Morocco lures Sharia cash with first Islamic bank
Morocco is poised to have its first full-fledged Islamic bank as early as September as the only North African country rated investment grade seeks to tap the US$1.8 trillion industry.
Dar Assafaa, an affiliate of the country’s largest lender AttijariWafa Bank, will probably become the nation’s first wholly Sharia-compliant financial institution when the central bank approves its switch, according to the Moroccan Association of Participative Financiers. The country introduced a law in January to regulate Islamic financial products and allow local and foreign banks to set up units that comply with the religion’s ban on interest.
“By September or October the first Sharia-compliant bank will start,” said Said Amaghdir, the chairman of the Casablanca-based association. “Morocco’s financing needs are huge, especially in project finance, and the stability we enjoy here will act in favour of Morocco.”
Political stability relative to neighbours has helped Morocco progress in an industry that’s stalling elsewhere in North Africa. Sharia-compliant finance in Egypt was derailed after Mohammed Morsi’s Islamist government was overthrown in 2013, while Libya has slipped into political chaos following the ouster of Muammar Qaddafi in 2011. Even in Tunisia, which directly elected its president for the first time in November, a debut sukuk sale has been delayed at least three times.
Morocco is rated BBB- at Standard & Poor’s, the lowest investment grade, while Egypt is B-, six levels into junk. Tunisia is rated Ba3 by Moody’s Investors Service, three levels below investment grade. Algeria and Libya aren’t rated.
The country’s Islamic finance bill, which came into force on January 30, also allows for the formation of a centralised Sharia board to oversee Islamic banks.
The Moroccan Association of Participative Financiers estimates total investment in Sharia-compliant products in the country will reach $7 billion by 2018. About $1.8bn in assets are held by Islamic financial institutions worldwide, according to S&P.
“Islamic finance may account for as much as 10 per cent of the total banking assets within 10 years,” said Mohamed El Kettani, the chief executive officer of AttijariWafa. “We are already a market leader and we aim to stay the leader under the new law.”
Morocco has some catching up to do to Tunisia in its drive to boost Sharia-compliant lending. The Islamic Corporation for the Development of the Private Sector said this month it is helping convert the country’s El Wifack Leasing into an Islamic bank as early as August, according to Mohammed Maher Mannai, ICD’s programme lead for Islamic financial institutions. It will be the nation’s third Sharia-compliant lender, he said.
Tunisia now plans to sell sukuk in the third quarter, the central bank governor said in January. Moroccan finance minister Mohamed Boussaid said in November his country will not sell sukuk before 2016.
Islamic finance was derailed in Egypt when Morsi, whose administration pledged to expand the industry, was removed from power. The country is revising a new sukuk law. In Libya, which passed a law in 2013 to ban non-Sharia compliant banking by this year, successor governments to Qaddafi have been unable to assert full control over the country, which now has two rival governments and parliaments.
The International Monetary Fund last month said Morocco can boost its growth to as much as 5.5 per cent in the medium term from the fund’s 4.4 per cent forecast in 2015 with economic reforms, including by enhancing transparency and governance.
“There’s political will with the government adopting this law and preparing for the sukuk issuance,” Montasser Khelifi, a Dubai-based senior manager at Quantum Investment Bank, said. “With Tunisia suffering from the Arab Spring, North Africa was relatively unattractive, while Morocco remains attractive for European investors.”
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Updated: March 9, 2015 04:00 AM