Zawya
From Business Islamica
Most Moroccan banking players indicate an interest in the opportunity but don’t have a strong command of relatively complex market.
Culturally… they associate Islamic banks to nonprofit institutions, which is obviously not the case
70% Murabaha products in the Middle East
What is your point of view on the development potential of the Islamic finance in Morocco?
Morocco can become the Hong-Kong of Africa! Islamic Finance should be developed in close conjunction with the Islamic economy, as Islamic finance is an integral part of the real economy, without which it would not have reached a plateau in its development. Today, the Islamic economy-also called the Halal-industry- which is a one of the high-growth segments of the global economy finds its niche in a multitude of sectors.
These sectors such as tourism, cosmetics, insurance, logistics, transport and food, will enable the African retail market to grow.
The African continent is booming and experiencing a high growth of its Islamic appeal.
The Islamic financial system may prove to be an interesting financial backbone. When I talk to a Moroccan banker, I see in him an African banker. The Islamic finance in Morocco must be conceived beyond the Morocco hinterland and throughout Africa.
Morocco can play the role of Hong-Kong with regards to China. Casablanca is considered to be Europe and America’s gateway to Africa, a business culture, professionalism of management, a banking fabric is already established throughout Africa with the Moroccan banks network. Political stability, which induces a legal certainty and investment security, foresight of the leaders, ideal geostrategy, good universities, an economy that is not based solely on finance but trade and industry, etc… In short, a whole set of assets which, if they are completed and gathered, can be a historic opportunity for Morocco. Islamic finance is a catalyst of this opportunity.
The reason behind adopting Islamic finance is the modernization of the financial system and the contribution to financial stability. Unlike conventional finance, Islamic finance is very modern due to the fact that it only goes back to forty years, it conveys a strong and necessary ethical content, and it aggregates huge levels of liquidity based in the Gulf and Asia.
The introduction of participatory banks will contribute to the diversification of products and banking relationships and compel the conventional banks to reflect on improving their traditional products.
Many banks are rigid and incapable of renewing their products. The Moroccan bank like those of any country will be facing major challenges, namely dematerialization, and immobilization. Nowadays, Facebook, Apple or Starbucks work on their own bank projects!
In this regard, I welcome the foresight of the Moroccan authorities who have taken on board the participatory banks throughout the local financial system.
Morocco is somewhat lagging behind in terms of adopting Islamic finance and introducing participatory banks. There are, in fact, over 500 Islamic banks in 60 countries. However, this delay will allow it to learn from the foreign experience and acquire know-how which will enable it to determine what works and what does not.
How would you take full advantage of the previous experiences in Morocco and elsewhere for a successful implementation of a participatory financial market in Morocco? What lessons should be learned, and which pitfalls avoided?
With regards to the Moroccan domestic market, the legislative progress and the parliamentary and governmental achievements are to be welcomed. Nevertheless, the regulatory framework constitutes a condition for the market access, but it is still far from sufficient to establish a successful Islamic finance. Most Moroccan banking players indicate an interest in the opportunity but don’t have a strong command of relatively complex market.
Having closely studied the situation in Morocco, the major pitfalls I have noted are the lack of knowledge of the client’s real expectations, the deficient marketing, the poor product segmentation, the banking services fantasy, the lack of agents training and tax treatment of Islamic banking products.
An initial attempt, which has met little success regarding a rough framework, induced the consumers to be vigilant. The Moroccan banks cannot afford to make mistakes, the clients and the market will study closely the products offered. Morocco offers tremendous opportunities, however it is fundamental to implement a suitable marketing plan. The distribution channel, the price and product offerings of different banks will be similar. Therefore, the playing field where things should be happening in this case is marketing and communication.
There is a need today for a complete change of the self-proclaimed trend of the sector and adapting what is on offer to the client’s needs. There is a lack of clarity on these products due to the lack of sufficient segmentation, Islamic finance is presented as a sector difficult to access by the market. There is a renewed interest in these Islamic products if they are well ‘categorized’ (private banking, Bank insurance (bananssurance), mortgage loans, car leasing). In Morocco, as elsewhere the “consumer is mufti”.
There are controversial figures showing that 57% of the population has bank arrangements. It is wrong to think that the introduction of Islamic finance will have a significant impact on the remaining 43%. This fact is not only related to Riba. There are several reasons. The impact on the unbanked will be low, because of Riba, a range of 6 to 10% of the Moroccan population and SMEs do not call on the services of conventional banks.
It is important to understand the purchasing behavior of the Moroccan consumer. Are they interested in buying a product based on religion or finance? This is the mistake made by many conventional banks around the world. They think that by creating an Islamic window, they will affect all Muslim consumers or the ultra-religious segment, which happens to be a minority, and then they believe that the market has reached saturation point. Which is not the case, because “less religious” consumers would be willing to buy these products, if they were offered according to an alternative proposal of values such as ethics, safety, absence of risk, service quality…
Today, Islamic banking products in Morocco are targeted in the first place at the elite that is to say to affluent consumers. It is a paradox; the population cannot afford an expensive Islamic finance.
Human resources are a challenge. Being a Muslim banker doesn’t mean having sufficient knowledge in Islamic finance. The only major concept of Islam related to money is indeed the Zakat that equates money treated by religion as a gift or benevolence. Culturally, this has an impact on the population in the markets where Islamic finance is emerging. They associate Islamic banks to nonprofit institutions, which is obviously not the case. Banks are companies with objectives and profitability obligations!
I take note of the fact that in the Moroccan banks, the directorate and senior management are aware of the Islamic products, however, few employees in agencies master the knowledge of products and they are the ones who are in contact with customers. There are two particularly sensitive products for the consumer, where he cannot run the risk or accept a lack of clarity: food and banking commodities. Food and money.
The first priority, therefore, is to train the human resources department. It is a big challenge. Even in a more developed market like Dubai, human resources pose a real problem.
Finally, as the cost of initial production of Islamic products will be at first higher than conventional products (investment, consulting, training, control, communication), the purchase price will be higher and inhibit some buyers. The tax treatment of these products could be a hindrance or an incentive to counterbalance an emerging industry.
A good price policy accompanied by a statement of the added value of the product to justify the possible difference in price is useful.
In your opinion, what can this bring to the Moroccan economy in terms of banking, investment, and savings -in the current context?
The economic and social situation has thrust Islamic finance to the forefront of the international scene. The bases of an ethical or participatory finance were revived since the crisis of 2008. In fact, conventional finance is in crisis for over forty years. Islamic finance brings to Moroccan consumers more choice. Providing more choice is always good for the consumer. Both banks will be forced to improve the services and products offered. The entry of foreign banks into the Moroccan market will accentuate this phenomenon and drive the quality of the banking system up.
Participatory and Islamic banks must have three service lines: investment, trade and social impact. Their commitment to these levels will determine the degree of their contribution to the Moroccan economy.
It is important to note that in the Middle East, a product such as Murabaha can reach 70%, but these countries have a trade-based economy whereas the Moroccan economy is based on agriculture and crafts. The emerging industry of Morocco and the important trade initiatives will be supported by Islamic finance.
Islamic banks must meet the needs of SME investments and invest in the future
Islamic finance will help attract inward investment from other Muslim countries. Products such as sovereign Sukuk will finance public-private partnerships including Morocco needs to continue on the path of development.
BIO: Laurent Marliere is an expert in management of complex organizations and international networks, he is a recognized specialist in the field of strategic marketing, Islamic finance, Islamic markets and economy. Laurent is also the CEO of ISFIN, and an advisory board member and country correspondent of Islamic Finance News. Laurent lectures on strategic marketing and marketing for the Islamic markets. He speaks English, French, German, Italian and Dutch. He can be contacted at LM@isfin.net.
