Morocco’s first Islamic bank will begin operating in late 2013. It is a genuine political victory for the Justice and Development Party (PJD) and opens up new prospects for the country's economy.
Prime Minister Abdelilah Benkirane has always dreamed of opening up the Moroccan banking market to Islamic finance. During the electoral campaign, the prime minister's party made Islamic finance one of its key issues, claiming that it would solve the country's liquidity problem and boost GDP growth by at least two percentage points.
Today, with a crisis in the background, the Islamist prime minister is about to realize his dream, beating all the opponents of the Middle East’s Islamist surge.
Benkirane has a valid argument: Connecting to the Islamic financial network would create a bridge to a banking market that knows no crises, that grows at double digits every year and where there are $1 trillion in transactions every year. It would also be the best way to attract petrodollars at a time when investments from Europe have slowed to a trickle.
Money in plenty
Boutayeb Belkacem agrees. He is an Islamic finance consultant and the former international director of the Saudi Dar al-Mal al-Islami group in Geneva.
For him, opening an Islamic banking branch in Morocco may "attract up to $5 billion in investments over the next three years,” or nearly half the investments lost in 2011.
Given such an argument, the reluctance of Bank Al-Maghrib’s head, Abdellatif Jouahri, is unjustified.
Every week Bank Al-Maghrib injects into the banking system between 50 and 70 billion dirhams [$5.8 to $8.2 billion] to cover the deficits created by Jouahri’s protégés while the bank’s stock price dwindles. It is an alarming situation.
The solution is not to be found in an unhealthy Europe but with our black-turbaned brothers. Their financial strength is evident and their methods are very popular in Morocco.
According to a recent study by the international firm Islamic Finance Advisory & Assurance Services, 94% of Moroccans “support Islamic banking.” Moreover, seven out of 10 people say that they are even “willing to invest in savings products that are compliant with Islamic law.”
In a country where nearly half the population still uses the conventional banking system, this calls for a plebiscite.
Stampede at Rabat
Full of confidence and supported by the public, Benkirane began prospecting Gulf bankers even before he formed his government.
In December 2011, the Islamist leader met with Khalid Bin Thani Bin Abdullah Al Thani, the chairman of Qatar International Islamic Bank (QIIB) and vice-president of its Qatari board. Meetings with Islamic bank leaders in the Middle East have since accelerated.
Today, more than a dozen applications for new banks have been submitted to the governor of the Central Bank, Abdellatif Jouahri, who has always resisted the “green” [Islamist] wave by claiming that “Morocco does not need more banks; the eight already here meet the economy’s needs.”
Among the applicants are the Saudi Al-Rajihi group, Kuwait Finance House, Dubai Islamic Bank, the Bahraini Albaraka bank and the Islamic Bank of Britain.
The Islamic banking giants operate in the Gulf countries, in Indonesia, Malaysia, and even in London. The odds seem to lean in favor of Faisal Islamic Bank, an Islamic banking giant whose main shareholder is none other than the Saudi ruling family. Benkirane and his team held several meetings with the financial group’s shareholders. The last meeting was on Sep. 25.
According to rumors, it was “to discuss the practical arrangements for investing in Morocco.”
This news may not please some of the kingdom’s friends because out of all the applications submitted, only one will be approved for now. The government wants to take it slow and not upset the existing order. “We thought it best to start with one Islamic bank and closely evaluate how things go,” said the PJD’s chief economist and Minister of Economic Affairs Najib Boulif to Reuters.
“If in six months the experience succeeds, there is nothing to stop us from allowing more Islamic lenders to invest in Morocco,” he said to reassure doubters.
Both bankers and Islamic jurists
To prepare for the entry of this new generation of “veiled” bankers, Al-Maghrib Bank has had to update its banking rules, which are the financial sector’s body of regulations. A new chapter of Islamic banking has been added and is now in the hands of the government, which must validate it before submitting it to parliament.
The vote will take place during the current parliamentary session. Its goal is to issue the first bank license in early 2013. From this legislation — fragments of which have been published in the press — we learn that these banks will not be called “Islamic” but “participatory.”
Why? Some inside the central bank tell us that “if these banks are called Islamic, it would mean that the traditional banks are not Islamic, which is difficult to accept.” It is play on words that recalls “halal” products in 2007, which were called “alternative products” to avoid confusion.
But beyond matters of form, financial authorities also impose drastic taxes on newcomers. There no question of allowing the future of Islamic banking to go to foreigners, 51% of whose capital must be held by local investors.
In addition to being under the legitimate control of Bank Al-Maghrib, the Islamic bank must answer to an Islamic law board all of whose members are Moroccan. It is an oversight committee composed of clerics who are responsible for making sure that the bank’s products comply with the precepts of Islam.