Morocco’s parliament gave final approval on Tuesday to an Islamic finance bill that will allow the creation of Islamic banks and enable private firms to issue Islamic debt, lawmakers said. Morocco has been trying to develop Islamic finance – mainly to attract wealthy Gulf investors – since an Islamist-led government took power in the aftermath of the 2011 Arab Spring protests.
Islamic banks, which ban interest payments and pure monetary speculation, have been growing in the Gulf and Southeast Asia for a decade. Wary of Islamist views, Morocco has long rejected the idea. But the country’s financial markets a lack liquidity and foreign investors, and Islamic finance could attract both. “The bill has been voted by 161 votes and no one was against it,” Said Khayroune, the head of parliament’s economics and finance committee, told Reuters. The bill will be effective once it is published in Morocco’s official bulletin in coming days.
The law will allow foreign banks and local lenders to set up Islamic banks in Morocco. It also contains measures on takaful, which allows the creation of Islamic insurers, and will enable private companies to issue sukuk (Islamic debt). Major Moroccan banks have been preparing to open Islamic offshoots since the legislative process began. Foreign lenders have been also testing the waters.
Gulf banks from Kuwait, Bahrain and the United Arab Emirates have expressed interest in entering the market when the bill becomes law. But sources have told Reuters Morocco may guide them towards partnering with local banks rather than establishing fully owned Islamic subsidiaries.
Morocco’s BMCE Bank is preparing to open an Islamic subsidiary as a joint venture with a major Islamic financial institution from the Middle East, the bank’s managing director has said. Other Moroccan banks, including Attijariwafa Bank and Banque Centrale Poulaire, are believed to be in talks with foreign Islamic lenders.
But a Thomson Reuters study of Morocco, released earlier this year, estimated Islamic banks might account for 3 to 5 percent of total banking assets by 2018, or about $5.2 billion to $8.6 billion – far below the roughly a quarter in the developed markets of the Gulf. The Moroccan market remains highly competitive, and bankers believe banking would expand by only a few percentage points, since Islamic finance is more expensive than conventional banking.
Originally published on www.reuters.com