Morocco’s parliament has started to discuss a bill regulating Islamic banks and sukuk issues after months of delays, after the Islamist-led government adopted it last month.
Parliament’s approval will be the last step before fully-fledged Islamic banks can be established in Morocco, whether they are subsidiaries of domestic banks or foreign owned, a measure which could bring in more Gulf Arab investment.
Attijariwafa bank, controlled by the royal family’s investment holding company SNI, has been the only Moroccan bank to create an Islamic subsidiary since Morocco began allowing conventional banks to offer a limited set of Islamic financial services in 2010.
Last year the unit, Dar Assafaa, signed a deal enabling it to offer Islamic financial products to 42 percent of state employees ahead of the approval of the draft bill when foreign rivals could step in.
“In order to transform Dar Essafa into a participative bank, we will need to increase its capital by 150 million dirhams, and subsequent investments will depend on how the market develops,” Attijariwafa bank’s Managing Director Ismail Douiri told Reuters in an interview.
“We have a very competitive market, and Moroccans are too sensitive to product prices, so I don’t expect a revolution in the Moroccan banking sector,” he said.
He said banking activities would expand by only a few percentage points as Islamic finance was more expensive than conventional banking.
Islamic finance banks are called participative banks under the Moroccan legislation.
Moroccans seem to be attracted by participative finance, but it is almost impossible to have products with the same prices as the conventional finance, at least initially, Douiri said.
Standard and Poor’s has estimated that if Islamic products were proposed at higher costs in North Africa, it would probably attract only limited demand.
Over the past few years, Morocco’s banks have started to tap the low income banking segment which is by nature more sensitive to pricing, the agency said in a report last month.
“Attijariwafa Bank may seek a foreign partner for its Islamic subsidiary, but it is not a top priority. We are good as we are. If foreigners have more experience in Islamic finance, we have the advantage of knowing the North African market very well,” Douiri said.
The bank posted a 4.8 percent drop in its first-half net profit to 2.2 billion dirhams, reflecting an economic slowdown and rising bad debts.
Douiri said financial results of full 2013 would confirm the first half trend.
“The results are coming out in the next few days. I cannot give more details, but bad loans seem steady at the second half of 2013, and would decrease in 2014,” Douiri said.
Source: The Africa Report