The Moroccan insurance regulator, namely the Direction des Assurances et de la Prévoyance Sociale (DAPS), recently finalized a Takaful draft law subsequent to a long consultation with the Moroccan Insurance Association of Professionals. This new law has been submitted to the Secretariat General of the Moroccan government for approval prior to its introduction to the Moroccan parliament.
Under the Takaful law, the model chosen is the fully-fledged or stand-alone option, whereby the Takaful business is exclusively confined to an independent entity and run through different business models (Wakalah or Mudarabah or a hybrid model such as Wakalah combined with Mudarabah).
The First Chamber of the Moroccan parliament voted on Sukuk in January with an amendment of Law No. 33-06 relating to securitization, thus paving the way for Sukuk issuance in Morocco:
Under the current situation of severe liquidity shortages, it has become necessary for Morocco to access diverse and new sources of capital and financing instruments.
Against this backdrop, the amendment of Law No.33-06 relating to securitization has mainly introduced three changes:
- Securitization is now open to a wide range of issuers (i.e. state, local governments, and any corporate entities in need of finance);
- Expansion of the securitizable universe, covering new asset classes (real estate, personal property, debt, etc.);
- Sukuk introduced can be issued on both the domestic and foreign markets.
Large-scale projects in need of much funding (such as the Solar Energy Project, worth US$9 billion) could potentially rely on Sukuk.
The establishment of a national Shariah board
The draft law advocates the establishment of a national Shariah board, the ‘Shariah Committee’, a central entity independent from banks, falling under the jurisdiction of religious bodies. Its main task will be to ensure not only the compliance of operations and products with the Shariah, but also the harmonization and centralization of the decision-making process.
The central bank of Morocco (Bank Al-Maghrib) will take on the administration and oversight of the Shariah committee. The composition and working procedures of that committee are currently at the development stage.
Morocco’s a strong potential
According to a recent market survey by Islamic Finance Advisory & Assurance Services (IFAAS), 94% of Moroccans perceive the Islamic finance system positively and are interested in the model. Of that total percentage, 70% of the respondents are attracted to saving and investment products, whereas 88% are enthusiastic about financing ones. These market findings evidence a strong local demand for participative financial products and services which, if successfully introduced into Morocco, should lift up the domestic banking rate.
As far as foreign demand for Islamic finance is concerned, Morocco boasts of one of the most efficient financial systems in the MENA. The country is also a gigantic worksite for investment projects seeking funding, particularly infrastructure (highways, dams, shipyards, etc.), tourism and real estate sectors that most likely appeal to Shariah compliant capital.
Morocco, which aims to make the financial center of Casablanca (Casablanca Finance City) a major platform at the crossroads of continents, should capitalize on those strengths to capture a competitive share of the Islamic capital.
Prospects of participative finance
The outlook of participative finance, or Shariah compliant finance, in Morocco looks positive because:
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It should ‘democratize’ banking for the local citizens to find the products that are aligned to their principles;
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It could potentially restore the financial and economic stability that has been missing, and rejuvenate the economy since the debt system has unveiled its drawbacks;
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It should create a paradigm shift as citizens will generally take more ownership while feeling involved in the collective efforts driven by the participative finance mindset.
Main challenges
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The national Shariah board’s day-to-day operations and ability to address the banks’ enquiries. Any major delays could jeopardize the banks’ time-to-market;
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The regulatory framework (new law and neutral tax system) required to support the participative finance model;
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Lack of consumer awareness of the guidelines and limits underlying the participative financial system;
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Shortage of Shariah scholars and qualified managers to fulfill the industry’s duties and responsibilities;
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Adequate Shariah compliant money market instruments;
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Extent to which the sales and marketing strategy of the participative financial institutions are innovative and effective;
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Transparency and competitiveness (particularly, in terms of pricing) of the participative financial products and services, compared to their conventional counterparts;
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Comprehensive and tailor-made education and training programs not only for a workforce deeply entrenched in the conventional mindset, but also for the mentors of the future generation of the participative finance employees.
Hakim Bensaid is the vice-chairman of Moroccan Association for Participative Finance — Shariah Compliant-AMFP. He can be contacted at
[email protected]
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