understanding that the client will deliver the goods at a later time. The payment is made immediately and in cash. A parallel Salam contract may be established between the bank and a third party to sell an asset with similar characteristics to the initial contract, with delivery at a later date and at an agreed price. However, criminal clauses for delays in delivery are prohibited, and guarantees may be required.
  • Leasing: This involves a lessor granting a lessee the right to use a designated property (such as equipment or assets) for a specified period in exchange for rent payments. The lessee uses the property without owning it. Leasing typically involves a medium-term duration, ranging from 2 to 7 years, depending on the materials and terms. According to the Ottawa Agreement, leasing involves the lessor entering into a supply contract with a supplier, based on the lessee’s indication, and then leasing the equipment to the lessee in exchange for rent payments, which account for equipment depreciation costs.

Investment Funds

National Investment Fund (FNI)

The FNI is a specialized public financial institution tasked with providing investment financing through loans to companies or by acquiring equity stakes in partnership with local or foreign investors to achieve national development objectives. The FNI’s interventions are governed by specific criteria:

  • The FNI’s intervention can reach up to 34%.
  • The recipient company must have the legal status of a joint-stock company (SPA).
  • The investment project must be in one of the priority sectors outlined, including Information Technology, Telecommunications, Innovation, Building and Public Works, Tourism, Food Industry, Industrial Subcontracting, Renewable Energies, Financial Services, Transport, and Logistics.
Wilayas Investment Funds (FIW)

Article No. 100 of the Supplementary Finance Law for 2009 mandated the establishment of a Wilaya Investment Fund to invest in the capital of Small and Medium Enterprises (SMEs) founded by young entrepreneurs. A budget allocation of 48 billion AD has been designated for this purpose and distributed among these funds. The Wilayas Investment Funds aim to support young entrepreneurs lacking sufficient capital and contribute to increasing the finance supply for the national economy, local development, and unemployment reduction. These funds are managed by private capital companies operating in the market segment, as well as public banks. They can invest in companies (SMEs) established by young promoters, with stakes of up to 49% in the capital.

Algerian Start-ups Fund (ASF)

ASF is a public venture capital company responsible for financing companies labeled as Start-ups through equity and quasi-equity. It was established through collaboration between the Ministry of Start-ups and six public banks. The Complementary Finance Law 2020 has relaxed certain prudential rules to encourage increased private sector investment in venture capital. For investors, participatory financing options like crowd funding are available. You can learn more at

Equity Crowdfunding

Crowdfunding involves financing projects by collecting small amounts from the public. This funding can be in the form of donations, loans, or investments, providing an accessible and flexible alternative to traditional financing methods for start-ups (such as banks or venture capital firms). With the introduction of equity crowdfunding in the 2020 complementary finance law, the Algerian Start-ups Fund (ASF) collaborated with the COSOB to establish a regulatory framework around crowdfunding intermediaries.

Guarantee Institutions

Guarantee Fund for Loans to SMEs (FGAR)

The FGAR guarantee covers a portion of the loan’s capital balance provided by the bank, with the percentage determined for each project and specified in the guarantee certificate issued by the FGAR to the bank. Key points regarding the FGAR guarantee include:

  • Guarantee rates range between 10% and 80% of the loan amount, based on project cost and risk.
  • The maximum guarantee amount per project is 100 million AD for creation and expansion projects.
  • The maximum duration of the guarantee is 7 years for conventional investment credit and 10 years for leasing.
  • The guarantee must be essential for the project’s execution and is subject to analysis by the FGAR.
  • Costs associated with guarantee coverage include a study committee fee and an annual commitment fee based on the outstanding amount of the guarantee.
Investment Credit Guarantee Fund for SMEs (CGCI-PME)

The CGCI-PME guarantees the risk of default on investment loans granted by banks or credit institutions, aiming to facilitate access to finance for SMEs to realize their productive investment projects. Key features of the CGCI-PME include:

  • It targets SMEs, small, and very small enterprises to support their creation, expansion, or renewal of production equipment.
  • Since 2018, the CGCI-PME has introduced a new product, the TPE Delegated Guarantee, focusing on very small enterprises to enhance financial inclusion and banking within the Algerian TPE sector.