Algeria’s Informal Economy: A Challenge for Formalization and Economic Growth

In Algeria, colossal sums circulate in the informal circuit. The informal economy is a sector that has imposed itself and that the authorities are unable to control, despite all the announcements made in this direction. This sector constitutes one of the greatest obstacles to the emergence of a strong and competitive economy. The money generated by the informal is spiraling out of control.

To reduce the weight of this sector, the governor of the Bank of Algeria, Salah Eddine Taleb, met with the heads of banking and financial institutions. During this meeting, the head of the Bank of Algeria gave instructions to improve the banking of informal money. He also called on the heads of these institutions to strengthen the financing of the national economy.

Salah Eddine Taleb, who recalled that Algeria’s financial indicators have improved, therefore gave guidelines for in particular capturing money from the informal sector by encouraging savings in Algerian banks. He also instructed banks to accelerate their digitization, reduce loan granting times and also the creation of independent agencies for Islamic finance. The Governor of the Bank of Algeria has encouraged banks and financial institutions to grant more loans for investment.

It must be said that for several months, the government has continued to multiply initiatives to attract money from the informal sector. However, for some experts, this strategy is not the right one. On this issue, finance expert Lies Kerrar pointed out that while it is “important to be concerned with the informal”, the fact of “framing the problem in this way misleads about what TO DO “.

This expert rather recommends posing the problem differently. “The problem is not to recover money from the informal sector. What is needed is to act on the fundamental reasons that have pushed a large part of Algerians to turn their backs on the formal system and operate informally,” says Lies Kerrar.

“To formalize our economy, we must first put in place a simple, reasonable tax system applicable to all. Then, of course, our banking system must make enormous progress in terms of customer service and the remuneration of deposits. If we want to attract bank deposits, we must first do the minimum to attract them: set up a minimum level of electronic payment services, and remunerate deposits in a reasonable to attractive way”, indicates the expert, explaining the procedure to be followed.