The Islamic or participative finances, as denominated in Morocco, represent just above 1% of the world’s financial sector, or the equivalent, about 2.7 trillion dollars in 2017.
On October 5th, the Moroccan authorities announced the success of the issuance of the first “sukuk” or Islamic bond for a value of 1 billion Dirhams (about 90 million euros) with a demand that exceeded 3.6 times the offer of bonds.
Islamic bonds or sukuk are one of the existing figures in Islamic finance, that in 2017 reached global sales of more than 55,000 million dollars, besides, it is not only a financial instrument of Muslim countries, but countries such as Germany or the United Kingdom have already issued their own sovereign Islamic bonds.
In Islamic finance, where interests of capital are prohibited, the main difference between a conventional bond and an Islamic bond of “iyara” type, is the one that has been issued in Morocco, is that these are a financial product that consists of a kind of ease with which the bank temporarily cedes to a client the ownership of movable or immovable property and for which the holders of the bonds receive the rents of those real estate, in this case, a 2.66 % for five years.
What is interesting about the success of the issuance of the first sovereign sukuk in Morocco is not the amount itself, but the confirmation of institutional support for development to this parallel financial industry. This is the second significant milestone since the Central Bank of Morocco approved the creation of five Islamic banks in January 2017 and allowed three branches of French banks (Société générale, BNP Paribas and Crédit Agricole) to offer Islamic financial products.
The development of Islamic finance in Morocco has not been easy. In fact, Morocco has been the last Arab-Muslim country to authorize the creation of Islamic banks in its territory, something that happened in 2017 with five authorized banks, formed by alliances between Moroccan and the Persian Gulf banks, Credit Immobilier and Hotelier (CIH). , associated with the Qatar International Islamic Bank; Banque Marocaine du Commerce Extérieur (BMCE), together with the group Al Baraka Banking Group of Bahrain; Banque Centrale Populaire (BCP) in collaboration with the Saudi Guidance Financial Group; Crédit Agricole du Maroc (CAM), in conjunction with the Islamic Corporation for the Development of the Private Sector (ICD), a subsidiary of the Islamic Development Bank based in Jeddah, Saudi Arabia; and Attijariwafa Bank, alone but in search of new partners.
The term “Islamic” in the definition of this type of finance is a constant debate within the industry. In the case of Morocco, it was decided to designate Islamic banks as participatory banks, probably to de-link the Islamic qualification from internal Islamist movements.
After a few years of lower growth probably linked, amongst other factors, to the lower price of a barrel of crude oil, it seems that the development of the Islamic financial industry will continue growing at a rate close to 10% in the coming years, although this industry is not exempt from challenges such as the one that threatens the entire financial ecosystem derived from the change of model that digitalization entails.
For Morocco, with a large part of its population that is unbanked, with a high percentage of unemployment and a significant dependence on foreign investment, the development of Islamic finance can mean an important inflow of resources.
Spain is the first commercial partner of Morocco and has important financial interests in the country. The analysis of the irruption of this industry in the neighbouring country estimates that it can reach between 10 and 20% of its financial industry in the next 3 years, as indicated by Standard & Poor’s economic analyst Mohamed Damak. This significant fact represents obvious business opportunities as well as the beginning of a change of model that we should follow closely.
Gonzalo Rodríguez Marín is the general coordinator of the Hispano-Saudi Center for Islamic Economics and Finance at the IE Business School.