Rabat- Morocco will finally launch its first Islamic bonds, better known as sukuk, after Bank Al Maghrib (BAM) and the board of Higher Council of Ulemas’ top experts gave approval to five participatory banks to set up their Islamic finance subsidiaries one year ago, Bloomberg reported.
Sukuk is the Arabic name for financial certificates defined by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as “securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets.”
Hicham Talby, who heads the financial sector department at the Ministry of Finance, said the financial instruments will be operational this year and will include four different formulas: Ijara, Wakala, Musharaka, and Murabaha.
“The government is conscious that we must develop and complete as soon as possible the operational, legal, and regulatory aspects of Islamic finance,” Talby said in a recent interview with Bloomberg.
As Morocco’s first sovereign debt is taking some time to be issued, Talby expects the process to be much faster for the next three planned sukuk issues,” though he declined to comment on the exact timing of the first issuance.
The government originally adopted legislation allowing Islamic banking and insurance in January 2014, with local reports suggesting that there were plans to establish the first fully operating Islamic bank by the end of 2016, after the government signed an agreement with the Islamic Society of Private Sector Development. Moroccan lawmakers have argued that there was a delay in authorizing Islamic banks.
Furthermore, the country’s banking experts believe establishing Islamic banks would pave the way for a new finance industry, open doors for more investment opportunities within and outside the region, and reinvigorate Morocco’s sluggish economy.
Islamic finance is based on religious principles that avoid interest and monetary speculation. The industry has grown rapidly over the past decade – growing 10 to 12 percent annually, according to the World Bank – as it broadens its investor base across the Middle East, North Africa, and Southeast Asia.