With the transformation of global financial markets, Shariah compliant banking services are becoming an increasingly attractive option for investors and financial institutions. In addition to Islamic bonds, Sukuk offer better growth opportunities through syndicated loans, project financing and refinancing, as well as equity markets.
As the new Islamic Finance Comes of Age report reports, activity in the Sharia-compliant Islamic finance sector is currently growing rapidly and offers promising opportunities for the global financial services industry to emerge from the current recession. Assets invested in Islamic finance currently stand at $ 800 billion and consultants estimate they could reach $ 4 trillion over the next six years. Given this development potential, several countries, including Morocco, offer significant opportunities for financial institutions to develop new partnerships and expand into global markets. The report discusses the capital markets in ten selected Islamic countries, which offer different opportunities to Western investors due to their different maturity and development. Furthermore, the ten markets can be divided into three groups, which greatly facilitates the choice of the right strategies to enter these different Islamic financial markets.
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These countries are classified into 3 best performing groups: Kingdom of Saudi Arabia (Saudi Arabia), Kuwait, United Arab Emirates and Malaysia. The challengers arrive: Qatar, Bahrain and Oman. And the rest, which are slowly advancing, are: Morocco and Tunisia, which approved Islamic financial products in 2007, while Egypt only recognized Sharia compliant products in 2020. However, these new entrants have the support of their governments and , in the case of Tunisia and Egypt, policy makers are doing everything they can to encourage the influx of investment. Only Morocco makes an exception for the regulations deemed “rigorous” by the report.
What challenge for Moroccan participatory banks?
Participatory banks made their Morocco debut in 2018, less than a year after Bank Al-Maghrib’s license. In 2021, Morocco has five participatory banks: Bank Assafa, Umnia Bank, Al Akhdar Bank, Bank Al Yousr and Bank al Tamweelwa Al Inma.
The country also allows three stakeholder structures within conventional banks to mobilize resources to meet customer needs by providing Sharia compliant products: Dar Al Amane, Arreda, Najma.
Based on a statistical report of ((published in September 2021), the total assets of Islamic banks increased by 52% from September 2020 to September 2021. This indicator looks very encouraging for the whole sector. However, it hides major challenges. that banking sector participation faces.
According to ” Islamic finance news real estate financing accounted for 85% of the industry’s total assets at the end of September 2021. This percentage has declined very slowly since December 2019. For equipment financing, they accounted for 6.7% of the industry’s total assets. 2021. This loan category grew by 30.6% in one year. And other categories account for 8.3% of total assets, including treasury finance and consumer finance, the source argues.
Obviously, real estate and real estate financing activities represent the least risky assets on any bank balance sheet, but at the same time generate the least profits. To achieve financial equilibrium, participating banks need to move towards short- and medium-term financing to meet new financing needs. They should also target other customer segments to serve, including high net worth individuals and companies (especially small and medium-sized businesses).
In addition, they need to enrich their range of services to attract more customers and be perceived as universal banks and not just as specialized financial organizations. They must provide products such as letters of credit, letters of guarantee, daily services, etc.), estimated ” Islamic finance news “.
The participatory bank does not know crisis
Participatory or Islamic banking is a growing subsector within the Moroccan banking system, according to data collected by the Al-Maghrib Bank.
According to a document published by Bank Al-Maghrib, Islamic financing of mortgages in Morocco amounted to 14,950 million dirhams in September 2021, marking an increase of 52.7% compared to the same period in 2020.
The document, titled “Key Monetary Statistics Indicators for September 2021,” details the overall performance of the banking sector in Morocco.
It shows that the solid performance of Islamic finance is particularly significant in real estate loans, with an increase of 32.0% compared to December 2020.
Murabaha financing, officially called “crowdfunding”, is an interest-free financing system.
According to Bank Al-Maghrib, the “Mourabaha” loan experienced an annual growth rate of 75% between 2019 and 2020.
As for customer deposits, participatory banks have continued their upward trajectory from their beginnings in 2018, rising from AED 1.4 billion in 2018 to AED 2.3 billion at the end of 2019.
Bank Assafa, the only participatory bank 100% owned by Moroccans, currently holds the largest share of deposits set at 1 billion dirhams, or about 38% of the participatory banking sector.
At the end of 2019, the global Islamic banking market was estimated at $ 2.5 billion. Such high numbers mean that Morocco still has a long way to go before its participating banks can operate in the highly competitive global Islamic financial market.
Takaful insurance planned for the first quarter of 2022.
In 2022, the pressure on participating banks would be even greater to reach equilibrium and improve the return on equity. The main challenge for them is to find a balance between product development efforts, growth imperatives and financial balance.
By the end of 2021, however, the first Takaful licenses would be granted and in the first quarter of 2022 there would be the launch of an offer that would have a positive impact on the entire sector in terms of product and deposit offers.