Morocco permits commercial banks to market Islamic banking products

23/03/2007

Moroccan banks are expected in the coming weeks to begin marketing three new forms of Islamic financing, recently authorised by the Central Bank. They include musharaka, murabaha and ijara products.

By Mawassi Lahcen for Magharebia in Casablanca -- 23/03/07

[Mawassi Lahcen] Moroccan Central Bank Governor Abdellatif Jouahri

The Moroccan Central Bank raised the idea of licensing Islamic financial products two years ago in response to the development of illegal banking channels which escaped official oversight. In recent years, the government has observed an increase in fundamentalist movements offering interest-free loans and alternative forms of funding, particularly in residential finance. The appeal of this type of finance is that it is believed to conform with Islamic Sharia, which forbids any financial transaction with interest. Because these practices exist outside the purview of monitoring by financial authorities, they are open to exploitation for money laundering or for funding criminal or terrorist activities.

At a press conference last Tuesday (March 23rd) in Rabat, Moroccan Central Bank Governor Abdellatif Jouahri said the authorised financing products are a response to the request of citizens who prefer to conduct transactions with no interest, and that they will help integrate these citizens into the official financial system. Jouahri explained that the three forms approved are known worldwide and are authorised by major European and US banks under the terms "leasing" (ijara), "sale on profit" (murabaha) and "joint venture" (for musharaka). He added that these forms of financing meet the standards established by the global Islamic organisations which specialise in this field and of which Morocco is an observer member.

"We chose to authorise these [programmes], and decided they… shall be offered by established commercial banks in the manner of traditional financial and banking products. Our position is clear. There will be neither Islamic banks nor non-Islamic banks in Morocco. And there won’t be any discrimination among Moroccans," Jouahri said,

The Central Bank left it up to each bank to choose the manner it deems most appropriate for marketing these products, either through its regular agencies or at special windows or through specialised branches. Moroccan commercial banks may establish their specialised branches in partnership with foreign banking institutions.

Jouahri noted that the newly authorised financial products were concerned solely with financing and not banking deposits. He said 53% of currency deposits at Moroccan banks were in the form of non-performing deposits, and there is thus no reason for citizens who prefer to conduct transactions with no interest to have reservations about banking deposits.

In a statement to Magharebia, Saadeddin Othmani, Secretary-General of the moderate Islamic Justice and Development Party, described this step as positive, since it expands financing options available to citizens and grants them greater freedom. "This step was anticipated and necessary. The Moroccan economy can’t be competitive unless it contains multiple and diverse financing methods," he said. "We can’t be locked into a single financing method. If European nations and European and American banks preceded us in authorising financial products such as these, I don’t know why Moroccan banks delayed all this time."