Banking Concentration and Financial Intermediation in Algeria: Evidence from the Four-Bank Concentration Ratio

Abstract

This study examines market concentration and financial intermediation in the Algerian banking sector over the period 2018–2023. Market structure is assessed using the four-bank concentration ratio (CR4) based on total assets, while financial intermediation is measured through bank-level lending activity, including loan growth and the loans-to-assets ratio. Using data from the four largest Algerian banks and aggregate banking sector statistics from the Bank of Algeria, the analysis documents a persistently high level of concentration, with CR4 values exceeding 60 percent throughout the sample period. Despite this structural concentration, lending dynamics exhibit considerable heterogeneity across banks, reflecting differences in balance-sheet conditions and strategic orientation. At the aggregate level, financial intermediation remains moderate and relatively stable, even during periods of heightened economic uncertainty. Overall, the findings suggest that high banking concentration in Algeria does not necessarily impede financial intermediation, which appears to depend more on bank-specific behavior than on market structure alone. The results provide policy-relevant insights for banking sector reforms and competition policy in highly concentrated, state-dominated financial systems.