RABAT - Seeking to reinvigorate economy and become a regional hub of Islamic banking, Morocco is planning its first fully-fledged Islamic bank.
The current plan is to allow a gradual introduction of Islamic banks to preserve the competitiveness of existing (conventional) banks," General Affairs and Governance minister Najib Boulif told Reuters.
He said a draft bill will be submitted to the parliament within weeks to introduce Islamic finance products in the kingdom.
"We expect parliament to approve the bill before the end of this year.
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The bill will provide a set of regulations on all Islamic finance products which specialized lenders will be able to offer in Morocco.
When the bill is approved, local banks and foreign Islamic banks will be allowed to set up the first Morocco-based Islamic lender.
"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, said Boulif.
There is a very strong demand from abroad for such a project.
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 authorizing more Islamic lenders.
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.
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.
The government says that the introduction of Islamic banking would help reinvigorate the kingdom's economy.
"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," Boulif told Reuters.
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), Boulif said.
This shortage hurts the financing of investment and impacts lending growth.
Morocco is also working on 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 capitalize on the stability we enjoy here to turn Morocco into a regional Islamic finance platform," Boulif said.
"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.
Islamic banks have proved a success because of rules that forbid investing in collateralized debt obligations and other toxic assets that cause financial crises.
The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.
Reproduced with permission from OnIslam.net