IFSO Mag Eté 2013 www.ifso-asso.com 1
Summer 2013 Issue #1
Exclusive interview of the
Moroccan minister in charge ...
I F S O Mag Summer 2013 www.ifso-asso.com 2
I F S O Mag Summer 2013 www.ifso-asso.com 3
n five years, the University of Strasbourg built an international
reputation i...
IFSO Mag Eté 2013 www.ifso-asso.com 4
I F S O Mag
La Tribune de la Finance Islamique
Head of publication: Salah Ab...
I F S O Mag Summer 2013 www.ifso-asso.com 5
By Ezzedine Ghlamallah
In France, in an article on the 25th of June, we
are sa...
I F S O Mag Summer 2013 www.ifso-asso.com 6
Islamic Finance in France, current situation
By Mahfoud Saadouni and Salah Abe...
I F S O Mag Summer 2013 www.ifso-asso.com 7
Expert Thoughts
Islamic Finance, Between Theory and Purpose
Extracts from the ...
I F S O Mag Summer 2013 www.ifso-asso.com 8
Expert Thought
Shariah substance. These discrepancies between
subsidiary compl...
I F S O Mag Summer 2013 www.ifso-asso.com 9
Islamic Finance In Morocco
Islamic Finance Geopolitics, Morocco’s Advantages
I F S O Mag Summer 2013 www.ifso-asso.com 10
Islamic Finance In Morocco
Exclusive Interview of Mr Mohamed Najib Boulif, Mo...
I F S O Mag Summer 2013 www.ifso-asso.com 11
Islamic Finance In Morocco
procedures of the committee are being
I F S O Mag Summer 2013 www.ifso-asso.com 12
Islamic Finance In Morocco
with an estimated more than $ 100 billion
market i...
I F S O Mag Summer 2013 www.ifso-asso.com 13
In Partnership with Alkhawarizmi Group
Sukuks Issuances : 1st half 2013
In th...
I F S O Mag Summer 2013 www.ifso-asso.com 14
Rendez-vous of Islamic Finance
around the World
IFSB – INCEIF Executive Forum...
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Ifso mag n°1 summer 2013


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IFSO MAG – The Islamic Finance magazine

IFSO Mag, at the rate of four issues per year, provides articles dealing with current events of Islamic Finance. IFSO Mag’s main objective is to inform on Islamic Finance issues. IFSO Mag has four sections. “News” presents the flash news of Islamic Finance and various institutions operating in the field. The “Articles” in turn provides articles dealing with Islamic Finance topics. The “Interview” is devoted to a personality who answers the questions of writing. Finally, the last section is devoted to “market monitoring” of Islamic Finance. IFSO Mag is distributed to students, teachers, professionals in the field of Islamic Finance, and anyone interested in the subject.

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Ifso mag n°1 summer 2013

  1. 1. IFSO Mag Eté 2013 www.ifso-asso.com 1 Summer 2013 Issue #1 FOCUSON Exclusive interview of the Moroccan minister in charge of general affairs and governance, and the flag-carrier of the Islamic finance project in Morocco, Mr Mohamed Najib Boulif. In France After Christine Lagarde’s kick-off, many Shariah compliant products were born. Lights on these progresses… Islamic Finance, between Theory and Purpose by Nasser HIDEUR ISLAMIC FINANCE IN MOROCCO ANALYSISEXPERT THOUGHTS
  2. 2. I F S O Mag Summer 2013 www.ifso-asso.com 2
  3. 3. I F S O Mag Summer 2013 www.ifso-asso.com 3 n five years, the University of Strasbourg built an international reputation in the field of Islamic finance, on both the research and the teaching plans. The team of researchers and teachers, made up of professional and academic people, is part of the Islamic finance experts’ network, highly reputed worldwide. The « Cahiers de la finance Islamique », first magazine in French dedicated to research in Islamic finance, is published and distributed on the University of Strasbourg’s website; 5 numbers of the magazine are available up to date, the 6th is in progress. Pioneer in France, the University of Strasbourg contributes to the training of practitioners of islamic finance, and who will soon be unavoidable actors. The University Diploma in Islamic finance created in 2009 at the University of Strasbourg was the first of its kind delivered by a French University and in the continental Europe. This university dipolma, open as a continuing education, is since January the 1st 2013, organized as an Executive MBA, delivered by the faculty of law. By September the 1st 2013, in parallel with the Executive MBA, a master’s degree in Islamic finance will be available in the law faculty, open to students in initial education. This university education, oriented towards research, will allow students to continue their education with a PhD. The current students of the Executive MBA in Islamic finance decided to create the Islamic Finance Student Organization at the University of Strasbourg. In order to show a strong and unavoidable identity to become a well-known actor in the development and progress of Islamic finance, the IFSO has decided to create its own magazine. Carried by the redaction team, the IFSO magazine, made the choice ab initio of excellence, in order to allow the spread of reflections and analyses as much pertinent and large as possible. The summary of this 1st number is revealing the know-how and professionalism of the members of the IFSO fellowship. The tone is given: this promotion shows off a very surprising dynamism and entrepreneurial spirit. Students from other disciplines, seldom show off such enthusiasm and professionalism at once: that proofs that Islamic finance is an enthralling study and research theme. I Editorial Michel Storck CoHead of University of Strasbourg eMBA of Islamique Finance
  4. 4. IFSO Mag Eté 2013 www.ifso-asso.com 4 Summary I F S O Mag La Tribune de la Finance Islamique Head of publication: Salah Aberkane Head of development: Lmahfoud Saadouni Chief Editor: Othman Benharoun Editors: Nassima Belal, Jamal Benerroua, Mouad Boutaour-Kandil, Klil Brahim, Ndiaga Cissé, Zakaria Ghadbane. A Magazine Quarterly Issued by IFSO, Islamic Finance Student Organisation, Strasbourg. Email: ifsomag@ifso-asso.com News: • Crowdfunding in France 5 • The Bahreini Bank AlBaraka in Morocco 5 • Law on Sukuks in Tunisia • Launch of Zitouna Takaful in Tunisia 5 • WIEF in London 5 Analysis: • Islamic Finance in France: current situation 6 Experts Thought: • Islamic Finance between Theory and Purpose 7 by Nasser HIDEUR Topic: • Géopolitic of Islamic Finance, Morocco’s assets 9 by Abderrazak ELMEZIANE • Exclusive Interview with Mohamed Najib BOULIF, Moroccan 10 Minister of general affairs and governance Market Review: • Market Review 13
  5. 5. I F S O Mag Summer 2013 www.ifso-asso.com 5 By Ezzedine Ghlamallah In France, in an article on the 25th of June, we are said that the FMA might favour the development of participative finance, in particular that of Crowdfunding, allowing many initiatives to see the light. Today, according to the FMA and PCA, participative finance is assimilated to non-guaranteed placements. Nevertheless, crowdfunding actors have the status of financial consultants in financial investments. This status doesn’t allow them to lead any prospection. It’s, therefore, desirable not to spread the non-guaranteed placement to CIF, but to change the status of participative funding as a non-guaranteed placement. Another path could be to extend the autorisations for the creation of an orders receipt-transmission service for a third party, in case the order is not issued by an OPCVM firm. This, currently, is not possible for platforms working under the status of consultants in financial investments. In Morocco, according to Reuters and to an article from info-express.ma on April, the 25th, Albaraka, a Bahraini bank, aims at strengthening itself in North Africa, thanks to huge investments in Lybia and Morocco. The Moroccan branch with a capital of $ 100 million will allow the group to pursue its strategy. “The international strategy has allowed the bank to survive to though market conditions in Bahrain. Its capital has diminished by 16% in 2012, in part because of civil tensions and unique transactions. But its capital rose by 11 % to $ 19.1 billion and the bank plans to get to $ 36 billion by 2017”, a close to the file source says. On the other hand and from an article of Afriuinfo.com on June, the 13th, the legal frame of Islamic participative banks is finally ready. The executive secretariat of the Moroccan government has submitted for examination this legal frame of participative banks to all the ministerial sectors; the Moroccan minister of economy and finance says. In Tunisia, (i) The parliament has adopted a bill allowing the Tunisian government to issue Islamic Sukuk. Experts foresee an issue towards the end of 2013 for an amount between 500 and 700 million dinar (250 and 350 million euros). If this forecast is realized, it will be the first sovereign issue of the Maghreb and North Africa. (ii) According to an article from webmanagercenter.com on June the 11th, Zitouna Takaful was created. The official launch took place in the UTICA. It makes of Zitouna Takaful the first Islamic finance firm of Tunisia and confirms the establishment of the Tunisian Islamic finance system.Today, 120 companies in the world offer Takaful insurances, representing an alternative to the traditional insurance in a context of crisis of moral and financial values (AIG for instance). For Zitouna Takaful, the goal is to innovate and diversify Tunisian insurance products, and to contribute in fine to the economic development in Tunisia, along with companies’ vitality and people’s welfare. Tunisians will have access to a whole range of Takaful insurances: IARD, assistance, company risk, building sites, naval, land and air transportations, foresight insurance, HR protection, funding and savings coverage, retirement, scholarship grants, along with El Haj savings. In London, The ninth world Islamic economic forum will take place for the first time out of the Muslim world, from the 29th to the 31st of October, while the City is willing to impose itself as a stronghold of Islamic finance, the organizers say. The ninth edition of the forum, named “A changing world, new relationships” will take place in the centre of congresses, Excel in London. According to the WIFE, more than 1500 people (ministers, experts, entrepreneurs…) from a hundred countries will participate to the event in order to “reinforce the commercial partnerships between Islamic and European markets and to think of the future of London as an international platform of Islamic Finance”. News
  6. 6. I F S O Mag Summer 2013 www.ifso-asso.com 6 Islamic Finance in France, current situation By Mahfoud Saadouni and Salah Aberkane e will adapt our legal environment in order to make Islamic finance benefit from the stability and innovation of our stock markets”, thanks to this declaration full of promises and symbols the ex-minister of economy Christine Lagarde has welcomed Islamic finance in France. A finance that can attire some 100 billion euros’ investments in the hexagon and that got a 4 billion euros’ potential in retail banking (source: Jouini-Pastré report for Europlace, 2009). It remains to be seen how. Islamic finance products require some legal and fiscal fittings out, that’s why the executive direction of Treasury has published a set of fiscal instructions concerning operations such as Ijara, Istisna’, Mourabaha and sukuks, that “will allow to give to investors and operators the legal and fiscal certainty essential to the development of these operations in France”, according to Christine Lagarde. The last two transactions have been given an overwhelming support. Sukuks are security assets backed by real assets; they represent the main capital investments’ tool in the Middle East, concerned about compliance to Shariah principles. According to Thomson Reuter-Zawya, more than 80 billion euros of sukuks were issued in 2012, showing an annual double-digit growth. London is the 1st place in the world of sukuks exchange on the secondary market with 23% in volume of listed securities (Alkhawarizmi report, 2012). Therefore, sukuks represent an alternative to bond issues to fund France and its companies. The Financial Markets Authority (AMF) has drew up, in 2010, a guide for operators for the launch of sukuks, and the Nyse-Euronext stock market has, moreover, opened a compartment for the listing of these securities. Since then, two issuances of sukuks intended to fund SME were created in 2012, Alfarooj and Orasis sukuks. The Mourabaha, as for it, is a buy and hire purchase transaction, structured to fund a real estate acquisition, in compliance with Shariah principles. This transaction is the most used mean for real estate funding in Islamic finance, and that suffers from a double taxation in the French fiscal framework. The fitting out of the French taxation framework on this aspect, has allowed Chaabi Bank, in collaboration with the group 570, to launch in 2011 a Mourabaha contract that can attempt a 10 years maturity, for real estate acquisitions. Chaabi Bank is the 1st to open a window for Islamic finance in France, with an Islamic deposit account for private customers, and it plans to open another account for SMEs. Swisslife has also launched a Shariah compliant life insurance placement in 2012. It turns out that Paris stock exchange is at a stand-still point in the Shariah compliant institutional funding. Indeed, neither the French state, nor French companies launched sukuks. However, Islamic finance finds a positive echo among private customers, mainly Muslims. The popularity and success of Chaabi bank offer is a proof. French banks remain reticent to the possibility of offering Shariah compliant services; Moody’s report has put the light on the social and political aspects that are obstacles, magnified by the lack of education and knowledge of this new finance. Organisms and fellowships such as ACERFI, AIDIMM, CIFIE as well as COFFIS are working on the promotion of Islamic finance in France and to set up concrete measures to support this new sector. The Executive MBA of the University of Strasbourg along with the University of Paris- Dauphine diploma are examples of educations launched in 2009 to teach Islamic finance principles in the hexagon. It is sure that in France Islamic finance is not progressing as wished by its stakeholders, but major advances have been accomplished. The authorities have permitted to welcome the Islamic finance; it’s up now to private actors to take over, and to durably set it in the hexagon. « W Analysis
  7. 7. I F S O Mag Summer 2013 www.ifso-asso.com 7 Expert Thoughts Islamic Finance, Between Theory and Purpose Extracts from the fourth issue of “Les Cahiers de la Finance Islamique” he financial crisis has generated a non- confidence and doubt climate. The drift of practices in conventional finance has left its marks on people’s minds in recent years. Many voices have been raised in order to moralize financial markets, with the purpose of making the funds more accountable and ethical. It is within this context that Islamic finance was distinguished. It is a finance, which, in its structured and operational terms, has set the goal and the purpose of providing financial services to meet the needs of a modern economy, while observing the provisions of the Islamic Shariah law, which prohibits interest loan in addition to the random and speculative financial transactions. We can define Shariah as a path, which leads to knowledge, belief and the accomplishment of God's will in order to reach happiness in this life and in the afterlife. The term Shariah encompasses all the Islamic religious precepts in their dogmatic, ritual, ethical, legal and mystical dimension. Islamic law is the legal expression of Shariah. It is observed in the social life of Muslims, the rules of Shariah are a religious or moral reference within the sphere of each individual conscience of people. It is applied by the governor or magistrate as part of the management of the city’s matters or while settling disputes, these rules become an imposed positive law notwithstanding the religious or doctrinal beliefs of the rights-bearing subjects. Shariah, as rules of positive law is only interested in apparent facts and willingness. As a religious rule, it covers the aspect of faith and, therefore, it is not only concerned with the strict sensu legal validity of the act and its compliance with the prescribed rules, but especially with the real intention of its author. If this plan goes through a seemingly consistent act, but has an unlawful purpose, then the act will be considered as a sin, which is morally and legally reprehensible. We are therefore faced with a legal fatwa, which is limited to facts and expressed will, and a religious fatwa, which is interested in the real will and the intended purpose. This implies the following corollary principle: Any act contrary to the guiding principles of Shariah even if it complies with its subsidiary rules becomes unlawful as a result. Shariah compliant financial practices have been developed in order to offer an alternative to the prohibition of the two factors frontally opposed to Shariah principles: Usury (riba) and hazardous hazard (gharar). Ultimately, the actions of Islamic financial institutions (IFIs) are an attempt to reconcile the customary and dedicated banking practices with the observance requirements of the fundamental principles of Shariah. The subsidiary compliance consists of the observance of the rules of validity arising from the different types of contracts. Moreover, the basic compliance is measured in terms of the interlocking of the general organization of Shariah compliant financial activities in the real economic sphere. This should be the basis and the outcome. Nowadays, the performance of activities of IFIs remains subservient to the dominant system in its technical, regulatory and professional standards. Some of these institutions in their desire to be more competitive and offer a competitive compensation to their shareholders or investors, do not hesitate to simply align to the practices of conventional finance. So many products as reverse Murabaha or organized tawaruk are structured in a way which comply with the subsidiary validity rule, but are in fact a duplication of their usurious (conventional) equivalents, emptying those contracts from their T Nasser Hideur General Secretary of AlBaraka Bank - Algeria
  8. 8. I F S O Mag Summer 2013 www.ifso-asso.com 8 Expert Thought Shariah substance. These discrepancies between subsidiary compliance and basic compliance does not mean an admission of failure of this innovative experience, based on a reconciliation of the financial economy with the real economy and the break with the culture of the usury and of the unproductive speculation. Notwithstanding the weaknesses and deficiencies of this emerging finance, it managed the challenge of maintaining its path against the current the dominant finance. The model needs be built more and more, and it is far from being perfect in its current situation. But it has demonstrated that it is not only coherent and viable, but could reasonably be a source of inspiration for the reform of the current international financial system, completely unstructured and disjointed. Islamic finance needs a new approach based on the science of the Shariah’s finalities in order to make financial practices of Shariah compatible with the overall aims of Islam. The Shariah board and regulators and standardization "Shariah" organisms are challenged today to develop a new methodology of fatwa and the doctrinal framework of IFIs to ensure consistency between the rules of formal validity of financial transactions and the rules of overall compliance with the spirit of Shariah. “ Any act contrary to the guiding principles of Shariah even if it complies with its subsidiary rules becomes unlawful “
  9. 9. I F S O Mag Summer 2013 www.ifso-asso.com 9 Islamic Finance In Morocco Islamic Finance Geopolitics, Morocco’s Advantages he American security tightening consecutive to september 11th events has decreed a ruthless hunt to Middle East countries capital with oil revenues suspected of financing terrorism obliging them to seek refuge in less hostile environments. Aware of the challenges of such a financial windfall, the major international financial centers have engaged in fierce competition in order to capture this latter. The London or Kuala Lumpur Malaysian Place has been a favorite refuge for those errants capital. In Africa, Egypt is a pioneer in terms of Islamic capital attractiveness; Tunisia, Algeria and Senegal are actively moving in this direction, while Morocco made a figure of country lagging behind. It was only in 2007 that the UK has authorized the marketing of Islamic financial products based on debt (Murabaha and Ijara) under the ambiguous name of alternative financial products that Dar Assafaa, attijari wafa subsidiary, commercializes to nowaday. Islamic financial products mobilizers of domestic savings (such as Mudaraba and Moucharaka) have not been allowed and even less those that may drain the resulting capital from Middle East countries (such as Sukuk and sovereign wealth funds). On the geopolitical plane, the situation seems paradoxical, because the country has considerable strengths even to propel to the rank of major financial center that could drain consequent Islamic financing. Morocco has, in fact, the most efficient of financial system in the MENA region. The country is also a real site of investment projects seeking funding, particularly in the field of infrastructure (highways, dams, shipyards,...) and in that of tourism and property which are as many of sectors likely to attract Islamic capital. With its privileged political and historical ties with the Gulf countries, sealed ties recently by an invitation to Morocco to join the C.C.G, the country can have a step ahead of all its competitors in terms of Islamic capital attractiveness. Morocco, which aims to make the financial center of Casablanca (Casablanca Finance City) a major platform at the crossroads of continents, should rather seize this opportunity by capitalizing on these assets. In 2012, Morocco finally seems to become aware, rather late, of this strategic option, which could accelerate its economic development. The draft law on Islamic banks, known as participative as well as eminent adoption of the amendment of the law 33-06 on debts securitization introducing Sukuk, seem to militate in favor of this new financial strategy. The strategy already begins to bear its fruits, four authorization requests to practice are already sent by banks of the Middle East to Bank AL Maghrib, of whom the powerful Saudi Faisal Islamic Bank bank. A project of emission of Sukuk is also for the study within the Ministry of Economy and Finance. The group KUWAIT FINANCES HOUSE-KFH-would have already confirmed, besides, its intention to introduce Sukuk in Morocco as tool of financing of big projects. The big projects in need of funding, like the ambitious solar energy program (9 billion USD), can rely on this alternative funding if all these geopolitical issues are analyzed as they should. T Focus On Abderrazzak ELMEZIANE Professor of finance at University MohammedV-Rabat
  10. 10. I F S O Mag Summer 2013 www.ifso-asso.com 10 Islamic Finance In Morocco Exclusive Interview of Mr Mohamed Najib Boulif, Moroccan Minister of General Affairs and Governance. The Minister is a great specialist of Islamic finance. He has proposed, when he was in the opposition, a complete bill to introduce Islamic banks' products in Morocco. IFSO Mag discussed with him about the past, the present and the future of Islamic Finance in Morocco. We approached banking products, investment products along with legal and fiscal arrangements that will allow the industry of finance to durably settle down in the cherifian kingdom. Interviewed by Mouâd Boutaour Kandil Morocco began experimenting with Islamic banking products since 2007. Could you explain to our readers how this experience was born? And what instructions and conclusions can be drawn? The Minister: Since their installation in the Gulf countries, Islamic banking products have been able to impose itself in the economic and financial global system. However, Morocco was the latest Arab country to have started in 2007, the introduction of some alternative financial products. This Moroccan experience had remained limited (less than 1 billion dirhams CA / year) on the one hand, due to the marketing of a single product from three allowed (Mourabaha), and on the other hand due to several factors holding back the development of these products, namely: (i)A non-neutral tax which led to high costs, compared to similar traditional products. (ii)Non-specialists in the field who fail to “promote” these products. (ii)One bank has operated on in this area through a dedicated subsidiary and therefore a limited basic customer. The Moroccan government is finalizing a new banking law with a chapter devoted to Islamic banks. Could you explain the broad outlines of this new law? The Minister: Further to the shortcomings I have mentioned, and taking into account instructions taken from the current economic climate, marked by the extent of the global economic crisis and the impact it begins to take on the national economy, it has become essential to carry out reforms in tune with these new variants. To this end, and in order to meet the necessities of savings mobilization and financial inclusion, the amendment of the current banking law has been necessary, with the purpose, amongs others, of introducing Islamic banks called participatory banks. The Moroccan new banking law draft has involved a set of reforms affecting mainly: (i)The establishment of a special legal framework for participatory banks. (ii)Expanding the scope of this draft law to cover all banking services, including investment services previously reserved exclusively to credit institutions. (iii)Strengthening the supervision on credit institutions activities. (iv)Establishing prevention and management mechanisms of crises, and (v)Strengthening of fighting mechanisms against money laundering. The draft law has devoted a whole chapter to applicable framework to participatory banks; it defines the activities and financing products that can be offered by these banks and their institutional framework, which gives them an independent status. The new law advocates the establishment of a central Shariaa board who will supervise banking activities as well as Islamic investment products such as Sukuk. Could you explain how this institution will be made and what powers she will be provided? The Minister: Indeed, this draft law advocates the establishment of a central Shariah board, "Shariah Committee" in the sense of the project. This represents a central entity, independent from banks, falling under religious and fatwas bodies. Its main task will be to ensure compliance, of operations and products offered to the public, to the Shariah, and this to ensure harmonization and centralization of decisions. Knowing, however the secretariat of the committee will be provided by Bank Al Maghrib. The composition and working Focus On
  11. 11. I F S O Mag Summer 2013 www.ifso-asso.com 11 Islamic Finance In Morocco procedures of the committee are being developed. You recently received a delegation of Faysal Bank. Many media think it will be the first Islamic bank to settle in Morocco. What is Morocco policy for the installation of Islamic banks in Morocco? Is this a move towards an open market for any local or foreign actors, of course, with a set of specifications? or we will have a much more controlled market with targeted agreements? The Minister: Several Islamic banks, not only Faysal Bank, have expressed interest to install in Morocco having regard to the opportunities offered by our country. We had the opportunity to officially receive 3 or 4. In a logical Prospection, we remain open to any local or foreign actor. In this context, it is strongly recommended that the Moroccan experience starts with a capital that is mostly Moroccan, with a gradual installation of these banks to ensure the system sustainability as a whole. But in the long term, and gradually progresses from this experience, once confidence and honed system installed, we can open doors to a perfect competition. Could you explain what will be the effect of Islamic banks installation on the Moroccan economy? The Minister: The Moroccan economy is currently suffering from a lack of liquidity, which leads to an increased need for funding, necessary for the investment development. The Islamic banks installation in Morocco is such as to bring great added value to the economy through (i) The injection of substantial amounts into the economic system, (ii)a greater banking (a segment of the population has no bank account with conviction), (iii)a participatory economy, not debt economy, (iv) encouraging public shareholding who can invest directly through Moucharaka and Moudaraba, (v) the increase in FDI (Foreign Direct Investments), especially those from the Gulf countries enjoying an excess of cash, and (vi)easy access to finance for Moroccan companies especially small and medium size companies. Now talking about the Sukuk, the First Chamber has voted on in January the amendment to the law 33-06 relating to securitization which paves the way for the issuance of sukuk in Morocco. Could you give us an outline of this amendment? The Minister: In the context of a cash pronounced deficit, it becomes necessary to access new sources of capital and financing instruments have more accessible and diverse. In this context, the amendment of the law 33-06 relating to securitization has made three main changes. First, securitization is now open to a wide range of issuers. In fact, the new law extends the scope of the initiators institutions to the State, to local governments, and commercial companies that have financing needs, or any other organization or entity other than individuals. Second, the expansion of the securitizable universe, covering new asset classes (real and personal property, the debt ...). Finally, Sukuk introduction can be issued on both domestic and international markets. What type of target investors, Morocco has with Sukuk? And do you have any idea about the amount of investments that Morocco will be able rise through this financial instrument? The Minister: First we target our local institutional investors, 75%, according to a CDVM survey, have a positive opinion on this instrument. We also target foreign investors, especially from the Gulf countries that have excess cash and are looking for alternative investments in financial markets affected by the crisis, and are simultaneously concerned with the rules of the Shariah . To answer the second part of your question, we must analyze the supply and demand. On the one hand, we must see the potential issuers of which 90%, according to the same CDVM (Moroccan Financial Authority) survey, would consider issuing sukuk, such issuers include several sectors (renewable energy, tourism, industry ... etc..) And operators engaged in ambitious development projects. And secondly, we must see the potential investors in such instruments, “ Several banks have expressed interest to install in Morocco “ Focus On
  12. 12. I F S O Mag Summer 2013 www.ifso-asso.com 12 Islamic Finance In Morocco with an estimated more than $ 100 billion market in 2012. If we add to this analysis, Morocco competitive advantages compared to other countries in the region, especially in terms of political and social stability, we can deduce that the amount of investment that Morocco can raise through this financial instrument can be very important and will progress gradually. We know from the French experience that the taxation plays a crucial role in the economic feasibility of Islamic products. What are the tax measures that accompany the Banking Law and the Law on the Sukuk. The Minister: Indeed, the fiscal framework plays a very important role on Sukuk economic and financial efficiency. For this reason and to reduce the potential tax additional costs in terms of corporate taxes, capital gain, registration duties or rights to land conservation, several fiscal support measures have been taken, including: corporate tax exemption of securitization investment trusts (SIT), registration fees on land titles, including acts of mortgages and registration fees. In addition, the proceeds from the sale of capital resulting from operations of disposal of fixed assets made between the originator and SIT under a securitization transaction will not be taxable. We discussed the past and present. To conclude this interview, we talk about the future and prospects of Islamic finance in Morocco. What do you see, sir”minister”, the next steps in the development of this industry in Morocco, and how your government plan to accompany it? The Minister: I remain very optimistic about the Islamic finance experience in Morocco for several reasons; first, it will help to "democratize" the banking and all citizens will find the right products to their principles. Second, it can restore financial and economic stability that was missing, and so give a new breath to the economy because the debt economy showed that she had the conceptual boundaries, and that it could become an obstacle to growth. Finally, it will create a new societal mind: indeed every citizen will feel involved in the participation in the collective effort. Some Asian countries have done it in their own way, and we think we can do it in a smarter and more resilient way. “ The amount of investment that Morocco can raise through Sukuks can be very important “ Focus On
  13. 13. I F S O Mag Summer 2013 www.ifso-asso.com 13 In Partnership with Alkhawarizmi Group Sukuks Issuances : 1st half 2013 In the first half of 2013, there were about 400 Sukuks issuances, for a total amount exceeding $50 billion. This amount is less than the 1st half of 2012 total issuance. We expect that this slowing trend will continue throughout the second half of 2013, due to capitals withdrawal from emerging markets, recently observed. The first element that can be highlighted is that during the first half of the current year, corporate issuances exceeded sovereign ones: 54% vs. 46%. Another interesting element to mention, is that more than the third of issuances have long maturity: over 10 years. These are Sukuks financing infrastructure projects related to water and energy sectors. We also notice a more and more increasing part of Saudi issuances. They represent 18% of total issues. Malaysia remains the most active country on this market with 57% of total issues. UAE come third with 12 % of market share. Market Review BHD 1% BND 1% IDR 5% MYR 57% PKR 1% QAR 1% SAR 7% SGD 0% TRY 2% USD 25% H1 2013 Sukuks Currencies Breakdown BAHRAIN 2% BRUNEI 1% INDONESIA 5% MALAYSIA 57% PAKISTAN 1% QATAR 1% SAUDI ARABIA 18% SINGAPORE 1% TURKEY 2% UAE 12% H1 2013 Geographical Breakdown Corporate 54% Souverain 46% H1 2013 Sukuks Breakdown by type of issuer <1; 35% 1-3; 5% 3-5; 10% 5-7; 12% 7-10; 4% 10+; 34% H1 2013 Breakdown by Maturity <1 1-3 3-5 5-7 7-10 10+ Performance of Islamic Financial Indices for the 1st half of 2013 Index Performance 2013 Performance 1 yr Dow Jones Islamic Market World Total Return $ 4.34% 16.38% MSCI USA Islamic Net Return $ 12.64% 21.35% MSCI Emerging Markets Islamic Net Return $ (14.24%) (0.33%) Dow Jones Sukuk ex-Reinvest Total Return $ (1.96%) 1.79%
  14. 14. I F S O Mag Summer 2013 www.ifso-asso.com 14 Rendez-vous of Islamic Finance around the World IFSB – INCEIF Executive Forum on Corporate Governance of Islamic Banks July 2013 Kuala Lumpur ISLAMIC FINANCE AND LAW Managing pluralism in market economy July 2013 Rome The First Annual Conference of Islamic Economics & Islamic Finance August 2013 Toronto International Conference on Islamic Banking, Finance and Investment August 2013 Kuala Lumpur Morocco Sukuk 2013 September 2013 Rabat, Maroc The Ninth International Conference on Islamic Economics and Finance (ICIEF) September 2013 Istanbul 1ère Edition du Colloque International de La Finance Entrepreneuriale Sous le Thème : « Finance Islamique : Pratiques, Défis et Perspectives » October 2013 Agadir, Maroc IFSB – INCEIF Executive Forum on Takaful October 2013 Kuala Lumpur, Malaysia Middle East Takaful Forum October 2013 Bahraïn 9th World Islamic Economic Forum October 2013 Londres 5th World Islamic Retail Banking Conference November 2013 Dubai Sommet Africain de la Finance Islamique November 2013 Djibouti The World Islamic Banking Conference December 2013 Bahraïn Our Sponsors