Morocco Islamic Finance 2014: Unlocking The Kingdom’s Potential

Morocco Islamic Finance Country Report 2014 presents the necessary confluence of economic, financial and political fundamentals that are coming together in a kingdom ready to embrace Islamic finance.

In Arabic, Morocco is called ‘Al Maghreb’, the westernmost land in the northwestern region of the maghreb (region denoted in lower case). Yet this dominant Arab complexion of Morocco belies the country’s and indeed the entire maghreb region’s richly tapered history and heritage long before lines in the sand were drawn to separate the modern nation states of Algeria,

Morocco and Tunisia.

Historically, the maghreb as a region is home to the native diverse Berbers who pre-date the arrival of the Arabs in the 7th century. Between the 7th and the 16th centuries the region was ruled by different successive Berber and Arab dynasties. During this period the maghreb reached a high during the 10th to the 13th centuries under the Arab Fatimid caliphate and

then under the Islamic Berber dynasties Almoravids and Almohads. The Almoravids founded Marrakesh in 1062, and extended their empire beyond present-day North Africa to parts of modern-day Spain, Portugal, France, Gibraltar and Mauritania.

In the mid-12th century the Almohads overtook the Almoravids, and ruled until their decline in the mid-13th century. Lesser and smaller Berber rule reigned until the middle of the 16th century when Arab dynasties returned first with the Saadis and then with the Alaouites in the 17th century. The maghreb fell under the influence of European powers in the early 19th century, but the Alaouites have persisted, and their position preserved through the five decades of European rule from the early to the mid-20th century, even if they did not have

significant power.

Today, the maghreb as an entity is embodied in the Arab Maghreb Union, which is a trade agreement signed in 1989 that envisions an economic and future political unity for Algeria, Libya, Mauritania, Morocco and Tunisia. The state of the Union, however, is inactive, fraught as it is with political disputes.

(Aquila Style / 02 Febuary 2015)

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Moroccan parliament approves Islamic finance legislation

Morocco's parliament gave final approval on Tuesday to an Islamic finance bill that will allow the creation of Islamic banks and enable private firms to issue Islamic debt, lawmakers said.

Morocco has been trying to develop Islamic finance - mainly to attract wealthy Gulf investors - since an Islamist-led government took power in the aftermath of the 2011 Arab Spring protests.

Islamic banks, which ban interest payments and pure monetary speculation, have been growing in the Gulf and Southeast Asia for a decade. Wary of Islamist views, Morocco has long rejected the idea. But the country's financial markets a lack liquidity and foreign investors, and Islamic finance could attract both.

"The bill has been voted by 161 votes and no one was against it," Said Khayroune, the head of parliament's economics and finance committee, told Reuters. The bill will be effective once it is published in Morocco's official bulletin in coming days.

The law will allow foreign banks and local lenders to set up Islamic banks in Morocco. It also contains measures on takaful, which allows the creation of Islamic insurers, and will enable private companies to issue sukuk (Islamic debt).

Major Moroccan banks have been preparing to open Islamic offshoots since the legislative process began. Foreign lenders have been also testing the waters.

Gulf banks from Kuwait, Bahrain and the United Arab Emirates have expressed interest in entering the market when the bill becomes law.

But sources have told Reuters Morocco may guide them towards partnering with local banks rather than establishing fully owned Islamic subsidiaries.

Morocco's BMCE Bank is preparing to open an Islamic subsidiary as a joint venture with a major Islamic financial institution from the Middle East, the bank's managing director has said.

Other Moroccan banks, including Attijariwafa Bank and Banque Centrale Poulaire, are believed to be in talks with foreign Islamic lenders.

But a Thomson Reuters study of Morocco, released earlier this year, estimated Islamic banks might account for 3 to 5 percent of total banking assets by 2018, or about $5.2 billion to $8.6 billion - far below the roughly a quarter in the developed markets of the Gulf.

The Moroccan market remains highly competitive, and bankers believe banking would expand by only a few percentage points, since Islamic finance is more expensive than conventional banking.

(Reuters / 25 November 2014)

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Morrocan bank ‘planning Islamic finance subsidiary with Gulf partner’

Brahim Benjelloun-Touimi said in an interview with Reuters that the proposed subsidiary “will take our partner’s name”, but he declined to reveal the identity of the financial institution.

Benjelloun-Touimi said he would give details after a bill to regulate Islamic banks and sukuk issues has been approved by Morocco’s parliament, which is expected before the end of this year. BMCE’s move would then need to be endorsed by Morocco’s central bank.

According to the Arab international newspaper Asharq Al-Awsat, Morocco’s lower house of parliament backed the bill last June. The paper said currently only the country’s leading bank, Attijariwafa, which is part-owned by Moroccan King Mohammed VI’s investment company Societe Nationale d’Investissement, has an Islamic banking subsidiary in the kingdom.

Morocco’s minister for general affairs and governance Najib Boulif said earlier this year that the Islamic finance bill was designed to allow “a gradual introduction of Islamic banks to preserve the competitiveness of existing, conventional, banks”.

Boulif said: “Local banks will be allowed to take at least 51% of the capital and as much as 49% will go to foreign Islamic lenders. There is a very strong demand from abroad for such a project.”

“We thought it is best to start with one Islamic finance institution as we wish to assess closely the experience to ensure its success,” Boulif said. “If it proves to be a success within six months, then nothing should stop us from authorising more Islamic lenders.”

A report published last February by international ratings agency Standard and Poor’s said Islamic finance could be a “good fit” for infrastructure and project finance in North Africa, because banks lack the long-term funding that these projects require. “After tremendous global success over the past decade, with total assets estimated at about $1.4 trillion, Islamic finance could make inroads in North Africa,” the report said.

Islamic finance expert Amir Ahmad of Pinsent Masons, the law firm behind Out-Law.com, said at the time that the report “sets out the natural course of development of Islamic finance in the rest of the Islamic world”. “The demand for infrastructure in North Africa could be the ideal catalyst for this development and North Africa is likely to be an attractive market.

(Out-Law.Com / 23 October 2014)

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Morocco Eyes Gulf Investors, Local Jobs Via Islamic Banking

Morocco last month inched closer towards the creation of a fully-fledged Islamic finance system after lawmakers approved a bill enabling the set-up of shariah-compliant banks. While the new legislation still requires final rubber stamping, Islamic finance in Morocco could help tackle two acute economic challenges: attracting more foreign investment and creating employment.

“Africa offers significant opportunities to the global Islamic finance industry. This law is one more important step for Islamic finance as new markets are opening up which are needed to deploy capital from other regions such as the Gulf,” said Afaq Khan, chief executive of Saadiq, the Islamic finance arm of Standard Chartered.

Morocco’s Islamic banking plans come at a time when the kingdom is implementing a series of economic reforms after turmoil from the Arab Spring turmoil swept through the Middle East and North Africa. In order to jumpstart its frail economy, the government has cut subsidies, is reforming the country’s pension system and is trying to spur competitiveness.

Aside from attracting more money from the Gulf where investors are keen on having more shariah-compliant investment opportunities, the introduction of Islamic banking may also increase access to finance for smaller businesses in Morocco.

“People in countries like Morocco realize that the era of the government taking care of all their problems is over so they’re looking for other means to fund their projects and Islamic finance being asset-based is a good tool for that,” said Jean AbiNader, executive director at the Washington D.C.-based Moroccan American Trade & Investment Center.

The Islamic finance sector is traditionally dominated by markets in South Asia, especially Malaysia, and the Persian Gulf. Outside those regions, a few countries have shown interest in capturing some of the shariah-compliant business opportunities. That is hardly a surprise with some of the estimates circulating such as E&Y’s recent prediction that global Islamic commercial banking assets would hit the $3.4 trillion mark by 2018. The U.K. last month became the first western country to issue a sovereign sukuk and in North Africa, Tunisia and Egypt have been working on legislation related to Islamic bonds.

“Egypt, Tunisia, Kenya, Morocco, countries in Eastern Africa are all looking at different stages of implementing new Islamic banking regulation. Issuing sukuk is always a very good idea to create recognition and to create a positive dynamic,” Mr. Khan said.

Despite the optimism on what Islamic finance could achieve for Morocco, its development still needs time and it’s not certain whether the country eventually will become an Islamic banking center.

“In terms of volumes it will remain peripheral for now but it is complementing the existing robust banking system. The question is whether Morocco will succeed in becoming the Islamic banking center for Francophone Africa. Morocco feels it has a strong role to play there,” said Mr. AbiNader.

(The Wall Street Journal / 08 July 2014)

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Morocco’s lower house of parliament approves Islamic banking law

Casablanca, Asharq Al-Awsat—Morocco’s lower house of parliament has approved a new banking law, which for the first time contains articles relating to Islamic banks, paving the way for a fledgling Islamic finance industry in the country after years of false starts.

The new law—previously presented to parliament earlier in January this year and in April 2012—now awaits official ratification via a final vote in the North African Kingdom’s upper house of parliament, the House of Councilors, in the next few weeks.

The bill will allow for local and foreign banking institutions to set up Islamic banking branches in Morocco.

Currently only the country’s largest bank, Attijariwafa, which is part-owned by Moroccan King Mohammed VI’s holding company Société Nationale d’Investissement, has an Islamic banking subsidiary in the Kingdom.

But anticipating the new law, two of Morocco’s largest banks, Banque Marocaine du Commerce Extérieur (BMCE) and La Banque Centrale Populaire du Maroc (BCP), told Reuters in March they were already positioning themselves to set up new Islamic banking branches in the Kingdom.

Morocco has for years been attempting to launch an Islamic finance industry in a bid to attract Gulf money to plug its sizable budget deficit. Along with Malaysia, Gulf countries account for the lion’s share of the global Islamic finance industry, estimated to be worth 1.4–1.7 trillion US dollars.

But Islamic finance products, which Morocco only allowed conventional banks to offer in a limited capacity from 2010, never took off in the Kingdom. According to a recent Gallup poll, only around 1 percent of adults in Morocco said they had used such products, with customers complaining of higher fees than those charged by conventional lenders.

However, it is hoped the new bill, which also contains legislation pertaining to the establishment of a Shari’a committee formed in coordination with the country’s central bank, will help build a robust regulatory environment for the sector in the country.

And despite the thus far lukewarm reception to Islamic finance in Morocco, a recent joint study by Thomson Reuters and Islamic finance consultant IFAAS showed a 98-percent demand for Islamic finance products among the Kingdom’s largely untapped market of 30 million Muslim residents. The study estimated Islamic banks could account for 3–5 percent of the total banking market in the Kingdom by 2018, or about 5.2–8.6 billion US dollars, providing a “substantial opportunity for investors and financial institutions.”

Under the new bill, Islamic banks will be called “Participatory Banks,” an alternative moniker commonly used to designate Islamic banking activity, and which stresses the desire on the part of Shari’a-compliant investors to “participate” in the profits of an institution or company, without earning money on riba, or interest.

The new law also paves the way for the launch of Morocco’s first sovereign Islamic bond, or sukuk, originally scheduled for 2013 when the bill was first presented to parliament in 2012.

Like Islamic finance in general, sukuk allow for partial ownership of an underlying asset by an investor, who now “participates” in, or shares the risk involved, in the asset along with other owners.

The new banking law also contains provisions for microfinance, online and mobile banking, and the regulatory environment for the banking industry as a whole in the Kingdom.

(Asharq Al-Awsat / 26 June 2014)

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Islamic finance backed

RABAT: The first house of Morocco's parliament approved a bill to allow the establishment of Islamic banks and enable private companies to issue Islamic debt yesterday after months of delays.

The bill still needs to be passed in a final vote in the second house in the coming weeks.

Morocco has been seeking to develop Islamic finance for about two years, partly as a way to attract Gulf money and fund a huge budget deficit. But the sensitivity of the Moroccan political elite to Islamism has repeatedly delayed the plans.

Legislators in the first house voted unanimously in favour of the law yesterday.

"The bill has passed (in the first house) by 75 votes and no one was against it," Said Khairoune, the head of parliament's economics and finance committee, told Reuters.

The bill will allow foreign banks as well as local lenders to set up Islamic banks in Morocco.

The central bank has started to set up a central sharia board with the country's body of Islamic scholars to oversee the Islamic finance sector.

Seven scholars and financial experts have started training to become members of the board.

The political momentum behind Islamic finance has increased since a moderate Islamist-led government took power through elections in late 2011.

Moroccan financial markets suffer from a lack of liquidity and foreign investors and sukuk issues could attract money from wealthy Islamic funds in the Gulf.

Last year, Morocco approved legislation allowing the government to issue sovereign sukuk, although it has yet to do so.

A Thomson Reuters study of Morocco, released in April, estimated Islamic banks could account for between three and five per cent of the country's total banking assets by 2018, or about $5.2 billion-8.6bn. Islamic banks will be called participative banks under the Moroccan legislation.

(Gulf Daily News / 26 June 2014)

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Morocco hopes regulation will aid second Islamic finance drive

Morocco is set to give Islamic finance a second try, counting on closer regulation and a clearer legislative framework to resolve problems which plagued its first attempt.

Banks in the country began introducing a range of Islamic finance products in 2007, calling them "alternative finance", but they drew little response from the majority Muslim population.

Both consumers and the banks themselves were unfamiliar with the products, while the lack of a detailed legal framework for Islamic finance also kept uncertainty and costs high.

This time, the environment is different. Morocco's parliament is considering a detailed bill that would regulate Islamic banks and issues of sukuk (Islamic bonds), and its passage - which could occur this year - is expected to prompt some Moroccan banks to establish dedicated sharia-compliant subsidiaries.

Meanwhile, Morocco's central bank plans to set up a central sharia board to oversee the sector. Sources aware of the plan told Reuters that seven scholars and financial experts had started training to become members of the board.

The political momentum behind Islamic finance has increased since a moderate Islamist-led government took power through elections in late 2011, and as the government struggles with a large budget deficit; sukuk issues could attract money from wealthy Islamic funds in the Gulf.

Said Amaghdir, chairman of the Moroccan Association for Participative Finance Professionals, an Islamic finance business association, said the tax treatment of sharia-compliant products would be crucial for the industry's development.

"We are fighting to get fair taxation for the participative products - that's how their prices would be closer to conventional ones," he said. "It is a matter of political will."

In its current form, the proposed legislation appears to address the tax issue well. It provides for the use of special purpose vehicles (SPVs), while transfers of real estate between sukuk originators and SPVs would not face double taxation, said Houda Chafil, managing director at Maghreb Securitization, a financial firm.

This is expected to favour the use of ijara sukuk based on sale and lease-back arrangements.

POTENTIAL

As several countries in the Middle East, including Oman and Libya, open up to Islamic finance, Morocco appears to be one of those with the most long-term potential; almost half of the population of about 33 million is believed to be outside the formal banking system.

A Thomson Reuters study of Morocco, released this month, estimated Islamic banks could account for between 3 and 5 percent of its total banking assets by 2018, or about $5.2-8.6 billion - still far below the proportion of roughly a quarter seen in the developed markets of the Gulf.

Moroccan banks have expressed cautious interest in the opportunities. AttijariWafa, Morocco's largest bank and the first to establish an Islamic unit, has said it will expand the unit after the bill passes.

Local lenders BCP, BMCE and BMCI , a subsidiary of BNP Paribas, may launch Islamic units of their own once the legislation is in place.

BCP, Morocco's second largest bank, aims to open an Islamic subsidiary alongside a partner with Islamic banking expertise, said Laidi El Wardi, BCP's general director for retail banking.

"First we want the new bank to create its own network, even though it will not be very large. I believe in the next four to five years, we will have at least 60 branches. For the second phase we will start using the conventional bank networks."

BMCE Bank, Morocco's third largest, is eyeing opportunities in sharia-compliant investment banking, takaful (Islamic insurance) and sukuk, BMCE officials said in the Reuters study.

Foreign banks look likely to play an important role in developing the market; Moroccan authorities may guide them towards partnering local banks rather than establishing fully owned Islamic subsidiaries, bankers believe.

Gulf banks from Kuwait, Bahrain and the United Arab Emirates have expressed interest in entering the market when the bill comes into force, said Lhassane Benhalima, the central bank's deputy head of banking supervision.

"We remain open-minded in our vision, and joint ventures between local banks and foreign investors are encouraged."

One banking industry source, speaking on condition of anonymity because of the sensitivity of the issue, said he expected the Moroccan central bank to approve the creation of only four to six Islamic banks, to avoid crowding in the sector.

"Most of the Moroccan banks interested in Islamic finance have already started talks with foreigners to make up joint ventures," the source said.

The ventures will face considerable obstacles, however, in particular a lack of consumer awareness of Islamic financial concepts, seen in consumer surveys conducted by BMCE.

"We think that it is normal to say that people want Islamic products, but we will need a lot of awareness because few of them know really what are the specificities and functioning of Islamic finance products," a BMCE source said.

INDEX

Moroccan officials are also looking to develop Islamic finance in areas outside banking. The Casablanca Stock Exchange is preparing to roll out a sharia-compliant index with around 35 companies, and will seek to list sukuk, said Karim Hajji, general director and chief executive of the exchange.

In the takaful sector, insurance companies are expected not to be allowed to open Islamic windows and instead will have to set up separate units, a move which could help differentiate the firms in an insurance market that is currently dominated by the largest four firms, the Thomson Reuters study said.

There is also a push to make the management of awqaf (Islamic endowments) more efficient, a process started in 2012 by the Ministry of Endowments and Islamic Affairs.

The country's awqaf own about 80,000 pieces of real estate across the country, but these tend to command low rental prices rather than competitive market rates, said Mohammed AlKawrari, awqaf president at the ministry.

"Moroccan awqaf are old awqaf; we have endowments that are twelve and a half centuries old. We have inherited the old awqaf in the historically rich old cities, such as Fez and Marrakesh," he said.

The ministry is studying the operations of real estate investment funds and the possibility of engaging private companies to help in the management of some of the properties.

However, AlKawrari conceded that the ministry faced a challenge: modernising awqaf and maximising their returns while avoiding a hike in rental prices, which could hurt low-income families occupying the properties. 

(Reuters / 08 April 2014)

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Morocco's Attijariwafa Bank looks to boost Islamic finance

Attijariwafa Bank, one of the biggest banks in North Africa, will boost its Islamic subsidiary as soon as the Islamic finance bill passes parliament, its managing director said.

Morocco's parliament has started to discuss a bill regulating Islamic banks and sukuk issues after months of delays, after the Islamist-led government adopted it last month.

Parliament's approval will be the last step before fully-fledged Islamic banks can be established in Morocco, whether they are subsidiaries of domestic banks or foreign owned, a measure which could bring in more Gulf Arab investment.

Attijariwafa bank, controlled by the royal family's investment holding company SNI, has been the only Moroccan bank to create an Islamic subsidiary since Morocco began allowing conventional banks to offer a limited set of Islamic financial services in 2010.

Last year the unit, Dar Assafaa, signed a deal enabling it to offer Islamic financial products to 42 percent of state employees ahead of the approval of the draft bill when foreign rivals could step in.

"In order to transform Dar Essafa into a participative bank, we will need to increase its capital by 150 million dirhams, and subsequent investments will depend on how the market develops," Attijariwafa bank's Managing Director Ismail Douiri told Reuters in an interview.

"We have a very competitive market, and Moroccans are too sensitive to product prices, so I don't expect a revolution in the Moroccan banking sector," he said.

He said banking activities would expand by only a few percentage points as Islamic finance was more expensive than conventional banking.

Islamic finance banks are called participative banks under the Moroccan legislation.

Moroccans seem to be attracted by participative finance, but it is almost impossible to have products with the same prices as the conventional finance, at least initially, Douiri said.

Standard and Poor's has estimated that if Islamic products were proposed at higher costs in North Africa, it would probably attract only limited demand.

Over the past few years, Morocco's banks have started to tap the low income banking segment which is by nature more sensitive to pricing, the agency said in a report last month.

"Attijariwafa Bank may seek a foreign partner for its Islamic subsidiary, but it is not a top priority. We are good as we are. If foreigners have more experience in Islamic finance, we have the advantage of knowing the North African market very well," Douiri said.

The bank posted a 4.8 percent drop in its first-half net profit to 2.2 billion dirhams, reflecting an economic slowdown and rising bad debts.

Douiri said financial results of full 2013 would confirm the first half trend.

"The results are coming out in the next few days. I cannot give more details, but bad loans seem steady at the second half of 2013, and would decrease in 2014," Douiri said.

(The Africa Report / 04 March 2014)

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Morocco Weighs Pursuing $1.7 Trillion Islamic Finance Industry

Morocco plans this year to allow Islamic banking for the first time as the only North African nation with an investment-grade rating at Standard & Poor’s seeks to tap the $1.7 trillion industry.

The country’s cabinet approved a draft Islamic finance bill on Jan. 16, according to Abdeslam Ballaji, a lawmaker who worked on the proposed legislation and a member of the ruling party. The draft, which also regulates Islamic banks and allows for sukuk sales, is pending parliamentary approval and may be enacted within five months, he said last week.

Demand for financing that complies with Islam’s ban on interest is accelerating worldwide, with assets expected to climb to $3.4 trillion by 2018 from about $1.7 trillion last year, according to Ernst & Young LLP. More than 95 percent of Morocco’s population of 34 million back the introduction of banking that adheres to Shariah, according to Said Amaghdir, secretary general of the Moroccan Association of Participative Financiers, an Islamic finance business association.

“Given the choice, Muslim retail customers on the street generally prefer to bank Islamically, even if there are higher costs,” Khalid Howladar, a senior-credit officer at Moody’s Investors Service, said by phone from Dubai yesterday. “Islamic banks historically have tended to grow at twice the rate of conventional banks in Muslim countries, and as such they tend to take a market share from the conventional system.”

Billions Required

The Moroccan Association of Participative Financiers estimates total investment in Shariah-compliant products to reach $7 billion by 2018, provided the law comes into effect by the middle of the year, Amaghdir said by phone yesterday.

“Plans to expand solar and wind energy, tourism and industrial parks will require billions, and the Gulf Cooperation Council will be keener on putting money here when the law is enacted,” he said. The six-nation GCC, which includes Saudi Arabia and the United Arab Emirates, is predominantly Muslim.

Banks may also sell short-term sukuk to fund Islamic subsidiaries, Amaghdir said.

Morocco’s central bank allowed lenders and insurers to sell three Islamic products in 2007 to help develop the nation’s financial industry. The country is “almost” ready to sell its first sukuk, Prime Minister Abdelilah Benkirane said in October.

Regional Competition

“We can’t afford to drag our feet any longer because regional competition for the Islamic finance pool is heating up, not just from our Muslim neighbors,” Ballaji, the lawmaker, said in a phone interview Jan. 20.

The U.K. plans to sell debut Islamic bonds this year as Prime Minister David Cameron seeks to revive a blueprint that’s been stalled since at least 2007. The Hong Kong government this month gazetted legislation to allow the sale of Shariah-compliant notes.

Moroccans may be misinformed about the benefits of Islamic banking, Ismail Douiri, co-chief executive officer of Casablanca-based Attijariwafa Bank, said in May.

“Islamic finance is often portrayed as low-cost type of finance,” Douiri said. “Islamic finance is not charity. One should not expect financing costs to decline.”

Shariah-compliant products are typically more expensive when they’re first introduced, Howladar of Moody’s said.

“Islamic products tend to come at a premium, because the creation of the products requires substantive investment,” he said. “Orthodox customers are willing to pay more to bank Islamically. Eventually, in the face of competition, those costs fall and are comparable to conventional products.

(Bloomberg News / 22 Jan 2014)

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Moroccan government receives new Islamic banking draft bill

Casablanca, Asharq Al-Awsat—A draft Islamic banking law was presented to Morocco’s government on Thursday, in a bid to widen the Islamic financial products and institutions available in the North African Kingdom.

The draft bill, which if ratified will be added as a chapter to Morocco’s existing banking law, could pave the way for the country to issue its first sovereign Islamic bond.

Morocco had been hoping to issue an Islamic bond in 2013 and to develop an Islamic finance industry after the bill was first put to parliament in April 2012. Those plans were subsequently put on hold due to disputes over other issues in the government that eventually led to a cabinet reshuffle in October.

With the government burdened with liquidity problems and a slow economy, the move aims to attract money from Gulf countries, which along with Malaysia account for the lion’s share of the global 1.4–1.7 trillion US dollar Islamic finance market.

Morocco’s economy has been hit by the effects of the Arab uprisings and adverse weather conditions that have blighted the country’s all-important agriculture sector.

Fully fledged Islamic institutions or products cannot currently operate in Morocco, but it began allowing conventional banks to offer a limited set of Islamic financial services products in 2010.

However, such products have thus far failed to penetrate the domestic market, with a mere one percent of adults in the country using an Islamic financial product according to a Gallup poll. Many customers have complained that these products charge higher fees than their conventional counterparts.

Under the bill, Islamic banks will now be called ‘Participatory Banks,’ an alternative moniker commonly used to designate Islamic banking activity, and which stresses the desire on the part of Shari’a-compliant investors to earn money on their capital—or “participate” in the profits of an institution or company—without earning money on riba, or interest.

Among the banking products that could be offered by these institutions, the bill specifically pointed out profit-sharing, leasing, partnership and speculation. Descriptions of these products to customers will be specified by the central bank governor following consultations with the country’s Credit Institutions Committee and after receiving agreement from the Supreme Council for Islamic Sciences, the highest Islamic authority in the land.

The draft law does not limit Islamic finance activities to Islamic banks. Any credit institution or product, including small loan providers and savings and deposits funds, will be able to practice Islamic finance operations provided they acquire prior permission from the central bank governor.

The new law also includes amendments which will place the decision-making process on the conformity of Islamic banking activities with Islamic Shari’a law in the North African kingdom squarely with the Supreme Council for Islamic Sciences.

That task was previously assigned to a specialized Shari’a body which was overseen jointly but the Supreme Council for Islamic Sciences and the country’s central bank, the Bank Al-Maghreb.

Islamic bonds form an alternative to finance development projects through credit, and represent joint ownership shares in an investment project with rewards linked to the performance, eschewing the need to earn money on interest.

(Asharq Al-Awsat / 16 Jan 2014)

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Moroccan government adopts Islamic finance law, seeks vote in parliament

Morocco’s government on Thursday adopted a bill regulating Islamic banks and sukuk issues after months of delays, paving the way for a final vote by the parliament of the North African kingdom later this year.

Approval of the law will be the last step before establishing full-fledged Islamic banks in Morocco, be they subsidiaries of Moroccan banks or foreign rivals, a measure which may bring more Gulf Arab investment into the country.

Morocco has been seeking to develop Islamic finance for about two years, partly as a way to attract Gulf money and fund a huge budget deficit. But the sensitivity of the Moroccan political elite to Islamism has repeatedly delayed its plans.

Last year, Moroccan deputies approved legislation allowing the government to issue sovereign sukuk, but it has not yet taken steps to raise its first Islamic bonds.

“We have adopted that law today and we are sending to the parliament,” communication minister and government spokesman Mustapha Khalfi told Reuters by telephone.

The minister said it was difficult to estimate how much time parliament would need, but experts expect it will vote before the end of this year.

Morocco’s central bank has started talks with a body of Islamic scholars on establishing a central sharia board to oversee the country’s fledgling Islamic finance industry, an official from Moroccan central bank told Reuters in April.

The board, composed of scholars and financial experts, would rule on whether instruments and activities complied with sharia principles.

Islamic banks will be called participative banks under the Moroccan legislation.

In 2010, Morocco began allowing conventional banks to offer a limited set of Islamic financial services, which obey principles such as a ban on the payment of interest.

The country’s Islamic finance drive accelerated after a moderate Islamist-led government took power through elections in late 2011, and as the Moroccan economy has been hit by the euro zone debt crisis.

(Al-Arabiya News / 16 Jan 2014)

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