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September 26, 2024 | 1 year ago
New excessive interest rate thresholds: The Bank of Algeria takes the lead
In an economic context characterized by inflationary pressures and growing credit demand, the Bank of Algeria (Banque d’Algérie) has set new thresholds for excessive interest rates applicable in the second half of 2024.
This decision aims to regulate lending practices in the Algerian banking sector and prevent abuses in usurious rates. In a new note signed by Abdelhamid Boulouadnine, Director General of Credit and Banking Regulation, and addressed to commercial banks, the Bank of Algeria sets clear limits for seven categories of bank loans, calculated based on the average effective rates declared by banks for the second half of 2023.
Thus, for the second half of 2024, the ceiling rate is set at 8.75% for overdrafts, 10.52% for consumer loans, 8.06% for short-term loans, 7.53% for medium-term loans, 6.70% for long-term loans, 6.70% for long-term loans, 6.70% for long-term loans, 7.35% for long-term loans, 7.35% for home financing loans, and 11.75% for leasing.
These thresholds are intended to regulate lending conditions while protecting borrowers against rates that are considered abusive. A comparative analysis with previous periods shows a slight upward trend in interest rates, particularly for leasing, which has the highest maximum rate, followed by consumer credit, which could have a direct impact on households and certain types of businesses. However, the impact of these measures raises questions about the real effects on different segments of the economy.
To better understand these issues, we gathered analyses from experts Hamidouche M'hamed and Souhil Meddah. According to Professor Hamidouche, these new ceilings will have an impact on several parts of the economy. "The 10.52% cap on consumer credit could slow down the demand for credit by households, which would have a direct impact on overall consumption and economic growth in the short term.
This could particularly affect sectors such as trade and household equipment, which are heavily dependent on demand for credit," he analyzed.
As far as companies are concerned, he points out that "the maximum rate of 8.06% for short-term loans could put pressure on the cash flow of small and medium-sized enterprises (SMEs), which generally depend on this type of financing to ensure their daily operations".
On the other hand, he estimates that long-term loans, with a maximum rate of 6.70%, "could encourage long-term investment, which is essential for the country's sustainable growth", specifying that "these conditions could favour infrastructure and industrial investment projects, which are fundamental factors for the economy".
September 29, 2024 | 
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