Morocco: opens up to Islamic finance

The introduction of the country’s first Islamic bank, slated for this year, should also provide further opportunities for foreign banks the think tank Oxford Business Group(OBG ) reports.Banking profits grew from Dh9.72bn (€871.19m) in 2010 to Dh10.1bn (€905.26m) at the end of 2011, a record high.

According to the most recent figures from Bank Al Maghrib, total profits had reached Dh6bn (€537.78m) as of June 2012. This represents a 3.8% increase from Dh5.7bn (€510.89m) over the same period in 2011, indicating the sector would see a strong finish to the year, OBG notes.

However, baking profits were lower in 2012 due to government measures such as a solidarity fund  to reduce poverty which banks had to contribute to, and a sector wide increase in salaries of 2.1 billion dirhams increase for bank employees with other socialmeasures to ensure stability.

Attijariwafa Bank, Morocco’s largest lender by market share, saw 1% growth in net profit in 2012 to reach Dh4.5bn ($403.33m), after contributing roughly Dh220m (€19.72m) to such collective measures. The bank, which has expanded its operations in several countries in the region, also reported it diverted an estimated Dh118m (€10.58m) of annual profits to protect against instability in Tunisia and Côte d’Ivoire.

 

overall sector indicators attest to the health of the banking sector in 2012. Total bank assets climbed from Dh886bn (€79.41bn) at the end of 2010 to Dh1.03trn (€92.32bn) by June 2012; the top three banks continue to hold roughly 65.6% of total assets. The volume of deposits also increased from Dh648bn (€58.08bn) in 2010 to Dh676bn (€60.59bn) in June 2012. Finally, the sector-wide rate of non-performing loans has hovered at 5% since 2010, with a coverage rate of roughly 67%, which provides a solid basis for growth.

 The government isworkingworks to formally introduce Islamic financial products. Conventional banks were first authorised to offer sharia-compliant products in 2010. However, this first opening met with limited success, as these services were offered through Islamic “windows” at existing banks..Islamic banks require their own structure and legislative measures for this are still before parliament awaiting enactment. The draft billprovides forthe gradual introductionof islamic banks so as not to glood the market OBG notes. The first Islamic lender will likely be structured to allow local banks to hold at least a 51% stake in the capital, while up to 49% of capital may be available to foreign institutions.

 
The continued stabilty in Morocco as opposed to political uncertainty in Egypt and Tunisia bodes well for the moroccan financial sector OBG concludes.