Islamic finance was uncommon in Morocco up to 2015, when the Bank Al-Maghrib began to approve – on a case-to-case basis – requests of conventional banks to open Islamic windows and started the process of formulating clear Islamic banking regulations for the banking industry.
The first banks to launch Islamic banking operations were Attijariwafa Bank, BMCE of Africa and Banque Centrale Populaire, as well as Societe Generale Marocaine de Banques, Credit du Maroc, Banque Marocaine pour le Commerce et l’Industrie and CIH Bank. With the latter, a lender focusing of the property and hospitality sectors, Qatar International Islamic Bank entered a joint venture to open the first fully-fledged Islamic banking branch network in Morocco under the name of Umnia Bank back in May last year, Gulf Times reported.
Meanwhile, Bank Al-Maghrib governor Abdellatif Jouahri in a review of the new regulations in June this year after the second quarterly meeting in 2018 of the central bank’s board expressed his satisfaction over the development of the “participatory banking” sector.
According to him, the country now has more than 70 banks and financial institutions providing Shariah-compliant financial services, which so far granted a total of 1.1bn Moroccan dirhams ($115.3mn) in lending. While the Islamic banking regulations, governed by the Shariah Committee for Participative Finance in the central bank, allows five popular types of Islamic finance transaction, (murabaha, musharaka, ijara, mudaraba and salam), murabaha – a credit sale for a markup – has proven most popular for participation banking clients, which prefer it for real estate and automotive financing, Jouahri said.
With fundamental Islamic banking structures now in place, Morocco also readies for the issuance of its first sukuk. Originally planned for 2017, the finance ministry is now preparing to issue four dirham-denominated sovereign sukuk in 2018 after eventually adopting the respective regulatory framework governing sukuk sales, according to Bloomberg News.
Hicham Talby, head of the treasury department in Morocco’s finance ministry, said the financial instruments they will start with include ijara, wakala, musharaka and murabaha. The first sukuk to be placed in the market will be worth 1bn dirhams ($104.7mn), Reuters cited a statement by the Moroccan finance ministry. In addition, the government wants to establish a sovereign sukuk fund for infrastructure and other public expenses.
In a next step, Morocco is preparing for the introduction of Islamic insurance, or takaful, in the country possibly by 2019. While a first takaful law was already passed in 2015, respective regulations for the insurance market have not been finalised yet, no licences have been granted and no official timeline for the launch has been set, which has led to considerable confusion in the commercial insurance industry, as well as for social security authorities which see takaful as a vehicle for state insurance provisions.
As of yet, the takaful regulations still remain in the draft stage, and Moroccan authorities are seeking inputs and advice from standard-setting Islamic finance authorities in Bahrain and Malaysia.
Overall, “participatory banking” is expected to add up to 10% of additional assets to Morocco’s banking system as Shariah-compliant banking would attract the currently unbanked to open bank accounts. It will also attract funds currently invested in overseas Islamic banks, which would also have a significant effect on Morocco’s economic growth that is currently rather lacklustre for an emerging nation at around 3% as per forecasts for 2018.