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Islamic banking, also known as Shariah-compliant finance, is a banking activity that respects Islamic practices and laws. Abiding by these rules, these banks perform in a quite different way when compared to ordinary or classic banks we are accustomed to. Good news for those who prefer to follow strictly the Islamic principles, as Islamic banks have started operating in Morocco recently. Through a couple of joint-ventures, Umnia, Al Yousr and Assafaa banks were created as an expansion plan initiated by Moroccan classical banks namely, CIH, BCP and Attijariwafabank respectively.
However questions are raised regarding the way these banks work, their operations and offers especially when it comes to loans. Speaking to Abdessalam Blaji, a professor of Islamic economics at the University of Rabat and Head of the Moroccan association of Islamic finance, the three abovementioned banks will help by financing and not granting loans in the way everybody is familiar with. «Islamic banks will not give loans», Blaji told Yabildi as these activities are prohibited by Shariah and considered usury also known as «riba».
How it works
«These financial institutions will only help finance people who want to buy a house, a car or equipments», he explained. According to Blaji this is called Murabahah, when the bank «purchases for you that good you wanted to buy (ex : house, fridge, car) and then sells it back to you», this will not include interests as other banks do. For the moment, the Moroccan Islamic banks will limit themselves to this kind of operation which will allow clients to buy houses.
As for the other offers, these financial institutions will provide, Blaji indicates that Moroccans will have the chance to open accounts in these banks and make deposits. And while many other people wonder whether they can sell their already existing loans they maintain with classical banks to Islamic banks, the expert stated that this is not possible. «This can’t be done because Islamic banking is regulated by a law designed for its particularity and it does not apply to classical banks’ operations».
Its operations
However, Islamic banks provide different kinds of operation such as «Mudarabah», profit and loss sharing, Musharaka, joint venture and Ijar leasing. These are accepted and will be introduced progressively in the Moroccan financial market. According to Blaji «Islamic banks are getting quite popular in Morocco and the proof is media coverage, people are eager to know how these banks work», he argued.
Another question that remains unanswered is how these banks earn money while they do not charge clients for interest. Well the answer lies in «equity participation systems», which according to Investopedia means «that if a bank loans money to a business, the business pays back the loan without interest, but it gives the bank a share in its profits. If the business defaults on the loan or does not earn any profits, the bank does not receive any profit either».
Now that Islamic banks are finally allowed to take part of the Moroccan financing sector, clients will have the chance to be introduced to shariaa-based banking operations.
