The Bank of Algeria published on 22 October the practical rules that banks and financial institutions must follow to provide factoring. Instruction No 09-2026, dated 7 October, implements Regulation No 26-03 of 13 August, which introduced the activity into Algeria’s banking framework.
Factoring allows a company to transfer a trade receivable to a financial institution and obtain cash before the payment date in return for a fee. For businesses facing long payment delays, the mechanism provides short-term financing backed by invoices.
Before entering into a contract, the factor must assess the financial position of both the company selling the receivable and the debtor. The written agreement must set out the fee, duration, overall and individual exposure limits and termination conditions.
Only receivables owed by debtors resident in Algeria are eligible. The company must submit invoices or equivalent documents with a summary schedule, while the financial institution must verify their eligibility before providing funds.
Subrogation transfers the rights and guarantees attached to the receivable to the factor. A receipt in two copies must accompany each financed invoice, and the company must promptly disclose any event that could affect the debtor’s ability to pay.