On 5 October, Morocco issued its first sovereign Sukuk valued at MAD $1 billion, or $105 million. In a phone conversation with Reuters ahead of its launch, Morocco’s then Finance Minister Mohamed Boussaid said that the move came after much preparation. “The legal framework is now prepared for Morocco to issue its first sovereign Sukuk in the coming weeks,” Boussaid told Reuters.
In August, Morocco’s King Mohammed sacked Boussaid, three days after the monarch urged action to tackle social and economic problems, according to local newswire, Agence Morocaine De Presse. “This Royal decision is part of the implementation of the principle of accountability which His Majesty is keen to apply to all officials, whatever their ranks or affiliations,” said the statement.
Nonetheless, Morocco’s Sukuk was issued as planned. ‘’We view Morocco’s tapping of the Sukuk market as a way for the Government to access an alternative source of long-term financing via a diversified investor base,” says Elisa Parisi-Capone, VP, Senior Analyst at Moody’s.
The move comes after years of planning, and more than a year after five Islamic banks began operations in Morocco. “The launching of participative (Islamic) finance products in Morocco complements and expands the range of products offered by the domestic banking sector and opens it to new financing capacities,” a statement from the Central Bank said at the time. “It will strengthen the attractiveness of Casablanca as a leading financial hub in Africa, in accordance with the will and guidance of His Majesty the King, may God assist Him.”
“We are delighted by the news that we will be able to positively impact the Moroccan consumer finance market,” said Khaled Elsayed, President and CEO of Guidance Financial Group, USA. “It is also nice to know that this achievement is yet another positive result of the remarkable success our distinctive US Islamic home finance programme has had since it was introduced over 15 years ago to the US Muslim consumer market,” Elsayed continued.
Ratings agency Fitch applauded the move. “We expect growth of participation banks will be high initially, as was the case following the introduction of Islamic banking in Turkey and Indonesia. The ability to access Islamic products will ensure that customers have access to a more comprehensive range of services. Customers who have avoided transacting with conventional banks for Shari’ah-related reasons can now move into the formal banking sector,” said Bashar Al Natoor, Head of Islamic Finance for Fitch Ratings.
The move to utilise Sukuk furthers the development of Islamic finance in the nation, as well as in the broader region. ‘’Morocco’s first sovereign Sukuk issuance is in line with our expectations for African Sukuk issuance, outlined in our report published last month. We forecast further Sukuk issuances in Africa to reach at least $1 billion over the next 18 months,” added Akin Majekodunmi, VP, Senior Credit Officer at Moody’s.
The banking sector has seen development in that time. Recently, one of the Islamic banks, Attijariwafa Bank Group in Morocco, has pushed to develop their technology in partnership with Path Solutions. Under the terms of the agreement, Path Solutions will provide and implement its interest-free core banking platform iMAL across the 31 branches of Attijariwafa Bank participative subsidiary Bank Assafa, including Shari’ah-compliant financing, delivery channels and trade finance.
Morocco-based Attijariwafa Bank is a leading bank in North Africa with a presence in 25 countries and with over eight million customers. The bank decided to acquire iMAL among many other vendor solutions, to run the operations of its new participative subsidiary Bank Assafa.
“The launch of our new participative banking subsidiary is part of Attijariwafa Bank’s long term vision to diversify its product offering. We looked at a number of solution providers for our new Shari’ah-compliant core banking system and we turned to Path Solutions following good references from several leading Islamic banks and because we simply wanted the best. We needed a core-banking platform in full compliance with Shari'ah, which could be implemented quickly and cost effectively, whilst providing the breadth of functionality that will allow us to achieve our ambitions. The iMAL solution fulfilled all these criteria,” Youssef Baghdadi, Chairman of the Management Board of Bank Assafa, commented.
Bank Assafa launched in July 2017, seven months after Islamic baking was approved.