The Role of the Legal and Regulatory Framework in Enhancing the Capacity of Islamic Finance to Attract Cash Liquidity from the Parallel Market: An Insight into the Algerian Experience (2019–2024)

Abstract

This study aims to analyze the role of the legal and regulatory framework in enhancing the ability of Islamic finance to attract liquidity from the parallel market in Algeria during the period from 2019 to 2024. The study focused on the effectiveness of the legal and regulatory reforms, particularly after the regulation 20-02, in integrating cash circulating outside official channels into the banking system. A descriptive analytical methodology approach was adopted based on an examination of legal and financial developments, supported by quantitative data on the volume of liquidity outside the banking system and the development of Islamic banking activity in terms of the number of Islamic windows and deposits.

    The study concluded that a clear and flexible legal and regulatory framework is required to boost the legitimacy of Islamic financial institutions and make them an effective means of absorbing funds that have accumulated outside of the banking system.