The informal sector represents a significant part of the economy in Algeria. The sums of money circulating outside the banking system are enormous, according to the Bank of Algeria. In Algeria, cash transactions are still the most popular method.
The annual report of the Bank of Algeria for the year 2023, recently made public, indicates that “despite less growth than the previous year (2022, Editor’s note), fiduciary circulation outside banks contributed 46.7% to the growth of the money supply.”
Money circulating in the informal circuit, which constitutes an obstacle for the national economy, therefore remains at a very high level. The report tracing the economic and monetary developments of the country in 2023 therefore highlights the shortcomings in the banking of money circulating in the informal sector.
However, the financial institution indicates that several projects are being launched to attract these funds. “Several projects have already been launched and were in the finalization phase at the end of 2023,” reveals the BA, which explains that the measures taken by the public authorities aim for “better financial inclusion through the introduction of modern means of payment.”
Informal money is “a significant component of the money supply, with a share of 34%,” notes the financial institution, which states that this poses “a major challenge for financial inclusion in Algeria.” However, according to this institution, the banking sector recorded “a positive development in 2023,” in terms of indicators of banking intermediation and banking of populations.
It must be said that the local banking landscape saw its direct network expand to 1,746 branches at the end of 2023, compared to 1,720 at the end of 2022. It is now made up of 7 public banks, 13 private banks with foreign capital, including one with mixed capital, 2 public financial institutions, 5 leasing companies, including 3 public and an agricultural insurance mutual approved to carry out banking operations.
These figures “reflect a density of one agency for every 26,690 inhabitants”, while “the ratio of working population/bank counters improved slightly in 2023, i.e. one counter for every 8,141 people of working age, compared to 8,238 people for the previous year”, indicates the Bank of Algeria. In addition to these financial institutions, there is a network of postal check centers, made up of 4,209 agencies spread across the entire national territory, i.e. one postal establishment for every 3,189 working people.
Development of modern means of payment to attract money from the informal sector
The level of banking, in terms of the number of accounts opened by banks to customers (active accounts in dinars and foreign currencies) and by the postal check center, is slightly increasing in 2023 and stands at 3.41 accounts per person of working age, compared to 3.26 accounts in 2022, the institution also indicates.
It should be noted that unlike traditional means of payment (checks and commercial paper), the use of which seems to be declining year on year, means of payment of an essentially electronic nature (transfers, direct debits and card transactions) are increasingly consolidating their dominance in terms of volume, according to the BA.
In 2023, the development of electronic money activity, i.e. modern means of payment, resulted in a total of 16,509,507 magnetic cards put into circulation, i.e. an increased rate of 21.1% and an electronic money fleet of 3,847 ATMs and 53,191 electronic payment terminals (EPTs), up 5.7% and 15% respectively compared to 2022.
An average of 4,292 cards issued by ATMs and 310 cards issued by POS were recorded in 2023. However, this remains “insignificant in terms of acceptance points”, underlines the BA, which adds that mobile payments authorized by the Bank of Algeria intra-bank recorded in 2023 “a very significant volume of 39 million transactions for a total value of 28 billion dinars”.
