20 March 2007
Last week marked the culmination of years of private sector effort to get the central bank of Morocco to allow sharia-compliant financial services onto the local market. As the leading banks gear up for the introduction of three new services, regulators have outlawed the use of any kind of religious connotations in the advertising of these products.
In late February, Abdelattif Jouahri, the governor of Bank al-Maghrib (BAM), the central bank of Morocco, finally gave the green light for so-called alternative financial products to be introduced in the Moroccan banking sector. The next step is validation by the GPBM (Groupement Professionnel des Banques Marocaines) and the APSF (Association Professionelle des Socits de Financement).
We have perfected a whole range of banking products that respond to the requirements and rules of sharia, and that conform to Moroccan regulations, Jouahri told a conference.
Banks operating in the Moroccan market are keen to launch the three new products authorised by the BAM, which are predicted to be slightly more expensive than traditional banking products. The products themselves are termed alternative rather than Islamic. As in Saudi Arabia, Islamic banks are not allowed in Morocco.
Nonetheless, the new products are in accordance with regulations issued by the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions, which has 115 members from 27 countries.
The rapid influx of Gulf investors into Morocco has entailed a rise in demand for this type of financing on the corporate side.
The availability of such offers has become a substantial asset in attracting Arab capital, said Mohammed Elzahir, director of the legal division of the Jordan-based Arab Bank.
The three types of authorised alternative products are the Moucharaka, the Mourabaha and the Ijara. The model adopted is akin to that of cooperative banks, with no element of interest rates, to avoid the charge of usury.
The Moucharaka, similar to traditional private equity, is a service whereby the bank takes a stake in an unlisted company, sharing the risk and potential loss, but also the potential profit. Two types of products exist: the Moucharaka Tabita, where the bank stays in partnership with the client until the contract's expiration, and the Moucharaka al Moutawakissa, where the bank progressively divests itself from the client's capital as the financed projects are implemented.
The Mourabaha consists of the bank acquiring an asset, on behalf of its client, which it then sells onto its client gradually with a margin included. Payment must take place within two years of the bank's acquisition of the asset.
The Ijara allows the bank to rent an asset, either real estate or a mobile asset, to a client. The Ijara Wa Iqtina is a form of leasing with an option to buy.
The bancarisation rate has remained more or less stable at 24% for the last few years, while banks have been striving to introduce new products and services. Banks are hoping to attract more people to the system by formalising transactions typically made in the informal sector.
A number of articles in the banking code of 2004 allowed for the possibility of banks to provide alternative products, without specifying the nature of these. Speculation regarding a possible date for introduction has been rife ever since.
Subsidiaries of large international banks in Morocco have been calling on their international expertise to create alternative products for the local market.
We see a significant potential demand for these alternative products, Rachid Marrakchi, director-general of Banque Marocaine du Commerce et de l'Industrie, a subsidiary of the French bank, BNP Paribas, told OBG. Our colleagues of BNP Paribas in the Gulf have already a long experience with this type of product, and we are actively preparing ourselves for their introduction to the Moroccan market
Islamic finance has indeed taken off in a significant manner internationally. Over 270 sharia- oriented institutions in 80 countries manage in excess of $265bn in assets. Organizations such as the Islamic Bank of Britain have even witnessed demand for their products from non-Muslim clients.
Last week marked the culmination of years of private sector effort to get the central bank of Morocco to allow sharia-compliant financial services onto the local market. As the leading banks gear up for the introduction of three new services, regulators have outlawed the use of any kind of religious connotations in the advertising of these products.
In late February, Abdelattif Jouahri, the governor of Bank al-Maghrib (BAM), the central bank of Morocco, finally gave the green light for so-called alternative financial products to be introduced in the Moroccan banking sector. The next step is validation by the GPBM (Groupement Professionnel des Banques Marocaines) and the APSF (Association Professionelle des Socits de Financement).
We have perfected a whole range of banking products that respond to the requirements and rules of sharia, and that conform to Moroccan regulations, Jouahri told a conference.
Banks operating in the Moroccan market are keen to launch the three new products authorised by the BAM, which are predicted to be slightly more expensive than traditional banking products. The products themselves are termed alternative rather than Islamic. As in Saudi Arabia, Islamic banks are not allowed in Morocco.
Nonetheless, the new products are in accordance with regulations issued by the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions, which has 115 members from 27 countries.
The rapid influx of Gulf investors into Morocco has entailed a rise in demand for this type of financing on the corporate side.
The availability of such offers has become a substantial asset in attracting Arab capital, said Mohammed Elzahir, director of the legal division of the Jordan-based Arab Bank.
The three types of authorised alternative products are the Moucharaka, the Mourabaha and the Ijara. The model adopted is akin to that of cooperative banks, with no element of interest rates, to avoid the charge of usury.
The Moucharaka, similar to traditional private equity, is a service whereby the bank takes a stake in an unlisted company, sharing the risk and potential loss, but also the potential profit. Two types of products exist: the Moucharaka Tabita, where the bank stays in partnership with the client until the contract's expiration, and the Moucharaka al Moutawakissa, where the bank progressively divests itself from the client's capital as the financed projects are implemented.
The Mourabaha consists of the bank acquiring an asset, on behalf of its client, which it then sells onto its client gradually with a margin included. Payment must take place within two years of the bank's acquisition of the asset.
The Ijara allows the bank to rent an asset, either real estate or a mobile asset, to a client. The Ijara Wa Iqtina is a form of leasing with an option to buy.
The bancarisation rate has remained more or less stable at 24% for the last few years, while banks have been striving to introduce new products and services. Banks are hoping to attract more people to the system by formalising transactions typically made in the informal sector.
A number of articles in the banking code of 2004 allowed for the possibility of banks to provide alternative products, without specifying the nature of these. Speculation regarding a possible date for introduction has been rife ever since.
Subsidiaries of large international banks in Morocco have been calling on their international expertise to create alternative products for the local market.
We see a significant potential demand for these alternative products, Rachid Marrakchi, director-general of Banque Marocaine du Commerce et de l'Industrie, a subsidiary of the French bank, BNP Paribas, told OBG. Our colleagues of BNP Paribas in the Gulf have already a long experience with this type of product, and we are actively preparing ourselves for their introduction to the Moroccan market
Islamic finance has indeed taken off in a significant manner internationally. Over 270 sharia- oriented institutions in 80 countries manage in excess of $265bn in assets. Organizations such as the Islamic Bank of Britain have even witnessed demand for their products from non-Muslim clients.
© Oxford Business Group 2007
