Morocco To Create Its First Islamic Banks

Islamic banking is defined as banking activity that is consistent with the principles of Islamic law or Sharia. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba) for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also haram (forbidden). Around the world it is estimated that more than one hundred billion dollars are circulating in the world's Islamic banking systems. With Muslims making up more than one fourth of the world's population, this amount is expected to grow, with 2011 showing a fifty percent increase since 2008. Now Morocco is about to create its first Islamic banks.

The issue of Islamic banking is one of the new Benkirane government's priorities. News reports indicate that the PJD government has completed writing the draft bill to be presented at the Chamber of Deputies.

Stefano Oliviero, writing for the ANSAmed website, reports that the draft bill has been written by the General Affairs and Governance Minister Mohamed Najiib Boulif's team of experts. On the financial instruments' market, the so-called "Islamic" instruments were already partially available, but the institutes managing them had never expressed their interest in the creation of specialized banks. However, PJD's victory changed many things, since the model has proved to resist the crisis and showed a large potential for growth.

The draft bill begins with classification of the general principles underlying products currently traded by banks, grouping them into halal (allowed) and haram (forbidden) by Sharia and specifies that lending must not be the source of profit. Imposing interests is therefore prohibited and lending is not considered a form of trading anymore: "Funding agreement with banks imply participation of the bank itself in both profits and losses".

Islamic banks do not merely propose financial brokering services as in traditional banking regimes; they play an active role in wealth generation, transformation and trade processes. The draft bill proceeds to determine which financing models are allowed. In general, they are "contracts compliant to Sharia regarding the use of funds aimed at generating profits".

The institutes allowed to work within this system are grouped in three categories: Islamic banks, financial institutions similar to Islamic banks and Islamic financial institutions.

Today, any moral entity allowed to collect funds, manage and invest them according to the Islamic law might be labelled as Islamic bank. These institutes would be subject to Sharia, not to current laws regulating the credit institutions and similar bodies, except the provisions that are already compliant with the Sharia. This would not prevent Islamic financial institutes from entering today's bank system: they would act under protection of Bank Al-Maghrib, the Moroccan Central Bank and by the National Council of Money and Savings, according to provisions of the Central bank, both as far as monitoring and prudential principles are concerned. The PJD project would also allow traditional banks to convert into Islamic banks, either totally or partially, creating branch offices, local cash desks or investment funds specialized in this kind of activity.


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