Written by David Pingree

On June 25, Morocco’s lower house of parliament, the Chamber of Representatives, unanimously approved a bill that would establish Islamic finance in the kingdom after months of delays.

The proposal, which was first drafted by the cabinet in January, would allow foreign and local lenders to begin Islamic finance operations, which will be overseen by the country’s central bank, the Bank al-Maghrib. Furthermore, the law also provides for the installation of Morocco’s first Islamic bond, or sukuk.

In the coming weeks, the country’s upper house, the House of Councilors, will vote on whether to ratify the Islamic finance law.

The new finance measures are just one part of a series of reforms that the Moroccan government has tackled in an effort to jumpstart its struggling economy since the Arab Spring rocked the region in 2010.

Morocco has tried to institute Islamic finance since 2012, according to Business Recorder, but fearing a new wave of social unrest, the kingdom’s political elite managed to contest finance reform.

However, proponents of Islamic finance found new momentum after the Justice and Development Party (PJD) came to power. PJD members and economic analysts are now saying that the introduction of Islamic finance will attract more foreign capital into the country and lower unemployment, The Wall Street Journal reported.

Currently, only the country’s largest bank, Attijariwafa, offers Islamic banking subsidiaries. In a recent Gallup poll, only 1% of Moroccan were said to have used Sharia compliant financing. Many of the participants in the poll complained of the service’s higher fees compared to conventional banking.

However, a joint study conducted by Reuters and Islamic Finance Advisory & Assurance Services reported a 98% demand for Islamic finance services in the kingdom, predicting that the new “participatory banks” could capture three to five percent of the finance market by 2018, aggregating USD 5.2 to USD 8.6 billion.

Even without official approval, banks are already making the necessary preparations for Islamic finance’s clearance.

Morocco’s central bank has started the process of establishing a Sharia board with the country’s Islamic scholars by training seven scholars and financial experts, according to Arab News. In addition, Banque Marocaine du Commerce Extérieur and La Banque Centrale Populaire du Maroc informed Reuters in March that they had begun making preparations for a possible Islamic finance launch.

To date, South East Asia and the Persian Gulf have dominated Islamic finance, accumulating USD 1.4 to 1.7 trillion, according to Asharq Al-Awsat. However, as Morocco has demonstrated, more countries appear to be making efforts to institutionalize the promising field.

“Egypt, Tunisia, Kenya, Morocco, countries in Eastern Africa are all looking at different stages of implementing new Islamic banking regulation,” Afaq Khan, chief executive of Saadiq, told The Wall Street Journal. “Issuing sukuk is always a very good idea to create recognition and to create a positive dynamic.”

–Edited by Kristine Diaz

By Ray