The government will submit to parliament a draft bill with a set of regulations for the introduction of Islamic finance products in the country within the next few weeks, General Affairs and Governance minister, Najib Boulif, told Reuters.
The draft bill will be added as a chapter to the country's Banking Law, providing a set of regulations on all Islamic finance products which specialised lenders will be able to offer from Morocco, Boulif said. It is the first time that the Moroccan government, led since December by the moderate Islamist Justice and Development Party (PJD) has detailed how it intends to develop Islamic finance in the country of 34 million.
Morocco does not allow fully-fledged Islamic institutions but started in 2010 allowing conventional banks to offer a limited set of Islamic financial services products although customers complain they are subject to higher fees than conventional banking products. So far only AttijariWafa, the country's biggest bank which is indirectly controlled by a holding company owned by Morocco's ruling monarchy, offers four such services based on Murabaha financing but only for personal finance.
Immediately after parliament approves the law, Moroccan authorities will allow local banks and foreign Islamic banks to set up the first Morocco-based Islamic lender, Boulif said. "Local banks will be allowed to take at least 51 percent of its capital and as much as 49 percent will go to foreign Islamic lenders. There is a very strong demand from abroad for such a project," said Boulif, himself a member of the PJD. Traders in Casablanca cite Qatar's International Islamic Bank as one of the likeliest foreign Islamic banks to want a foothold in Morocco.
"We thought it is best to start with one Islamic finance institution as we wish to assess closely the experience to ensure its success. If it proves to be a success within six months, then nothing should stop us from authorising more Islamic lenders," added Boulif. In allowing fully-fledged Islamic finance institutions to operate in Morocco, Rabat aims to overcome what has become a chronic shortage of liquidity, speed up economic growth and help its ambitions to develop a regional finance hub in Casablanca.
"Our economy is in desperate need for a push to help it jump to an economic growth pattern above the (annual) 4 percent we have had in recent years," said Boulif. When in opposition PJD legislators had said the development of a fully-fledged Islamic finance system in Morocco would add 2 percentage points to annual GDP growth.
"Morocco is struggling with liquidity shortage that forces the central bank to inject between 30 and 35 billion dirhams each week (into the banking system). This shortage hurts the financing of investment and impacts lending growth," Boulif said. Morocco is also working on a developing a regional financial hub known as the Casablanca Finance City with a view to winning business with other countries in the north and west of Africa.
"We are keen to capitalise on the stability we enjoy here to turn Morocco into a regional Islamic finance platform," Boulif said, adding however that Tunisia and Libya may also harbour similar ambitions. "Good investment opportunities don't wait. I think we will have to work pretty quickly to enact the new law in 2012 and not squander a very good and rare opportunity.