Algeria has taken a significant step forward in its monetary and banking regulations with the recent enactment of Law №23–09 on June 21, 2023. This new law introduces important provisions specifically addressing the operations of fintech, digital banks, and payment service providers in the North African country. This marks a pivotal moment as the Algerian government recognizes the evolving landscape of financial technology and the need for a comprehensive regulatory framework.
Authorization and Operations
The law clearly stipulates that only banks are authorized to engage in traditional banking operations. However, payment services, which were previously exclusive to banks, can now be provided by duly approved payment service providers. The specific list of payment services and the criteria for approving these providers will be established by a regulation issued by the Algerian Council of State. This development opens up opportunities for non-bank entities to participate in the payment services industry, fostering competition and innovation.
Financial institutions, on the other hand, are restricted from receiving funds from the public or managing means of payment. However, they are permitted to undertake all other operations apart from these two activities. This limitation ensures that banks maintain their crucial role as custodians of public funds and gatekeepers of payment mechanisms, while allowing financial institutions to contribute to the financial sector in other ways.
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Expanded Operations
Banks and financial institutions in Algeria now have the authority to engage in several related operations beyond traditional banking activities. These expanded operations include foreign exchange transactions, transactions involving gold, precious metals, and precious coins, as well as investments, subscriptions, purchases, management, custody, and sale of securities and various financial products. This broader scope of operations enables banks and financial institutions to adapt to changing market demands and provide a more diverse range of services to their customers.
Establishment and Regulatory Approval
To establish a bank, financial institution, independent brokerage intermediary, foreign exchange office, or payment service provider in Algeria, the Council’s authorization is required. The authorization process entails submitting a comprehensive application file, which includes an investigation report assessing compliance with the relevant regulatory provisions, particularly those outlined in Article 87. The Council will provide a separate regulation specifying the requirements for updating the application file periodically. This ensures that authorized entities continuously adhere to regulatory standards and remain accountable.
Emergence of Investment Banks and Digital Banks
The law further paves the way for the establishment of investment banks and digital banks in Algeria. Investment banks play a vital role in facilitating investment activities and providing specialized financial services. Digital banks, on the other hand, leverage technology to offer innovative and convenient banking solutions to customers. These new types of institutions reflect the government’s recognition of the importance of embracing digitalization and catering to the evolving needs of Algerian consumers.
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Legal Forms and Capital Requirements
Payment service providers, independent brokerage intermediaries, and exchange offices can be established as joint stock companies, simplified joint stock companies, or limited liability companies. This flexibility in legal forms provides entrepreneurs with options that suit their specific business models and preferences.
Banks and financial institutions, regardless of their legal form, must have fully paid-up capital in cash, meeting the minimum amount specified by a regulation issued by the Council. This requirement ensures the financial stability and resilience of these institutions, safeguarding the interests of depositors and stakeholders.
International Institutions and Resident Representation
Foreign banks and financial institutions intending to operate in Algeria must allocate capital to their branches in the country, meeting or exceeding the minimum capital requirements applicable to Algerian banks and financial institutions. This ensures that foreign entities maintain financial strength and accountability within the Algerian market.
Additionally, these foreign entities must appoint at least two senior executives residing in Algeria who hold positions of significant authority and responsibility. These executives will be entrusted with the determination of the entity’s activities and the management of its branches in Algeria. This provision strengthens the local presence and commitment of international institutions, promoting effective governance and decision-making within the country.
Algeria’s recent monetary and banking law, Law №23–09, signifies the government’s proactive approach to adapting to the changing financial landscape and embracing the potential of fintechs, digital banks, and payment service providers. The law opens up opportunities for innovation and competition while ensuring the stability and integrity of the financial sector. By allowing non-bank entities to provide approved payment services, expanding the operations of banks and financial institutions, and facilitating the establishment of investment banks and digital banks, Algeria is poised to create a robust and inclusive financial ecosystem. These regulatory advancements will undoubtedly contribute to the country’s economic growth and enhance financial services for Algerian citizens.
DOWNLOAD THE NEW LAW HERE (PDF)
Fintech digital banks law Algeria Fintech digital banks law Algeria
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard