Islamic Financial Institution
“Islamic Finance development: the Moroccan experience”
Student: FZ Habib Eddine
CIFP online 2013
1. Islamic Banking in North Africa
Compared to other Muslim regions North Africa is still undeveloped in terms of Islamic Finance Institutions. The largest Islamic Bank in the region is Faisal Islamic Bank of Egypt established in 1971 but it is still a small institution compared to other Banks in Middle East and Gulf Area, according to the table illustrated below. In other North African countries such as Tunisia, Mauritania and Algeria there is one Bank that has the monopoly of the market, the Al Baraka Bank. This, according to IDB, is not allowing product innovation and development. Al Baraka Bank is present also in Egypt. IDB table shows also that North African region is far away to be among the top ten countries in terms of Shari’a compliant assets. The African country (Egypt) with the highest percentage of bank assets compliant with Shari’a principles is number 12 and it has only 4.9% of total bank assets.
The numbers illustrated above demonstrate that the market size of the industry in this region is quite attractive, especially if we look at the number of population of this area and the percentage of Muslims is above 90% in each country.
According to the Islamic Development Bank the reason of Islamic Banking undevelopment in the area are mainly three: 1) The limited development of retail banking in general;
2) Lack of knowledge about Islamic Banking among potential customers; 3) The absence of support from the political authorities.
As our project work is focused on the Moroccan case, we will see how the political support played a decisive role in both developing and undeveloping Islamic Banking in the Kingdom.
2.1 IDB projects in Morocco
Despite being a minor contributor to its capital, Morocco is the largest single beneficiary of Islamic Development Bank trade and funding projects among the other North African countries.
That is because funding is based on the accuracy of the proposed project rather than the country contribution to the Bank. The role played by Morocco in this financing is an indicator of the need of Moroccan actors in having financial facilities conformed to Shari’a law.
2. First attempt in introducing Shari’a compliant products
The very first attempt in the commercialisation of Shari’a compliant products and services is back to 1985 whenthe former Wafabank received the proposal from Moroccan Association for the Studies and Research in Islamic Finance (Asmeci) to launch Islamic Finance products in Moroccan market. Former President of Bank Wafa was very sensitive to the issue and he contributed to its start-up. Then a project team composed by Moroccan researchers was established. Supervised by Mr. Kettani who had a deep knowledge in Islamic Finance products, the project team had done a full study taking in consideration the local market, the law etc. but the day before the public launch Bank Al Maghreb suspended the initiative.
International Banks have done other attempts, however Moroccan authorities were rejecting them, most probably to protect the already established Moroccan Banking sector.
Thus, it was clear that Moroccan authorities were not interested in the introduction of Shari’a compliant products. We will see how Bank Al Maghreb were putting efforts in preventing this projects without considering the market trend and the needs of the Moroccan population.
3. Bank Al Maghreb opens to Shari’a compliant products
With a population of 99% Muslims Morocco has no Islamic Banks or Institutions. Morocco is one of the major players in the African economy, with a DGP accounting for $110,354 billion in 2011 with an annual growth between 3.7% and 4.9% in the last 4 years. By referring to international criteria the Moroccan Banking system is well developed and regulated. Moroccan...
* Islamic Development Bank (IDB), “Islamic Banking and Finance in North Africa, Past Development and Future Potential”, 2011.
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