Islamic finance widens footprint in Maghreb nations.
By Arno Maierbrugger/Gulf Times Correspondent/Bangkok
The predominantly Muslim countries in the Maghreb region of North Africa have set sight on introducing proper legal frameworks for Islamic finance and supporting and expanding the Islamic finance industry in a quest for more banking and funding options alternative to conventional finance. Among them are two nations that will launch Islamic finance regulations for the first time: Algeria and Morocco.
In Algeria, the state-run Banks and Financial Institutions Association plans to introduce a range of Islamic finance products under a new framework as a part of the country's future strategy to reform and modernise the underdeveloped national banking sector, according to the association's director Boualem Djebbar. The move comes as the relatively oil-rich country struggles with dwindling hydrocarbon income from low oil prices and is looking for new sources for long-term financing of infrastructure and other public projects and to revive the country's industry as a whole.
So far, Islamic finance was not unheard of in Algeria, but suffered from a lack of Shariah-compliant banking and investment products and an archaic banking system well below international standards. The entire country of around 40mn people is just served by two full-fledged Islamic banks -- Al Baraka Bank, a subsidiary of Bahrain's Al Baraka Banking Group, and Al Salam Bank Algeria, launched by Bahrain's Al Salam bank and Emirati, Kuwaiti and other Gulf investors.
Together with Islamic windows of conventional banks such as Gulf Bank Algeria and Trust Bank, the market share of Islamic financing in the loan market is estimated at around one quarter of all loans. With the new push, it is expected that more than half of Algeria's around 20 commercial banks could offer Islamic finance products in the mid-term, and products could not just comprise Shariah-compliant loans, but also modern investment solutions, company and sovereign sukuk, Islamic financing for small and medium enterprises, and also niche products such as Islamic microfinance, Haj and Umrah financing, as well as takaful.
Another welcome effect of a broader and modernised Islamic finance industry would be the opportunity for foreign investors from Arab states to directly invest in Algeria with less hassle.
Another North African country opening up for Islamic finance is Morocco, which so far has been the laggard in the regional industry. The country's central bank only said on June 30 this year that it would start issuing approvals for at least ten Islamic banks, with the aim of allowing the first of them to begin business in early 2017. Respective legislation and a regulatory framework including a Shariah board at the central bank will be set up to oversee the new industry.
According to Lhassane Benhalima, the Moroccan central bank's Head of Banking Supervision, two Qatari banks are interested in Islamic banking in Morocco, namely Qatar International Islamic Bank which seeks a partnership with Casablanca-based CIH Bank, and Masraf Al Rayan, which has requested to open its own Islamic banking subsidiary in Morocco.
Among other Gulf banks, Bahrain's Al Baraka Banking Group and Dubai's Emirates NDB are also interested in entering Morocco's Islamic finance industry. The central bank said it will first approve products based on murabaha, musharaka, ijara and salam, and later on takaful. The issuance of the first-ever government sukuk is expected later this year.
Apart from Morocco and Algeria, Tunisia is also moving towards a broader Islamic finance industry which was neglected prior to the country's 2011 revolution. Over the past five years, Islamic financial institutions such as Bank Zitouna and Best Bank (the local arm of Bahrain's Al Baraka) have been set up, and Amen Bank is in the process of opening an Islamic window this year.
"Tunisia has the opportunity to utilise Islamic finance for the good of its own economy and also to act as an Islamic hub for the French-speaking portion of Africa," says Rihab Grassa, Islamic finance consultant and researcher at the Tunisian Islamic Finance Association.
Islamic finance is also making inroads in the two remaining Maghreb states, Libya and Mauritania. The latter has seen the establishment of a number of Islamic lenders in the past five years, Banque Al Muamalat Assahiha, Banque Al Wava Mauritanienne Islamique, Maurisbank and Banque Islamique de Mauritanie, which is co-owned by the Islamic Development Bank and Turkey's Bank Asya.
Maurisbank's licence was revoked last year due to liquidity problems, though. Meanwhile, large domestic banks such as National Bank of Mauritania and Banque Mauritanienne pour le Commerce International adopted Islamic finance principles.
Libya, in turn, has plans to transform its entire banking sector to comply fully with Islamic law and to set up an Islamic economy, a process which is, however, hampered by the ongoing civil war. No time frame has been given, but the Central Bank of Libya this year started to cooperate with the World Bank to develop a strategy.
[c] Gulf Times Newspaper 2016 Provided by SyndiGate Media Inc. ( Syndigate.info ).
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|Publication:||Gulf Times (Doha, Qatar)|
|Date:||Jul 12, 2016|
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