Despite the Kingdom’s many attractive investment incentives – political stability, beneficial tax structures, business hubs like Casablanca Finance City and strategic access to African frontier markets – Morocco is a relative newcomer to the world of Islamic finance. Efforts to establish Islamic banks in Morocco date back to the 1980s, though Bank Al-Maghrib has long rejected institutional support for the sector due to concerns over compliance with existing banking regulations and the apprehension about the growth of Islamist movements. GHALIA MOKHTARI writes.
The introduction of the new Banking Law in March 2015 marked a shift in this policy, outlining for the first time a new category of Islamic or ‘participative’ banks whose products and services must be Shariah compliant.
Updated legal framework
Law n°103-12 – the Banking Law
Published in the Official Bulletin in March 2015, the new Banking Law was updated to include provisions applicable to participative banks. According to the law, participative banks must be approved in accordance with the same regulation applicable to traditional banks. They are permitted to offer the same banking services and financial operations as traditional banks outlined in Articles 7, 8, 9 and 16 of the Banking Law, so long as these operations do not involve the receipt or payment of interest. In addition, participative banks are authorized to carry out the following Shariah compliant Islamic operations: Murabahah, Ijarah, Musharakah, Mudarabah, Salam and Istisnah. The application of the law is left to the central bank, the exact conditions of which will be specified in circulars.
The Banking Law also requires participative banks to report their activities to a special board within the Supreme Council of Islamic Scholars. This board, established by royal decree in February 2015 as the Shariah Committee for Participative Finance, is tasked with ensuring that Islamic products offered by participative banks are Shariah compliant. Similarly, participative banks are obligated by the Banking Law to set up their own internal compliance functions to monitor the conformity of their products and services with the committee’s rulings.
Lastly, the Banking Law establishes a deposit guarantee fund specific to participative banks. The fund may offer indemnities to depositors or financial help to struggling participative banks.
Law n°59-13 – insurance and Takaful
Published in the Official Bulletin in September 2016, Law n°59-13 modifies and completes Law n°17-99, establishing the Insurance Code which includes a general framework for Takaful, or Shariah compliant insurance. In July 2017, the Government Council approved a draft decree on Takaful that empowers the governmental authority in charge of finance to establish regulatory provisions for Takaful contracts. Relevant regulations are expected to be delivered in the first half of 2018.
Draft Law n°69-17 – securitization and Sukuk
In early February 2018, the Moroccan House of Representatives passed an amendment to the existing securitization law that facilitates the issuing of Sukuk.
The new Draft Law n°69-17, which modifies and completes Law n°33-06 on securitization, defines and sets out the terms and conditions of Sukuk in Morocco.
Article 7-1 of the Draft Law defines Sukuk as “units of the same value representing an undivided ownership right over assets acquired or to be acquired by the Securitization Fund or investments made or to be made, whether such ownership is full or divided. Such assets include real estate, movable assets, usufruct rights, services or assets constituting the assets of a project or a specific investment.”
Article 7-2 sets out the Sukuk that can be issued by the Securitization Fund, the relevant terms and conditions for which will be implemented by decree as follows:
• Financing Sukuk
• Sukuk Ijarah
• Investment Sukuk, and
• Sukuk related to investment portfolios.
Islamic banking licenses and Bank Al-Maghrib circulars
In January 2017, the central bank granted five Moroccan banks with licenses to establish Islamic subsidiaries. Each opted to partner with international Islamic institutions: BCP and Saudi Arabia’s Guidance Financial Group; BMCE Bank of Africa and Bahrain’s Al Baraka; Credit Agricole du Maroc and the Islamic Corporation for the Development of the Private Sector (ICD); CIH Bank and QIIB; and Attijariwafa Bank, which had entered into partnership negotiations with the IDB but ultimately opted to act independently. Subsidiaries of Societe Generale, BMCI and Crédit du Maroc were also granted relevant licenses.
Two months later, the central bank released three circulars relating to Islamic finance activities. Published in the Official Bulletin in March 2017, the circulars state that all Islamic transactions are subject to preliminary approval from the Shariah Committee for Participative Finance. In addition, they authorize participative banks to offer five types of Islamic transactions (all but Istisnah covered by the Banking Law), establish regulatory conditions for deposits and outline the conditions for traditional banks to offer Islamic products via ‘Islamic windows’.
Recent developments
Since the central bank issued its approval in January 2017, the five new Islamic banks have all opened their doors. Umnia Bank, the joint venture between BCP and QIIB, was the first to open in June 2017. BTI Bank (BMCE Bank of Africa and Al Baraka), Bank Al Yousr (BCP and Guidance) and Al Akhdar Bank (Credit Agricole and ICD) followed thereafter. Bank Assafa, the successor to Attijariwafa’s subsidiary Dar Assafaa, has also officially opened for business.
Ghalia Mokhtari is the founder of Mokhtari Avocats. She can be contacted at [email protected].