- 1. Morocco IslamicFinance 2014:UnlockingtheKingdomsPotentialA
JOINT INITIATIVE OF:A Member ofExclusiveANALYSIS | TheRole of IDB
Groupin Poverty Allevia-tionand ReducingUnemployment inMorocco
P49ANALYSIS | MoroccosYouth: Misfortune orBad Policies P54Exclusive
Interview:Mohammed Boulif,Al Maali ManagingPartner P18Exclusive
Interview:Houda Chafil,Managing Director,Maghreb
SecuritizationP137Exclusive Interview:Karim Hajji,CEO,
CasablancaStock ExchangeP162STRATEGIC PARTNER:ALMAALI
2. IslamicYour gateway to Islamic markets and investmentsA
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2013 Thomson Reuters. 9568510 09/13 and the Kinesis logo are
trademarks of Thomson Reuters. 3. Morocco Islamic FinanceCountry
Report 2014 presentsthe necessary confluence ofeconomic, financial
and politicalfundamentals that are comingtogether in a kingdom
ready toembrace Islamic finance.In Arabic, Morocco is called Al
Maghreb, the western-mostland in the northwestern region of the
maghreb(region denoted in lower case). Yet this dominantArab
complexion of Morocco belies the countrys andindeed the entire
maghreb regions richly taperedhistory and heritage long before
lines in the sand weredrawn to separate the modern nation states of
Algeria,Morocco and Tunisia.Historically, the maghreb as a region
is home to thenative diverse Berbers who pre-date the arrival of
theArabs in the 7th century. Between the 7th and the16th centuries
the region was ruled by different suc-cessiveBerber and Arab
dynasties. During this periodthe maghreb reached a high during the
10th to the13th centuries under the Arab Fatimid caliphate andthen
under the Islamic Berber dynasties Almoravidsand Almohads. The
Almoravids founded Marrakesh in1062, and extended their empire
beyond present-dayNorth Africa to parts of modern-day Spain,
Portugal,France, Gibraltar and Mauritania. In the mid-12thcentury
the Almohads overtook the Almoravids, andruled until their decline
in the mid-13th century. Lesserand smaller Berber rule reigned
until the middle ofthe 16th century when Arab dynasties returned
firstwith the Saadis and then with the Alaouites in the17th
century. The maghreb fell under the influence ofThis report gives
youthe economic, financialand political funda-mentalsyou need to
navigateinvestment decisions for Mor-roco.More exclusively, this
re-portalso presents an overviewof the potential for the growthand
development of Islamicfinance based on four studies:a national
survey focused onretail Islamic finance, anotherfocused on SMEs,
interviewswith key industry stakeholders,and an assessment of
Islamicfinance investment scenarios.European powers in the early
19th century, but theAlaouites have persisted, and their position
preservedthrough the five decades of European rule from theearly to
the mid-20th century, even if they did not havesignificant
power.Today, the maghreb as an entity is embodied in theArab
Maghreb Union, which is a trade agreementsigned in 1989 that
envisions an economic and futurepolitical unity for Algeria, Libya,
Mauritania, Moroccoand Tunisia. The state of the Union, however,
isinactive, fraught as it is with political disputes. 4.
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SOLUTIONS POWERING DECISION MAKINGThomson Reuters is an integrated
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industry through providing solutions that enhancetransparency,
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waslaunched in 1975.Our knowledge solutions help you gain clarity
and transparency in therapidly emerging Islamic finance industry by
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productsprovide access to a full spectrum of all relevantIslamic
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COMMUNITYIslamic Finance Gateway (IFG) Community is theone
dedicated knowledge Gateway for profes-sionalsfrom across different
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7ExclusiveInterviews2014 ISLAMIC FINANCE COUNTRY REPORT |
MoroccoCONTENTSForeword 9ACKNOWLEDGEMENTS 12STUDY PURPOSE, SCOPE
& APPROACH 13EXCLUSIVE TO THIS REPORT 15MOROCCO AT A GLANCE
27MACRO -ECONOMIC ENVIRONMENT 33FINANCIAL MARKET LANDSCAPE &
TRENDS 61ISLAMIC FINANCE DEMAND & POTENTIAL 93ISLAMIC FINANCE
DEVELOPMENTAND RECENT ACTIVITIES 125ISLAMIC FINANCE INFRASTRUCTURE
155ISLAMIC FINANCE SECTOR INVESTMENTCONSIDERATIONS & KEY
CHALENGES 165STRATEGIC ROADMAP FORISLAMIC FINANCE INDUSTRY
DEVELOPMENT 173APPENDIX 177contributorS 183ANALYSIS | The Role of
IDB Group inPoverty Alleviation and ReducingUnemployment in
Moroccoby Dr. Ismaeel Ibrahim Naiya (ERPD) &Dr. Rami Abdelkafi
(CTY), IRTIANALYSIS | Moroccos Youth: Misfortune or Bad Policiesby
Lahcen ACHY, Professor of Economics(INSEA,Morocco) and Senior
Associate (CarnegieMiddle East Center)Exclusive Interview
withMohammed BoulifAl Maali Managing PartnerExclusive Interview
withHouda ChafilManaging Director at Maghreb Securitization,Maghreb
Titrisation, Groupe CDGExclusive Interview with Karim HajjiGeneral
Director and CEO, Casablanca StockExchangeLhassane BenhalimaDeputy
Head, Banking Supervision,Bank Al-MaghribLaidi El WardiGeneral
Director, Retail Banking, Banque PopulaireMinistry of
FinanceMohamed MaaroufDirector, Participatory Development
Finance,Banque marocaine du commerce extrieur(BMCE)Abderrahmane
LahlouIndependent expert who has been involved withthe development
of Islamic finance in Moroccofrom the late 1980sMohammed
AlKawrariAwqaf President, Ministry of Endowments andIslamic
affairs495418137162698184104121142 7. Blue window on pastel wall.
8. FOREWORDSThe Morocco Islamic Finance Country Report is part of a
series designed toprovide key insights and analysis on the
development of emerging or frontierIslamic finance markets. The
Reports objectives are aligned with those ofThomson Reuters Islamic
Finance Gateway to provide accurate information andinsightful
analysis and to promote transparency and access to information on
thebroader Islamic Economy.The Islamic finance industry is
developing unevenly across a number of countries,but one point is
clear, perhaps more than at any other time in the industrys
develop-ment,that appropriate regulatory measures and frameworks
are needed to builda dynamic infrastructure to support both the
conventional and Islamic financialsystems within a countrys
borders, and contribute to stronger supply streams toattract demand
in under-penetrated markets.Driven by the repercussions of the 2008
financial crisis and the shockwaves of theArab Spring, countries in
North Africa have started to strengthen the core pillarsthat
support the growth of a holistic Islamic finance industry. Tunisia,
Egypt andLibya all have plans for the development of their
respective Islamic finance indus-tries,with Libya aiming to
completely restructure its financial sector in line withIslamic
principles starting from 2015.Morocco had introduced Islamic or
alternative financial products as they areknown locally,on a small
scale in 2007. The country is now putting in placenecessary
legislative frameworks that will allow for the establishment of
participa-torybanks, kickstart sukuk issuance, build an Islamic
capital market, and start atakaful sector. Investors are scrambling
to participate in what appears to be theimminent growth of a
potentially vast, relatively greenfield sector in a countryhungry
for funding and financing, particularly for infrastructure
development as wellas the overall inclusive prosperity of the
nation.Beyond economic and financial fundamentals, this Report
provides a spectrum ofkey insights and perspectives of government
and private sector stakeholders withrespect to the unique
opportunities and challenges faced by Moroccos new Islamicfinance
sector. These are combined with retail and SME surveys to present
Islamicfinance investment opportunities and scenarios for Moroccos
real economy.We hope that this Report will help you navigate your
way to meaningful and suc-cessfulinvestments in the Kingdom of
Morocco.Dr. Sayd FarookGlobal Head Islamic Capital Markets, Thomson
Reuters92014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 9. The
Islamic Finance CountryReports continue to focus oncountries where
Islamic Financehas a great potential to develop. The thirdedition
of this report is dedicated to theKingdom of Morocco, which across
historyhas been one of the most important gatesof civilizational
interaction between theOccident and the Orient.Endowed with a
strategic location inNorthwest Africa at the confluence of
theAtlantic Ocean and the Mediterranean,Morocco is one of the best
performingcountries in the MENA region in termsof economic growth
with an average of4.7% since 2000. The country offers astable and
business-friendly environ-mentand is engaged in an
ambitiousmultidimensional economic programthat focuses on the
enhancement of thecompetitiveness of its economy and therealization
of an inclusive and sustain-ablesocio-economic development.It is
therefore not surprising that Moroccolaunched the Casablanca
Finance City(CFC) to be a regional financial hub; itis endowed with
an attractive environ-mentcapable of attracting
internationalinvestors. The Islamic Financial ServicesIndustry
(IFSI), with total assets estimatedat USD 1.6 trillion in 2012 and
expected toreach USD 6.5 trillion in 2020, naturallyconstitutes one
of the engines which canfavour the acceleration of the CFCs
de-velopment,on condition that the industryis well anchored in the
country. And thepremises of the emergence of an IFSI inMorocco are
not lacking. The kingdomenjoys: i) strong government support forthe
development of Islamic finance assignaled by recent advances in the
legalframework of the Islamic financial system,ii) high interest
from the population foralternative financial products offered bythe
IFSI, iii) interest from the countrysconventional banks in opening
specialisedwindows for alternative products.It is not surprising
that the IslamicResearch and Training Institute (IRTI)have accorded
a high priority to theproduction of the Islamic FinanceCountry
Reports (IFCR). Indeed, it isin line with the institutes strategy
tocontribute to the development of theIslamic finance services
industry in OICmember countries. With our missionTo inspire and
deliver cutting edgeresearch, capacity building, advisoryand
information services in the area ofIslamic economics and finance
IRTIis ready to extend our support to theMoroccan public and
private institutionsin their efforts to improve their capaci-tiesin
Islamic Economics and Finance,to offer high level advisory services
toconventional banks who wish to openparticipatory banking windows
andrelated services, and to advise privatefirms looking to raise
funds through theissuance of sukuk.It gives me great pleasure to
invite youto discover the Morocco Islamic FinanceCountry Report
2014, which has beenproduced with professional rigour, andwhich
benefits from diverse perspectivesand opinions from the primary
stakehold-ersactive in Islamic finance in Morocco.Enjoy the report
and do not hesitate toshare your opinion!Professor Dr. Mohamad Azmi
OmarDirector General, IRTI10Forewords 10. The Kingdom of Morocco
firstintroduced Islamic financialproducts and services, or
alterna-tivefinancial solutions as they are calledin the country,
through conventionalfinancial institutions at the national levelin
2007. In 2013, the country approvedthe amendment to the
securitization billto allow for the issuance of sukuk andbenefit
from the potential of the Islamiccapital market.Enhancing the
related ecosystem andenvironment has been a necessarycorollary to
recent initiatives and theKingdom has been gradually workingto
develop an appropriate legal andregulatory framework for
participatorybanks, the term used in the Kingdom forIslamic banks.
The Moroccan parliamentis now expected to approve the bill
onparticipatory banking anytime in 2014.To follow, the regulatory
framework fortakaful is expected to be issued towardsthe end of
2014. These and other relateddevelopments are clearly signaling
thedawn of a new horizon for Islamic financein Morocco.The Morocco
Islamic Finance CountryReport 2014 delivers the recent,
mostrelevant, high impact insights on Islamicfinance investment and
expansion op-portunitiesin Morocco, and providesa comprehensive
overview of thelegal and regulatory requirements forIslamic
financial services. It providesan accurate pulse of retail
consumers,corporate customers and the govern-mentregulatory
roadmap, all of whichwe believe will be very meaningful forall
interested stakeholders.We are confident this Report will
bringuseful insights to the stakeholders thathave interest in this
promising market,from inside or outside the Kingdom. Itis a timely
contribution which highlightsthe opportunities as well as the
potentialchallenges interested parties may facewhile tapping into
this market.The Report is one of a series of Islamicfinance country
reports and marketanalyses produced collaboratively byCIBAFI, IRTI
and Thomson Reuters.The series evaluates the appetite andpotential
for Islamic financial servicesas well as the economic and
financialfundamentals for the new frontiers andemerging markets for
Islamic finance.They provide practical insights for local,regional,
and international investors andall stakeholders, especially those
inter-estedto offer Islamic financial services,as well as those
interested in benefitingfrom the same services.As the global
umbrella of Islamic banksand financial institutions, CIBAFI
iscommitted to addressing the needsand expectations of our members
andstakeholders, in effectively contributingto the development and
dissemination ofIslamic finance information, awarenessand analysis.
In partnership with IRTIand Thomson Reuters we will continueto
deliver pioneering reports such as thisin order to galvanise the
development ofIslamic finance globally.Mr. Abdelilah BelatikCIBAFI
Secretary General112014 ISLAMIC FINANCE COUNTRY REPORT | Morocco
11. ACKNOWLEDGEMENTSThe Morocco 2014 Islamic Finance Country Report
ispart of the series of reports produced in partnershipbetween
Thomson Reuters, the General Council forIslamic Banks and Financial
Institutions (CIBAFI) and theIslamic Research and Training
Institute (IRTI).The goals and motivations of this report follow in
the same vein as the previous country reports - toserve the needs
of the Islamic finance industry and to provide financial
institutions, customers andother stakeholders with high quality
intelligence and insights into the Islamic finance opportunityin
Morocco in order to help all parties make informed decisions. This
report reflects the efforts of abroad and diverse group of
experts.The authors are grateful to Abderrahman Elglaoui, Director
of the Islamic Development Bank for theWest Africa Region for
facilitating our interviews and meetings in Morocco.We are also
grateful to Dr. Abusif Ghnyah and Najat Abqari of the Islamic
Development Bank, fortheir invaluable support during our field trip
to Morocco.We would also like to thank Islamic Finance Advisory
& Assurance Services IFAAS, a leading interna-tionalsharia
advisory firm, for sharing the information and data of their
Morocco Consumer SurveyDr. Sayd FarookGlobal Head Islamic Capital
MarketsThomson ReutersMr. Abdelilah BelatikSecretary
GeneralCIBAFIDr. Mohamad Azmi OmarDirector GeneralIRTIexecuted in
2012.Last but not least, we would like to express our appreciation
to Thomson Reuters management, par-ticularlyNadim Najjar (Interim
Managing Director, GGO Middle East, Africa and Russia) for his
trustin and commitment to our work.Sincerely12Acknowledgements 12.
STUDY PURPOSE, SCOPE & APPROACHThe MOROCCO 2014 ISLAMIC FINANCE
COUNTRYREPORT is part of a series of Islamic finance countryreports
and market analyses to evaluate the situationand appetite for
Islamic finance in the Organisation forIslamic Cooperation (OIC)
countries that are developingor engaged in Islamic finance. The
reports are distrib-utedfree of charge for the benefit of the
industry andother interested parties. These Islamic finance
countryreports are different from the regular country
reportsavailable in the market, since they focus on the
invest-mentand development opportunities of Islamic finance.The
MOROCCO 2014 ISLAMIC FINANCE COUNTRY REPORT provides practical
insights forlocal, regional, and international investors to offer
Islamic financial services. These insightsbetter inform the
investor of the Islamic finance potential for emerging and untapped
marketsvis--vis the retail and corporate markets. The reports also
provide an assessment of the devel-opingregulatory environment.The
objectives of the Morocco Islamic Finance Country Report are:1. To
provide the most relevant, high-impact insights on emerging Islamic
finance investment andexpansion opportunities in Morocco2. To
provide a comprehensive overview of relevant legal and regulatory
requirements or trends tothe offering of Islamic financial services
in Morocco3. To provide an accurate pulse of retail consumers,
corporate customers and government regula-toryroad map4. To be a
pioneering report in galvanizing the development of the Islamic
finance space inthe country132014 ISLAMIC FINANCE COUNTRY REPORT |
Morocco 13. EXCLUSIVESurvey with focus on retail Islamic finance
16SME survey on use of financial services 17Key insights from
industry stakeholders 20Islamic finance investment scenarios 24and
industry developmentArabesque interior, Meknes, Morocco 14.
15EXCLUSIVE TO THIS REPORTMorocco has not taken to modern Islamic
finance quiteas readily as its Arab cousins in the Gulf despite
thekingdoms prominence and deep roots in Islamic civilisa-tion2014
ISLAMIC FINANCE COUNTRY REPORT | Moroccosince the 7th century.The
introduction of Islamic finance in Moroccohas been start-stop at
best; the first attempt atintroducing Islamic financial products,
or alter-nativefinancial products as they are called inthe country,
was in 1991 when Wafa Bank tookthe lead but the banks offering of
alternativefinancial products was short-lived due to legalissues.
In 2007 there was a more concertednational-level introduction of
sharia-compliantfinancial products within conventional
financialinstitutions but this has not made significantimpact.
Following these first experiments andincreasing investment
opportunities particu-larlyfrom Gulf countries and the plans for
theCasablanca Finance City to propel Morocco as aregional financial
hub, the kingdom is now readyto more fully embrace Islamic
finance.Morocco is viewed as an exciting emergingIslamic finance
market with vast opportunitiesfor investment, and the countrys
current govern-mentis keen to develop the industry both for
itscitizens as well as to attract foreign investment.Islamic
finance in Morocco is set to take rootand bloom with the
establishment of Islamicbanks, or participatory banks as they are
calledlocally, and other Islamic financial institutionsthat will
come onto the financial landscape onceall relevant legislation is
put in place. As of thiswriting a bill regulating participatory
banks andsukuk has been adopted by government, pavingthe way for a
final vote by parliament. Approvalof the law is expected before the
end of 2014.The draft laws for takaful and mutual funds areset to
follow. 15. 1. SURVEY WITH FOCUS ON RETAILISLAMIC FINANCEThis
Report presents a national retail financial servicesusage and
perception survey conducted by the IslamicFinance Advisory and
Assurance Services (IFAAS) inJune 2012. The survey assessed the
demand for alter-nativefinancial products in the Moroccan retail
marketfrom a weighted sample of 813 individuals aged 18to 55 from a
variety of socio-economic backgroundsfrom cities and surrounding
rural municipalities ofCasablanca, Rabat, Marrakech, Agadir, Fes,
Tangier andOujda. A significant 79% of respondents said they
wouldbe very interested in participatory banking servicesonce
available.Based on the survey findings and the experience of other
markets that have launched Islamicbanking, we estimate that
Moroccan participatory banking assets could potentially reach
between3% and 5% of total banking assets by 2018. This could mean
participatory banking assets ofbetween US$ 5.2 billion and US$ 8.6
billion, generating a profit pool of between US$ 67 millionand US$
112 million for Islamic finance providers.Our projections are based
on two primary assumptions: full government support, and
increas-ingknowledge and awareness of Islamic finance products and
services to highlight the Islamicfinance proposition.16EXCLUSIVE TO
THIS REPORT 16. 2. SME SURVEY ON USE OFFINANCIAL SERVICESSMEs are a
major part of the Moroccan economy. Theyaccount for more than 95%
of the total number ofoperating enterprises, contributing over 30%
to GDPand 48% to total employment1. SMEs struggle withaccess to
capital, and Islamic financial institutions couldfill this
gap.Almost half of the SMEs we surveyed did not use any type of
financial services in the last five yearsand those who did use
financial services mainly depended on financial institutions for
corporatefinancing needs. 98.2% of SMEs surveyed do not bank
Islamically and when asked if there wasinterest to consider
participatory banking, 71% answered maybe with 22% saying yes and a
low7% saying no. How would Islamic financial institutions win over
SMEs? The survey found that ahigh percentage 85% of SMEs consider
low rates and fees the most important factor whenusing financial
services and so it was unsurprising that a high 64% said the most
important factorfor them to consider participatory banking is
competitive rates.1 EBRD strategy doc/ European Bank for
Reconstruction and Development 2012172014 ISLAMIC FINANCE COUNTRY
REPORT | Morocco 17. Exclusive Interview with MohammedBoulif, Al
Maali Managing PartnerWhat is your opinion of the evolution ofthe
Moroccan Islamic finance industrysince 2007?Morocco is a recent
entrant to the Islamicfinance industry and has chosen a
specificpath that is moderate and progressive. Thisprudent approach
started with the launchof Alternative Finance in 2007 and
wasconfirmed by the Participative Banking Actchapter (which is
being considered by par-liamentas of this interview) that is
incorporated into the generalBanking Act. This is also true for the
bill on takaful. We believe thatthis gradual strategy aims at
maintaining stability of the financialsector of the country.
However, this incremental strategy for the devel-opmentof the
industry should be embedded in a clear 5- or 10-yearstrategic plan
driven by a clear vision. This would give strong signalsto the
market, especially to investors, of Moroccos next steps
forward.What will be the key challenges for Islamic finance in
Morocco?We believe that the most critical challenge is to get all
stakehold-ers regulators, banks, financial institutions, operators,
academia,and others on board. We must stop hesitating as we did
during theAlternative products phase.The second challenge is
obviously the need for a strong regulatory andcomprehensive
framework that will ensure legal security for all stake-holdersand
provide tax neutrality for Islamic financial
instruments.Operational challenges are more about how to meet the
specific re-quirementsof operators in this industry, and challenges
will includeliquidity management, central bank refinancing scheme,
and settingup an appropriate accounting and reporting framework.The
sharia governance system seems to be on the right path; it is setby
the National Council of Sharia Scholars, a move which will
stream-linethe harmonisation process at the national level.Market
and customer awareness needs the engagement of all
stake-holders.Indeed, though the appetite for Islamic financial
products ishigh among the population, most of the consumers are not
knowl-edgeableor correctly informed about Islamic financial
products whichcan harm the penetration process and again repeat the
same misfor-tunesfaced earlier for Alternative products.What is the
most appropriate model for Morocco to adopt tobenefit from the
development of the Islamic finance industry?Morocco should develop
a proper model that will fit its economicand social environment. We
think that an intermediary modelALMAALI18EXCLUSIVE TO THIS REPORT
18. between the one in the Middle East, which ishighly
capitalistic, and the Malaysian model,which is based too much on
debt instruments,would be the most appropriate.The Moroccan model
should be developed withmajor innovations and diversification in
terms ofproducts that must meet the market demand,for example:1. A
financial inclusion program mainly for poorand rural populations is
important. This canbe achieved through the development ofIslamic
microfinance and would also benefitmicro and small businesses.2.
The large agricultural sector needs instru-mentssuch as salam and
mugharasa3. SMEs need strong support through profit-sharingtools
such as mudaraba andmusharaka,4. Home financing could be bolstered
throughistisna and diminishing musharaka5. For industrial and
infrastructure projects, theuse of sukuk instruments will help the
countryattract foreign and new sources of funding.Many surveys have
highlighted the willingnessof Moroccan retail customers to adopt
Islamicfinancial products. Do you think these inten-tionswill lead
to a significant change in thelocal financial industry landscape?A
significant switch to or take-up of Islamicfinancial services has
not happened in themore than 50 countries where Islamic
financialservices exist, especially within prudent, strongand
stable financial systems. However, weshould note that the Moroccan
financial systemis developing dynamically, and it is
characterisedby diversification which will make the marketa
friendly environment for product innovation,including Islamic
finance. We believe that likeany new industry, there will be a wait
and seephase in Morocco, which may take time.Could Morocco be
positioned as the regionalfinancial hub for Islamic finance?It goes
without saying that Morocco has thepotential to become the Islamic
finance hub innorthern and western Africa, in the footsteps ofother
hubs such as Malaysia, UK and Bahrain.First, the country is blessed
with a unique locationat the crossroads between the Middle
East,Europe and Africa and with strong economic andpolitical
relationships with these regions.Furthermore, Morocco has an
enviable politicalstability, a vibrant economy and strong
religiousleadership in the region. Finally, many economicsectors,
especially the financial industry, haveembraced a regional strategy
and have becomekey players in Africa.Consequently, Morocco could
become animportant player channeling Islamic financeinvestments
from GCC countries to the region,which is in line with the
Casablanca FinanceCity project. In order to do so, and as
mentionedearlier, a strong strategy within a long-termvision should
be clearly set and communicatedto all stakeholders. For example, we
cannotimagine a regional leadership without an
in-stitutionalIslamic finance infrastructure thatharmonizes
standards and practices, tax neu-tralityor without qualified human
resources. Butdefinitely Morocco is well positioned to capturethis
opportunity.Mohammed BOULIFMohamed Boulif is Managing Partnerat Al
Maali Consulting Group. He heldseveral senior positions in
interna-tionalcompanies, and was Group asDirector of Finance for
Dar Al MaalAl Islami for 10 years where he was incharge of
planning, coordination andsupervision of financial and
account-ingactivities for two entities in bankingand takaful in
Luxembourg. Mr Boulifhas extensive international experi-encein
documenting and developingIslamic financial products (Legal,Sharia
and Operational aspects),Audit, Governance and AccountingNorms for
Islamic financial institutions.He is frequently invited as a
speakerat international Islamic finance eventsand conferences, and
is also a visitingprofessor and lecturer at executivemasters
courses in Islamic finance inuniversities in Europe and
Africa.192014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 19. 3. KEY
INSIGHTS FROM INDUSTRYSTAKEHOLDERSInterviews with key industry
stakeholders have givenus direct insight into the concerns and
issues facingIslamic finance in Morocco. In this section we note
keypoints from the interviews. While only select excerptsare
presented throughout this report, all interviews haveinformed and
contributed to the research and writingof this report. Interviews
were conducted in September,2013 with:1. Ministry of Finance
Directorate of External Financing and Budget2. Bank Al-Maghrib (the
central bank)3. Ministry of Endowments and Islamic Affairs4.
Attijariwafa Bank5. Dar Assaffa6. Banque Populaire7. Banque
Marocaine du Commerce Extrieur (BMCE) Bank8. National Agency for
the Promotion of Small and Medium Enterprises, and9. An independent
expert20EXCLUSIVE TO THIS REPORT 20. a. Ministry of Finance At the
time of the interview, the draft law onparticipatory banking allows
participatorybanking windows. Conventional insurance companies will
notbe allowed to open takaful windows; takafuloperations must be
separated and operateout of a different branch. The draft law on
takaful does not includeany considerations for inclusion of
socialsecurity (pension) funds. Moroccos currentlegal provisions
for pension funds allowfor investments in the stock market,
statebonds and real estate, and these legal pro-visionsare under a
separate purview. Members of the central sharia board forIslamic
finance will be appointed from theSupreme Council of Scholars, with
the sec-retariatbased at Bank Al-Maghrib.b. Bank Al-MaghribBank
Al-Maghrib is Moroccos central bank. Itwas founded in 1959 and is
based in Rabat. Alternative banking products were intro-ducedin
2007 after a series of trainingworkshops were conducted within
conven-tionalbanks and related financial institu-tions.A limited
range of products was in-troducedcentering around ijara,
musharakaand murabaha. From the first introduction of
alternativeproducts between 2007 and 2011, murabahawas dominant.
However, overall, alternativebanking products did not exceed MAD 1
billion(approximately US$ 120 million). Additionally,there are
still double taxation issues relatedto ijara, which are being
looked into now. The draft banking law will allow the creationof
any alternative financial product thatis consistent with sharia
provisions. It willallow the creation of participatory banks
(i.e.Islamic banks) which will be licensed by thecentral bank and
conventional banks willalso be allowed to offer the same productsto
their customers. The draft law definessome of them murabaha,
mudaraba,musharaka and ijara but other productswill also be
allowed. All products must beapproved by the central sharia board.
Morocco seeks to unify fatawa for Islamicfinance under the Central
Sharia Board(which will follow the Maliki school of
juris-prudence)with the secretariat based at thecentral bank.
According to Bank Al-Maghrib, there will beno restrictions as to
who can apply for par-ticipatorybanking licenses. However,
jointventures between local banks and foreigninvestors might be
encouraged.c. Ministry of Endowments and Islamic AffairsMorocco has
a deep heritage of endowments(awqaf) that spans 12 centuries. In
2012 theMinistry of Awqaf started a restructuringexercise in order
to enhance the management ofawqaf institutions and Islamic
charitable bodies.The ministry currently manages a
substantiallegacy of over 51,000 commercial, housingand
professional real estate in the kingdom.Awqaf properties include
those in cities aswell as agricultural lands. Income from
theseendowments jumped 62% in 10 years fromMAD 164 million in 2002
to MAD 266 million(approximately US$ 31.5 million). Total incomefor
agricultural endowments totaled MAD 70.7million in 2012. The
ministry oversees the con-structionand maintenance of awqaf
propertiesfor rent in order to increase awqaf revenues.The main
challenge is to modernise the systemand administration of awqaf,
especially in termsof leveling off rental prices at market rates
andironing out issues related to customary rights,which are
tradeable but lower the rental valueof awqaf properties. However,
if rental prices are212014 ISLAMIC FINANCE COUNTRY REPORT | Morocco
21. hiked up to market rates then the many poorfamilies who
currently occupy awqaf propertieswould be left homeless. Awqaf will
benefit from financing from partici-patorybanks in the country.
Currently, the mainsources of financing come from the Ministry
ofFinance and the Islamic Development Bank. The ministry has
dabbled in the stock market,and in terms of the development of
Islamicfinance in Morocco, the ministry is lookingtowards
investment funds in real estate. The interests of the awqaf lands
are numer-ous;they are not limited to the religious,social and
educational aspects but alsoextend to the medical and health
sectors. Urban expansion has enveloped many piecesof agricultural
lands, which if left undevel-opedwill be turned into slums. The
ministryworks with the private sector through
invest-mentpartnerships to develop these plotsof land. These
investment opportunities areopen to both local and foreign
partners. The ministry is overseeing large construc-tionprojects
for residential buildings andcommercial complexes. Many of Moroccos
most touristic sites areawqaf properties, but the budgets of the
Min-istryof Culture and the Ministry of Tourismare not sufficient
to maintain the sites. The Ministry of Endowments and
IslamicAffairs has started a new strategy to diver-sifyincome; the
ministry is building culturalcentres that will house the rich
heritage ofthe different regions. These centres househistorical and
literary artefacts, and offerpublic lectures and viewings. The
ministry also works on literacy pro-grammesin mosques. These
programmesmainly attract older citizens and women.The ministry also
oversees programmes forimams and religious leaders.d. Banque
PopulaireBanque Populaire (BP) is a publicly listedcompany that was
established in Moroccoin 1926. It is Moroccos second largest bankin
terms of size and market share. In 2007the bank was one of three
that introduced alimited range of alternative banking
products(centering around murabaha and ijara), withinits
conventional banking network. In BPsopinion, the first (i.e. 2007)
wave of alterna-tivebanking products was not successful inMorocco
due to three reasons: higher cost thanconventional products, public
perception oflack of Islamic authenticity of products, andregulator
constraints on bank promotion andmarketing of alternative financial
products.BP will open an Islamic subsidiary once theIslamic banking
law is passed by parliament. BP considers the regulations on
participa-torybanking to be very general and thesemay not
necessarily help make alternativebanking products as competitive as
conven-tionalproducts. BP is seeking to open its participatory
banksubsidiary with a partner who has technicalexpertise in Islamic
banking. The bank hasa potential candidate partner but remainsopen
to other potential partners. BPs new participatory banking
subsidiarysbrand, name and distribution channels arein place. The
bank will assume a defensivestrategy. BPs participatory banking
subsidiary will firststart with individual financing. The
bankssurveys have revealed that there is no hugeinterest for SME or
corporate financing.Additionally, matters related to
sharia-com-pliantSME and corporate financing are stillunclear.
Hence this sector will grow slower22EXCLUSIVE TO THIS REPORT 22.
than individual financing at the outset. BP will have a definitive
plan for trainingbank employees on participatory bankingand finance
by Spring 2014. It will rely onFrench-speaking experts in Islamic
financeto train its staff. The bank is aiming for around 60
largebranches for its participatory bank in fourto five years.e.
Banque marocaine du commerceextrieur (BMCE) BankBanque Marocaine du
Commerce Exterieur, orBMCE Bank, is listed on the Casablanca
StockExchange. It was established in Morocco in1959. BMCE Bank is
Moroccos third largestbank in terms of size and market share.
Thebank is planning to establish private partici-patorybanking, and
is equally interested insharia-compliant investment banking,
andproviding takaful products for Morocco. BMCEBank has an eye on
being a gateway Islamicinvestment bank for Africa and Europe. BMCE
Bank believes that Moroccos regu-lationson participatory banking
are notsufficiently robust to develop a dynamicIslamic Finance
industry for the countrybut that it is adequate for a nascent
sectorand are confident on the willingnessof Bank Al Maghrib to
develop this lawwhenever it is necessary. The bank has conducted
several feasibil-itystudies which have revealed a lack ofawareness
about Islamic finance in theMoroccan market. BMCE believes that in
Morocco the impor-tantplayers in banking sector will certainlyuse
their expertise and resources to supportMorocco Participative
Finance industry andto make it as successful as the
conventionalfinance for their dedicated niches. BMCE Bank sees a
promising future for thesukuk market in Morocco, especially
withregards to financing infrastructure projects. BMCE believes an
Islamic finance academyin Morocco will help develop the
industryshuman capital. Casablanca can assume an important
posi-tionfor Islamic finance as the mid-pointbetween Africa and
Europe.f. Independent ExpertDr Abdul Rahman founded the
MoroccanAssociation for Islamic Economics in 1987 andwas involved
in the countrys first experimentwith participatory banking when
Wafa Bankattempted to open an Islamic window. Thisexperiment was
suspended due to politicalopposition. He then went on to establish
thecountrys first sharia-compliant joint mutual fund. Among other
matters the participatorybanking draft law considers sharia
gover-nance.Dr Abdul Rahman calls for mindfulnesson the matter,
saying that sharia governancemust also be considered separate from
theCentral Sharia Board. The draft participatory banking law
cur-rentlydoes not cover Islamic microfinancedespite feedback and
demands from thebanking sector. A good goal to achieve by 2020 is
toincrease the market share of participatorybanks to 5% of the
total banking sector. To start with, a joint venture bank that
willinclude both local and foreign banks ispreferred. With this,
existing banks shouldnot be worried about customer migration asthey
will all be part of the new bank. Awareness of Islamic finance
comes mainlyfrom religious institutions.232014 ISLAMIC FINANCE
COUNTRY REPORT | Morocco 23. 4. BIRDS EYE VIEW: Islamicfinance
investmentscenarios and industrydevelopmentMorocco presents
substantial opportunity for anyIslamic financial institution and
investor; the country ishome to a majority Muslim population of
32.52 million,it embodies a strong heritage of waqf, holds a
bankingasset base of $127 billion (2012), and has no
standaloneIslamic financial institution. Our retail survey
findingsalso point to significant interest in Islamic finance
fromthe population. The most requested products andservices are
personal financing, home financing andautomobile financing.
Takaful, investment funds, andmicrofinance are other key product
opportunities.Morocco allows 100% foreign ownership ofbanks but
some sources within the countryhave indicated that the level of
foreignownership for Islamic financial institutionshas not been
determined (the banking draftlaw 103-12 was not officially
published asof January 2014). The financial sector willbenefit from
the Casablanca Finance City(CFC) project to make Casablanca a
regionalfinancial centre. The Moroccan Financial Boardmanages the
initiative. Firms that qualify to bepart of the CFC will receive a
CFC Status thatallows for specific tax incentives, exchangecontrol
facilitation and other elements that fa-cilitateease of doing
business.Public Private PartnershipsInvestment opportunities should
be evaluatedagainst various active government reformprogrammes that
include projects not only ininfrastructure but also in renewable
energy,agriculture, and automotive and othermanufacturing
sub-sectors. Investment ingovernment projects through Public
Private24EXCLUSIVE TO THIS REPORT 24. Partnerships (PPP) is a
viable opportunityin Morocco; approximately 50% of energyprojects
have been put into action by PPP.CorporatesThere is strong appetite
from the corporatesector for sukuk. According to a survey
conductedby the Moroccan financial market authority(official name
Le Conseil Dontologique desValeurs Mobilires, CDVM) in 2012, 9 out
of 10institutions would be interested to issue sukukif permitted by
law. The market will also beboosted by the Islamic Development
Banks(IDB) decision to support Moroccos plannedfirst sovereign
sukuk. The countrys infrastruc-tureprojects could also benefit from
sukuk.There are large gaps in Moroccos infrastruc-turesector,
particularly in municipal services.SMEsSMEs account for more than
95% of the totalnumber of operating enterprises, contributingover
30% to GDP and 48% to total employ-ment.2 Our survey of SMEs
reveals that theyare most concerned with cost of financingand
perceive alternative products (i.e. Islamicproducts) to be more
expensive than con-ventionalproducts. Almost half of the
SMEssurveyed had not used any financial servicesin the last five
years. Islamic providers havethe opportunity to tap into this
lucrative andfinancially underserved market particularly forworking
capital, equipment/material financingand leasing. Morocco has a
strong microfi-nancesector that presently does not haveany Islamic
microfinance participation. Bothconventional and Islamic
microfinance presentanother viable financing option for
SMEs.WaqfAnother key area of opportunity is
Moroccoswell-established awqaf network. The awqafministry currently
manages over 51,000 com-mercial,housing and professional real
estates.The ministry is keen to fully modernise its
awqafpreservation and development system, andawqaf asset management
could provide lucrativeopportunities for Islamic financial
institutions andinvestors. The ministry has experience workingwith
local and foreign private companies todevelop awqaf lands and would
welcome moreprivate partnerships for future growth and
devel-opmentof awqaf lands and properties.TourismTourism is a major
growth sector for theMoroccan economy. The sector is developedand
has always been a key target of FDI intoMorocco. Additionally a
large segment of thepopulation either directly or indirectly
dependson tourism for employment. There is a growingMuslim tourist
niche market that Morocco cancertainly benefit from. With its rich
heritageand cultural connectivity, Morocco can moreactively work to
attract this growing market.Muslim tourists represent a major
nichemarket globally worth US$ 126.1 billion in2011, with the
sector set to grow another 4.8%through 2020. This compares
favourably to theglobal average of 3.8%. The biggest benefi-ciaryof
this market has been Turkey, Malaysia,and the United Arab
Emirates.12 EBRD strategy doc/ European Bank for Reconstruction
andDevelopment 2012252014 ISLAMIC FINANCE COUNTRY REPORT | Morocco
25. People walking by buildings in Morocco 26. MOROCCO AT A
GLANCEPolitical snapshotIn the modern era Morocco gained
independence from France in 1956,when Sultan Mohamed became king.
His son Hassan II succeeded himin 1961 and ruled for 38 years. He
was an important proponent of theprocess of pursuit for peace in
the Middle East and North Africa and wasone of the original
promoters of the Islamic summit meetings; underhis patronage the
fist meeting that led to the establishment of theOrganisation of
the Islamic Conference (OIC) (renamed Organisationof the Islamic
Cooperation in 2011) in 1969 took place in Rabat. Thatmeeting was
co-initiated with King Faisal of Saudi Arabia.In more recent years,
Morocco avoided the moresignificant political fallouts of the Arab
Springexperienced in Tunisia, Egypt and Libya. In June2011 King
Hassan IIs son, King Mohamed VIresponded to the growing demands for
moredemocracy by introducing a wide range ofpolitical and social
reforms including the draftingof a new constitution accepted by a
large marginin a popular referendum in July 2011.The new
constitution introduced various funda-mentalreforms, including a
more democraticdecentralised system of governance with
anindependent judiciary, and outlined the funda-mentalgrounds for a
new social contract withlaws guaranteeing both public engagement
andaccess to information. Nevertheless, MohammedVI continues to be
the definitive authority main-tainingcommand over the national army
andthe power to veto new laws as well as appoint-mentof ministers.
The prime minister, however,must come from the political party with
the mostnumber of seats in parliament.The new coalition government
formed inJanuary 2012 was led by the moderate IslamistJustice and
Development Party (offical name Parti de la justice et du
dveloppement, PJD),followed by the Istiqlal party, and the
NationalRally of Independents (NRI). The cabinet of 30ministers was
headed by Abdelilah Benkiranefrom the PJD. After ministers from the
Istiqlalparty left the coalition in July 2013, KingMohamed
increased the number of ministersto 39, and the ministers from the
Istiqlal partywere replaced by members of the NRI.No fundamental
changes were broughtforward by the Islamist-led government,
par-ticularlywith respect to public liberty andfreedom when
compared to previous govern-ments.However the government has
placedimportance on social dialogue as a means tostrengthen social
democracy. Important stepstowards the governance agenda relating
toaccess to information law were also taken.Municipal elections
were expected to be held inmid-2013 but no dates have been
confirmed, asof this writing. Municipal elections supported bythe
king are considered to be the internal factorof the regionalisation
process.272014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 27. View
from Mount Toubkal (4,167 metres), Atlas, Morocco.Moroccos
2011Protest MovementThe February 20 Mouvementdes Citoyens pour le
Change-ment,or Movement forChange attracted tens of thou-sandsin
major Moroccan citiesdemanding political change andmore democracy.
The demon-stratorsalso demanded an endto corruption, and
improvementsto the countrys socio-economicills which include high
unem-ployment,abuse of authority bysome government officials,
andconcentration of political andeconomic power amongst theminority
elite. (Also known asthe Makhzen.)After two weeks of demonstrations
across thecountry, King Mohamed VI appeared on nationaltelevision
on March 9 promising significant consti-tutionalchanges.The protest
movement came into existence from aloose alliance between liberals,
supporters of theIslamist Justice and Charity Organisation (JCO,
AlAdl Wal Ihsan) and leftist youth leaders. The JCOis banned (but
tolerated) yet is estimated to beamong Moroccos largest grassroots
organisations.The protests continued after the 2011
constitutionalrevision process but are now greatly reduced. As
of2012, activities and plans involving the liberals andthe JCO have
receded. Most Moroccans want to givethe new government enough room
and opportunityto prove itself rather than take their demands to
thestreets again. However a minority still remains ag-gravated.Most
fear that continued protests wouldlead to greater instability and
impact negatively onthe economy. Such apprehensions may perhapsalso
stem from the fear of heightened politicalturmoil in neighbouring
Libya and Syria.28MOROCCO AT A GLANCE 28. Full name: Kingdom of
MoroccoPopulation (2012) 32.52 million (IMF)Capital RabatLargest
City CasablancaArea 710,850 sq. km / 274,461 sq. miles (including W
Sahara)Major Languages Arabic and Berber (official), French,
SpanishMajor Religion IslamLife Expectancy 70 years for men | 75
years for Women (UN)Monetary Unit Dirham (MAD) = 100 centimesMain
Exports Minerals, seafood products, textile, fertilizers, fruit and
vegetablesGDP Per Capita (2012) US $2,955.86 (current US$)
(IMF)Internet Domain .maInternational Dialing Code +212Largest
cities and townsRegionPopulation,thousandsPopulationDensity,persons
persq. kmSum(Area in sq.km)1 Grand Casablanca 3,616 2,239 1,6152
Souss Massa Draa 3,095 44 70,8803 Marrakech Tensift Al Haouz 3,088
99 31,1604 Tanger Tetouan 2,460 213 11,5705 Rabat-Sal-Zemmour-Zaer
2,349 245 9,5806 Mekns-Tafilalet 2,126 27 79,2107 Doukkala Abda
1,978 149 13,2858 Oriental 1,909 23 82,9009 Gharb-Chrarda-Bni Hssen
1,850 210 8,80510 Taza Al Hoceima Taounat 1,803 75 24,15511 Chaouia
Ouardigha 1,646 235 7,01012 Fs-Boulemane 1,568 79 19,79513 Tadla
Azilal 1,448 85 17,12514 Guelmim Es semara 425 3 122,82515 Laayoune
Boujdour Sakia El Hamra 246 2 139,48016 Oued ed Dahab Lagouira 73 1
50,880Source: African Development Bank.292014 ISLAMIC FINANCE
COUNTRY REPORT | Morocco 29. PoliticsMorocco has a fundamentally
stable politicalenvironment relative to its North AfricanArab
Spring neighbours. In June 2011 KingMohamed VI responded to the
growingdemands for more democracy and introduceda wide range of
political and social reformsincluding the drafting of a new
constitutionaccepted by a large margin in a popular ref-erendumin
July 2011. Early Parliamentaryelections were held in November 2011
whichushered in a coalition made up primarily ofthe Justice and
Development Party (officalname Parti de la justice et du
dvel-oppement,PJD), the Istiqlal party, and theNational Rally of
Independents. In July 2013the Istiqlal party quit the coalition
govern-ment,forcing the PJD to form a new coalitionwith the
National Rally of Independents (NRI)in October.EconomyMorocco has
been on a steady path of economicrecovery since the stagnation of
the 1990s,with sound macroeconomic managementand sustained growth
in non-agriculturalsectors. The countrys Haut Commissariat auPlan
reported GDP growth of 4.8% in the firstquarter of 2013, rising to
5.1% for the secondquarter and dipping to 4.5% in the thirdquarter.
All signs point to an improved GDPperformance in 2013 from sluggish
growth of2.7% in 2012 (IMF World Economic OutlookOctober 2013).
Moroccos economy has grownan average of 4.7% since 2000, which
isalmost double that of the average of 2.6%per year from 1990 to
1999. The InternationalMonetary Fund (IMF) projects growth of
5.1%for the whole of 2013 and 3.8% for 2014, attrib-utingthe
slowdown in 2014 to the normalisationof rain-dependent agricultural
production afteran exceptional harvest in 2013. (IMF WorldEconomic
Outlook October 2013)LegalWith the new constitution and
government,aspects of Moroccos legal system are beingreviewed and
revised, particularly the judicialsystem that has traditionally
been viewedby Moroccans as corrupt, and favouring therich and
powerful. Modern Morocco followsa mixture of Spanish and French
civil codes.Islamic law prevails with the Mudawana, apersonal
status code based on the Malikischool of jurisprudence, that
governs primarilyfamily matters such as marriage, divorce,
in-heritanceand child custody. Like sharia, theMudawana is not
immutable and has beenupdated throughout the years; the most
recent2004 reforms particularly considered therights of women and
children.Foreign PolicyMoroccos foreign policy focuses mostly
onFrance, Spain, and the United States. Thecountry is currently
serving a two-year stintas a non-permanent member of the
U.N.Security Council. It is a major non-NATOally of the United
States. Unlike neighboursTunisia, Algeria and Libya, Morocco is not
amember of the African Union. It is a memberof the Arab
League.GeographyMorocco is located at the northwest of Africa.It is
bordered in the north by the strait ofGibraltar and the
Mediterranean Sea; to thesouth by Mauritania; to the east by
Algeriaand to the west by the Atlantic Ocean. TheMoroccan coast
extends over 3,500km.30MOROCCO AT A GLANCE 30. PORTUG A LNorth
Alant i c OceanS PA I NMOROCCOA LG E R I AC A N A R I E( S PA I N
)MAU R I TA N I ACeutaMelillaFsRabatCasablancaMarrakechM A L I 31.
InsideMACRO-ECONOMICFUNDAMENTALSResilient economy 34Budget deficit
post 2008 36and Arab SpringGood trade links 39Ambition to be
regional financial hub 41FDI & Investment trends 45Unemployment
a critical concern 47General business environment 52Rabat
Cityscape, Morocco. 32. 33MACRO-ECONOMIC FUNDAMENTALS2014 ISLAMIC
FINANCE COUNTRY REPORT | MoroccoStrengths1. A strategic
geographical position Morocco stands at thecrossroads between
Europe and Africa and has land and seaaccess to Arab lands across
North Africa to Jordan and theGulf Cooperation Council (GCC)
countries.2. Member of Arab Maghreb Union.3. The worlds biggest
producer and exporter of phosphate.4. Thriving sectors include
services, automotive, logistics, andtransport.5. A solid and
resilient banking sector with little exposure toexternal risks.6.
Low level of inflation.7. Unique Free Trade Agreements with access
to 1 billion con-sumers(Europe, Africa, North America).8.
Competitive labour costs.9. Stable and business-friendly
environment for foreign investors.10. Despite headwinds from the
Eurozone crisis and the ArabSpring, the kingdom retains its
investment grade rating. Fitchaffirmed Morocco at BB- with a stable
outlook while S&Pholds the kingdom to BB-, but with a negative
outlook (bothNov 2013).weakness1. High-level of unemployment: 9% in
2012 (IMF, October 2013),unemployment high especially among young
graduate menand women.2. High compensation fund for subsidies but
currently transi-tioningout of subsidies; the government announced
(on Jan17, 2014) an end to subsidies of gasoline and fuel oil and
wasstarting to significantly cut diesel subsidies3.3. Limited
access to financing for SMEs.4. Arab Maghreb Union as an entity is
inactive, and Moroccostrade with other member countries is very
low.5. Weak business climate.6. Economy heavily dependent on the
Eurozone, with Spain andFrance each absorbing 20% of the countrys
exports.7. Relatively limited domestic capital market.8. Very
dependent on agriculture and vulnerable to price move-mentsof
hydrocarbons.opportunities1. Implementation of the national pact
for Industrial Emergenceto boost growth.2. Development of
Casablanca Finance City (CFC) to pushMorocco as a regional hub to
serve the fast emerging Northand West Africa region.3. Encouraging
niche industries for export and promotionof service.4. Pledge to
reduce budget deficit.5. Favourable tax reform.6. Speeding up
reform of public procurement.7. Increasing education budget (6% of
GDP in 2012).8. Active strategies for renewable energies (solar and
wind)and water production and management.9. Development of capital
markets (including new productsand markets).Threats1. Foreign
exchange reserves depleting since 2008.2. Low level of household
saving.3. High level of corruption.4. Sensitive to swift
implementation of compensation fund reform.5. Close eye must be
kept on trade and budget deficits; both nar-rowedin 2013 and must
be controlled to meet conditions setby international lenders.
Treasury debt is about 60% of GDP.6. Shortage of raw materials for
agri-food and textile sector.7. Moderate drop in transparency and
international ratings.SOWTSWOT Analysis3 Reuters, Morocco ends
gasoline, fuel oil subsidies. Jan 17, 2014. 33. Resilient
EconomyDespite the twin negative shocks of domestic
politicalupheaval in 2011 and the Eurozone crisis, real GDP
inMorocco grew by 5% in 2011 compared to 3.6% in 2010.However, a
slowdown in activity in 2012 pushed growthdown to 2.7%, which was a
mid-point figure for oil-importingcountries in North Africa. Real
GDP growthbounced back up to 4.5% in 2013.Moroccos 4.5% GDP growth
was the clear leader in North Africa in 2013 when Tunisia and
Algeriagrew 2.7%, and Egypt 2.1%. Moroccos economy grew an average
4.6% for the period 2000-2007,which is almost double that of the
average of 2.6% per year from 1990 to 1999.GDP breakdown by sector
(2013)Sector % of GDP% ofPopulationEmployedServices 43.35%
34.6%Manufacturing &29.86% 21.90%IndustryAgriculture 15.09%
39.8%Contribution of different sectors to GDP
(2013)14.8%5.5%2.4%3.7%3.2%0.9%14.2%2.4%5.8%9.4%9.8%2.5%13.4%8.9%Education,
Health and socialactionPublic AdministrationServices provided to
firms andpersonal servicesFinance and
InsuranceCommunicationTransportHotels and
restraurantsTradeConstruction and
PublicworksElectricityManufacturing IndustryExtractive
industryFishingAgricultureSource: Ministry of Economy &
Finance, Q3 2013.34MACRO-ECONOMIC FUNDAMENTALS 34. Real GDP Growth
And Projected Growth (% changes and constant prices)Sustained
growthA middle-income, medium-sized economy,sustained economic
growth over the lastdecade has pushed GDP in 2013 to US$
105.1billion (current US$), which is almost treblethe US$ 37
billion in 2000. GDP per capitahas also more than doubled to US$
3,199.13in 2013 (current US$, IMF) from US$ 1,300in 2000.Buoyant
GDP growth to 2019The IMF estimates real GDP growth movingon a
positive trend to reach 5.6% by 2019above the estimates for Algeria
(4.3%), Tunisia(4.5%), Egypt (4%), South Africa (3.0%), andLibya
(3.5%). (IMF World Economic Outlook,April 2014)Diverse economyIn
terms of importance to GDP, Moroccoseconomy is predominantly
services-based.However the agricultural sector employsa larger
proportion of the population. Thecountrys manufacturing sector has
beengrowing, but the government needs to domore to create jobs in
the industrial sector.REAL GDP GROWTH PROJECTED GDP GROWTHMorocco
GDP per capita at PPP
(US$)1.6%7.6%3.3%6.3%4.8%3.0%7.8%2.7%5.6%4.8%3.6%5.0%2.7%4.5%3.9%4.9%
5.2% 5.4% 5.6%
5.6%2000200120022003200420052006200720082009201020112012201320142015201620172018201920132012201120102009200820072006200520042003200220012000$5,456$5,193$4,741$4,568$4,374$3,939$3,585$3,224$3,007$2,901$2,671$3,415$4,107$5,022As
a result of the ArabSpring, there is a newpolitical constitutionand
economic strategyMorocco has started the process of
increasingpolitical pluralism and openness which impactson economic
strategy. It is implementing struc-turalreforms in many areas: the
labour market,justice, education, competition policy and
mon-etarypolicy. It is working to consolidate publicfinances, and
liberalise the economy through aprivatisation policy.Source: IMF
World Economic Outlook Database, April 2014.Source: IMF World
Economic Outlook Database, April 2014.352014 ISLAMIC FINANCE
COUNTRY REPORT | Morocco 35. Budget deficit post 2008and Arab
SpringMoroccos 2013 budget deficit fell to 5.4% of GDP, thelowest
level since before the Arab Spring uprisings. Thedeficit had been
on the rise it was 4% in 20104, 6.9%in 2011 and 7.6% in
2012.Moroccan public finances were relatively healthy before the
global crisis of 2008 but have sincedeteriorated due to the
swelling of expenditures. Pressures were particularly fierce in
2011 and2012 when the government had to manage growing social
demands and the sharp rise in interna-tionaloil prices while
maintaining its investment efforts.4 Reuters, Moroccos budget
deficit falls to lowest since beforeprotests. Jan 23, 2014.5
Reuters, Morocco ends gasoline, fuel oil subsidies. Jan 17, 2014.6
Reuters, Moroccos budget deficit falls to lowest since
beforeprotests. Jan 23, 2014.Current account deficitSince 2007,
Morocco has run a currentaccount deficit, mainly driven by a
negativetrade balance. The persistent merchandisetrade deficit,
driven by the countrys need forimported energy, has been largely
offset byinflows including transfers from Moroccansresident abroad,
tourism revenue, and foreigninvestment. In 2010, the current
account deficitstood at 4.6% of GDP.Good credit ratingEconomic
growth in the 2000s led to a positivecredit rating by the major
credit rating agencies.Since 2010, Standard & Poors has
main-tainedthe kingdoms Investment grade ratingalthough the latest
Nov 2013 outlook wasnegative. In 2013, Moodys changed its outlookto
negative from stable with the local currencybond rated Baa1. On Nov
5, 2013, Fitchaffirmed the kingdoms long-term foreign andlocal
currency Issuer Default Rating at BBB-andBBB respectively, with a
stable outlook.Controlling subsidiesIn a bid to improve public
finances, the govern-mentannounced on Jan 17, 2014 that it
wasputting an end to gasoline and fuel oil subsidies,and was
starting to make significant cuts todiesel subsidies.5 The public
budget for foodand energy subsidies for 2014 is MAD 35 billion,down
from MAD 42 billion in 2013 and MAD 53billion in 2012. The
government is aiming for abudget deficit of 4.9% of GDP in
2014.6Zagora, Morocco March 14, 2010 : People takingfuel at one of
the rare gas stations of Afriquia, whichis the largest gas provider
in Morocco, along the roadbetween Ouarzazate and Zagora. This
region alreadybelongs to the Sahara desert.36MACRO-ECONOMIC
FUNDAMENTALS 36. Gross Debt, and as % of GDP Structure of External
Government Debt8070605040302010600500400300200100Gross Debt
(Billion MAD, LHS) % of GDP (RHS)2003200420062010Source: Ministry
of Finance, Kingdom of Morocco. Source: Ministry of Finance,
Kingdom of Morocco.Prudent debt management policyThe Moroccan
authorities have implemented anactive debt management policy to
reduce thekingdoms public debt. However, treasury debtto GDP has
been above the 50% target set bythe Ministry of Economy and
Finance, and was60% of GDP in 2012. The public debt was on
adownward trend until the financial meltdown andthe soaring prices
of raw materials. At the end of2012, treasury debt stood at MAD
493.7 billion,which is the equivalent of 59.6% of GDP, a
6-pointrise compared with 2011. Overall, the debt burdenhas been
declining since 2000 and has remainedflat since 2009 to reach 2.4%
of GDP as of thiswriting. Only 14.1% of the debt is denominated
inforeign currency, but the bulk of this is contractedto official
creditors at concessional
terms.100%90%80%70%60%50%40%30%20%10%BilateralcreditorsMultilateralcreditorsInternationalfinancial
marketExternal DebtForeign exchange reserves and activeexternal
debt management policies giveMorocco the capacity to service its
debt. Atthe end of 2010, current external debt stoodat US$ 20.5
billion.FOREX reservesForeign exchange reserves continued todecline
in 2011, totaling less than 6 monthsworth of goods and services
imports. Thistrend has continued in 2012 with foreignexchange
reserves dropping 20% and coveringfour months worth of
imports.0020002001200220052007200820092011201233 31 2936 37 35 34
2950 54 5658 5650 534818 15 166 815 13240%2005 2006 2007 2008 2009
2010 2011 2012General Government Gross Debt (% of GDP)2006 2007
2008 2009 2010 2011 2012Egypt 90.3 80.2 70.2 73.0 73.2 76.6
80.6Morocco 59.4 54.6 48.2 48.0 51.3 54.4 60.5Asia 34.5 35.1 31.3
31.5 40.8 36.7 34.5Euro Area 68.2 80.1 85.7 88.2 93.0Latin America
50.6 49.5 50.4 53.2 51.7 51.5 52.0MENA 78.4 71.1 62.3 64.9 66.8
70.1 75.5G-20 36.5 35.6 32.9 34.6 39.8 36.8 35.1Source: IMF World
Economic and Financial Surveys, Fiscal Monitor: Taxing Times,
October 2013.372014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 37.
Low inflation levelsMorocco has been running a structurally low
inflationrate and the annual growth of consumer price index(CPI)
has surpassed 3% on only two occasions sincethe early 2000s.
Inflation was maintained at that levelmainly due to a cautious
monetary policy targetinginflation, stable exchange rate and
government inter-ventionthrough the compensation fund (food and
oilprice subsidies).In 2012, inflation as measured by the change in
the CPI was 1.3% versus 0.9% in 2011, despitea 16% increase in
administered fuel prices in June 2012 and a poor harvest amid high
globalcommodity prices. This can be attributed to the milder
pressures from local demand and the easeof inflation for Moroccos
trading partners. Inflation in Morocco remained the lowest in the
MiddleEast and North Africa region, at 1.3%.Evolution of Inflation
and Projected Inflation (% changes) Regional Average Inflation 2000
- 2012 (%)3.91.91.0 0.9PROJECTEDSource: IMF World Economic Outlook
Database, April 2014. Source: IMF World Economic Outlook Database,
October 2013 andIRTI calculation.1.90.62.81.21.51.03.32.01.0 1.32.5
2.5 2.5 2.5 2.5
2.5200020012002200320042005200620072008200920102011201220132014201520162017201820191.73.5
3.8 3.95.9 6.17.912.319.7MoroccoTunisiaAlgeriaJordonEgyptSouth
AfricaMauritaniaNigeriaTurkey38MACRO-ECONOMIC FUNDAMENTALS 38. Good
trade linksTo boost foreign trade and attract foreign direct
invest-ment(FDI), Morocco has adopted an open economystrategy
towards foreign markets. Morocco has freetrade agreements with the
EU, US, Turkey and severalArab nations.Trade deficit, Imports &
Exports2013 trade deficit narrowed 2.8% from MAD202.06 billion in
2012 to MAD 196.38 billion(US$ 23.80 billion) in 2013, driven by a
2%drop in imports energy imports dropped4% and wheat imports were
down 31.7%as 2013s national harvest hit record levels.Total imports
decreased 2% in 2013 toreach MAD 379.22 billion from MAD
386.94billion in 2012. However 2013 exports dipped1.1%.7 Moroccos
trade deficit had been de-terioratingin recent years mainly due to
theincreased price of crude oil and an increase inwheat, corn and
sugar imports8 (2012 importswere 7.9% more than in 2011) so
2013simproved import figures are indeed goodnews. However the dip
in exports in 2013would need to be checked moving forwardas the
country was enjoying rising exports inrecent years as a result of a
rise in the sales ofphosphates and derivatives. Exports of
goodsincreased by 5.5% in 2012 to MAD 184.7billion while
manufacturing goods exportsincreased by 4.7% in 2012.91 2 3Worlds
largestexporter of phosphatesMorocco is known for its fertile land
and is theworlds largest exporter of phosphates; it has75% of the
worlds known reserves, and supplies36% of the worlds crude
phosphates.9Red arches on the coast of the Atlantic Ocean,Morocco.7
All 2013 trade deficit, import and export figures from Reuters,
Jan17, 2014. Moroccos trade deficit narrows 2.8 percent in
2013.Available from:
http://www.reuters.com/article/2014/01/17/morocco-trade-deficit-idUSL5N0KR08V201401178
Monetary Policy Report, prepared for the central bank
board.December 20, 2011, pp 17-18.9 Office Chrifien du Phosphates,
2013392014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 39. Strategic
locationLocated at the confluence of Europe, Africa, andthe Arab
World, Morocco has easy access toover one billion consumers in the
three regions.Strong links with the EUIn 2008 the kingdom entered
into an AdvancedStatus agreement with the European Union (EU)and in
April 2013 the first round of negotiationsbetween the EU and
Morocco for a Deep andComprehensive Free Trade Area (DCFTA)
wasstarted. The DCFTA will extend significantlytrade relations
between the EU and Morocco toinclude trade in services, government
procure-ment,competition, intellectual property rights,investment
protection and the gradual integra-tionof the Moroccan economy into
the EU singlemarket, for example in areas such as
industrialstandards and technical regulations or sanitaryand
phytosanitary measures.10 Moroccos majortrading partner remains the
EU, with which 60%of the total volume of the countrys foreign
tradetakes place. Asia and the USA are second andthird, with 20.5%
and 13.7% shares respectively.Additionally, 75% of workers
remittances comefrom EU member states11, and the EU is a
signifi-canttrading partner the bloc absorbed 57%of Moroccos
exports in 2011, provided 59% ofits imports, and accounted for 70%
of touristsvisiting the country.FTA with the U.S.Morocco is the
only African country (so far) tohave a bilateral FTA with the
United States.The U.S.-Morocco FTA eliminated tariffson 95% of
bilateral trade in consumer andindustrial products. Tariffs on U.S.
exports toMorocco will be phased out entirely by 2024.The FTA
provides new trade and investmentopportunities for both countries
and hasencouraged economic reforms and liberalisa-tion.Since it
came into force, bilateral tradebetween the two countries increased
272%through November 2011.Formal trade links with the Middle EastIn
the contemporary era, Moroccos trade andinvestment links have been
closest with theEU but Morocco has recently been more openand
attentive to investment and trade with theArab world. Morocco has
notable FTAs signedwith Turkey, the Mediterranean Arab nations
Tunisia, Egypt and Jordan (through theAgadir Agreement) and the
United ArabEmirates (UAE). It is also in continuing discus-sionsand
negotiations on a revised UnifiedAgreement for the Investment of
Arab Capitalin the Arab States (which first came into forcein 1981
and whose members are nations ofthe Arab League); a draft text was
adopted inearly 2013 ensuring free movement of capitaland providing
national treatment and most-favoured-nation status to
investments.12 12310 European Commission, 2013. Available from:
http://ec.europa.eu/trade/policy/countries-and-regions/countries/morocco/11
Ministry of Economy and Finance of Morocco, 201312 United Nations
Conference on Trade and Development(UNCTAD), 2013. World Investment
Report 2013: Global ValueChains: Investment and Trade for
Development. Available
from:http://unctad.org/en/PublicationsLibrary/wir2013_en.pdf40MACRO-ECONOMIC
FUNDAMENTALS 40. Ambition to be regionalfinancial hubMorocco is
developing a regional financial hub knownas the Casablanca Finance
City. The government wantsCFC to be a centre notably for the Great
North WestAfrica Region (GNWA Region). The financial hub will
po-tentiallycontribute up to 2% of Moroccos total GDP andhelp
create more than 30,000 new jobs.GDP Growth in Mediterranean
Region, 2013 (%) Regional GDP Per Capita 2012 (USD Current
Price)4.5%4.3%3.3%2.7%
2.7%2.1%1.0%MoroccoTurkeyJordanAlgeriaTunisiaEgyptLebanon$9,920$11,046$5,174$5,438$6,594$3,199$3,226$4,345$1,469YemenMoroccoEgyptTunisiaJordanAlgeriaIraqLebanonLibyaSource:
IMF World Economic Outlook Database, April 2014. Source: IMF World
Economic Outlook Database, April 2014.412014 ISLAMIC FINANCE
COUNTRY REPORT | Morocco 41. INSPIRE MOREETHICAL BUSINESSWORLDWIDE
42. Casablanca Finance City as a regionalfinancial hubThe
Casablanca Finance City (CFC) seeks toposition Casablanca as a
regional financialcentre. CFC is still under construction
butseveral companies have already been grantedCFC status. The zone
is meant to provide anattractive environment for national and
inter-nationalinstitutions in terms of a specialisedinfrastructure,
a single regulatory system,a qualified talent pool, appropriate
humanresources, specific tax incentives, exchangecontrol
facilitation and other related services.The development of CFC is
part of a com-prehensivestrategy that aims to reinforceMoroccos
attractiveness for foreign investmentand enhance and offer
international investorsa gateway to regional investment mainly
inthe maghreb and West Africa. The project ismanaged by the
Moroccan Financial Board,which is a public-private initiative
comprisingof founders Bank Al-Maghrib, Caisse de Depotet de
Gestion, Casablanca Stock Exchange,Groupe Banque Populaire,
Attijariwafa Bank,BMCE Bank and four insurance companies Mamda,
Cnia, Atlanta-Sanadand, and Axa.The institutions based at the CFC
could serveeither exclusively non-residents or a combina-tionof
residents and non-residents. They canbelong to one of the following
sectors: Financial services companies: corporate andinvestment
banking, private equity, assetmanagement and insurance, etc.
Professional services firms: consulting firmsin management
strategy, legal, tax andaudit, ratings agencies, research and
infor-mation,etc. Regional financial and non-financial
head-quarters:undertaking supervisory, marketingand coordinating
activities in at least oneother foreign countryThe emergence of a
dynamic Islamic financialservices industry in Morocco will also be
anasset to the development of CFC and willattract foreign capital,
especially from theMENA region.Moroccan banksabroadThe presence of
Moroccan banks abroad, mainlyin Africa, is one of the prominent
features ofthe Moroccan banking system. Moroccan bankshave more
than 25 subsidiaries (with more than1,200 agencies mainly in
sub-Saharan Africa), 10branches and 59 representative offices
(mainlyin Europe).5th largest AfricaneconomyMorocco has become a
major player in Africaneconomic affairs and is the 5th largest
Africaneconomy by GDP (PPP).Selection of very colorful Moroccan
tajines.44MACRO-ECONOMIC FUNDAMENTALS 43. FDI & INVESTMENT
TRENDSMoroccos FDI is concentrated mainly in the real estatesector,
followed by industry and tourism. Morocco wasthe only North African
country to register FDI growthin 2013 inflows grew a solid 24% to
US$ 3.5 billion,according to the United Nations Conference and
TradeAgencys (UNCTAD) Global Investment Trends Monitor.FDI inflows
into Africa as a whole grew by 6.8% to anestimated US$ 56.3 billion
from 2012 to 2013, driven bythe strong performance of Southern
African countries,including South Africa and Mozambique.Morocco
also led FDI inflows in North Africa in2012 at US$ 2.836 billion.
Egypt trailed closelyon US$ 2.798 billion.13 Moroccos
stabilityrelative to Egypt, Tunisia, Algeria and Libyahas proven
attractive to investors. In addition,a vast project of economic
modernisation hasbeen launched to boost FDI. Casablanca
inparticular aims to become an internationalfinancial centre.To
attract FDI, the government adopted theInvestment Charter in 1995
that providescompany exemptions for VAT and corporatetax for 5
years. In the industrial sector, theEmergence Plan creates
infrastructure whichoffers turnkey premises. In the case of
off-shoringfacilities, the government has offeredtelecommunications
costs set at 35% belowthe market price and training grants of upto
US$ 7,000 for each Moroccan employeeduring the first three years of
employment.A new version of the investment incentiveregime is
currently undergoing a governmen-talreview. 113 United Nations
Conference on Trade and Development(UNCTAD), 2013. World Investment
Report 2013: Global ValueChains: Investment and Trade for
Development.452014 ISLAMIC FINANCE COUNTRY REPORT | Morocco 44. FDI
by SectorCar trade and repairs 7%Finance and Insurance
12%Accomodation and catering 11%Real estate 34%Manufacturing ind
ustry 26%Ele ctricity, gas, air conditioning 7%Con struction 3%FDI
BYSECTORSource: Moroccan Investment Development Agency (2011).FDI
by SourcesGermany 3.0%Kuwait 3.7%USA 5.0%Britain 5.3%Switzerland
5.3%Belgium 5.4%France 38.2%Sp ain 6.9% United Arab Emir ates
20.0%Sa udi Arabia 7.1%FDI BYSOURCESSource: Moroccan Investment
Development Agency (2011).FDI Inflow, 2007-2012 (US$
million)2,8052,4871,9521,5742,5682,8362007 2008 2009 2010 2011
2012Source: United Nations Conference On Trade And Development,
World Investment Report 2013.46MACRO-ECONOMIC FUNDAMENTALS 45.
Unemployment a critical concernUnemployment, especially among the
youth, remainsa critical concern. It fell to 9% in 2012 from a high
of13.4% in 2000 but questions remain over the quality ofjobs on
offer. Youth unemployment (15-24 years of age)fell from 31.1% in
1990 to 15.7% in 2005 but increasedto 17.9% in 2012 with urban
youth unemployment sur-passing33.5%.Private sector hiring lower
than public sectorsThe Moroccan government has been undertaking
necessary initiatives to tackle unemploy-mentover the years.
However the governments expanding workforce is not matched by
similargrowth within the private sector. Other measures such as
enhancing industry and servicessectors maybe more effective.A World
Bank report puts Moroccos unemployment rates of tertiary education
graduates at18.1% (down from 28.9% in 2000), which is lower in the
MENA region only to Tunisias 22.9% (upfrom a much lower 8.7% in
2000) and Egypts 19% (up from a lower 12.8% in 2000)14 althoughit
is clear from the figures that Moroccos employment situation for
tertiary education graduateshas improved while Tunisias and Egypts
have deteriorated. For Morocco (and similarly for itsNorth African
neighbours) youth unemployment is not only a waste of productive
resourcesbut also a catalyst for social unrest. Education and
employment synchronisation, effective jobcreation strategies, and
self-dependency of the youth are key. 114 World Bank, June 2013.
Benchmarking Governance As a Tool for Promoting Change: 100
Universities in MENA Paving the Way.472014 ISLAMIC FINANCE COUNTRY
REPORT | Morocco 46. Poverty down from doubledigits but still an
issueThrough the creation of the National Initiative for
HumanDevelopment which makes available Micro credit (or
microfinance) to provide access to basic social services and
alsopromotes employment for youth and women, Morocco hasachieved
the first Millennium Development Goal (MDG)relating to poverty
reduction. Using the national poverty line(US$ 1.50 per day) as a
standard measure, the rate of povertyfell from 16.3% in 1999 to
approximately 9% to date (the figureis higher in rural areas, at
14.4%). (Moroccan National Bureauof Statistics, 2013) The
government has initiated the secondphase of the national initiative
which is to improve health,education, roads, water, sanitation and
electricity.Improving Human DevelopmentIndex rankingMorocco ranks
130 out of 187 countries on the2012 Human Development Index (HDI)
andranks 17th in the MENA region. (United NationsDevelopment
Program, 2013) Its HDI score(0-1, where 1 is best) has been
climbing steadilyfrom 0.435 (1990) to 0.507 (2000) to 0.579(2010),
to 0.582 (2011) and 0.591 in 2012. Its2012 ranking places it just
below Nicaraguaand directly above Iraq.Improving life expectancy
and yearsof schoolingLife expectancy at birth has improved from64.1
years in 1990 to 72.2 years in 2011. Lifeexpectancy for females has
increased from 66.1to 74.5, and from 63 to 69 for males;
expectedyears of schooling have improved from 6.6years in 1990 to
11 years in 2011. Despite thisconstant improvement in the past two
decades,Morocco still lags behind comparable countriessuch as Egypt
and Tunisia. This is mainly due tothe disparity in access to health
and educationbetween the urban and rural areas.48MACRO-ECONOMIC
FUNDAMENTALS 47. Fes, Morocco - July 27, 2010: People on a
streetmarket. Fes center is listed in UNESCO and it isthe largest
preserved medieval city in the world.Also its one big
market.ANALYSISThe Role of IDB Group in PovertyAlleviation and
ReducingUnemployment in Moroccoby Dr. Ismaeel Ibrahim Naiya (ERPD)
& Dr. Rami Abdelkafi (CTY), IRTIMorocco is one of the founding
member countries that established the IslamicDevelopment Bank (IDB)
on August 12, 1974. The first IDB operation in Morocco wasapproved
by the Board on September 9, 1977. To date IDB Group financing
approvals forMorocco has cumulatively reached US$ 5.27 billion for
various projects with concentration mainlyin energy (36%),
transportation (35%), and water, sanitation and urban services
(18%). The totalIDB-approved ordinary operations (excluding
cancellation) in Morocco has reached 92 amountingto approximately
US$ 2.4 billion. About 90% of the financing approved for the
country has beennon-concessionary. In 2011, Morocco was the first
among IDB member countries to receive dis-bursementswith an amount
of US$ 288 million.Other IDB Group entities the International
Islamic Trade Finance Corporation (ITFC) and theIslamic Corporation
for the Insurance of Investment and Export Credit (ICIEC) have also
madesignificant contributions to Morocco. Most recently Morocco
joined the Islamic Corporation for492014 ISLAMIC FINANCE COUNTRY
REPORT | Morocco 48. IMLIL, MOROCCO - JULY 27: A Berber shop keeper
poses for a photograph in the village of Tisgui Ntknt on July 27,
2007 in Imlil district, Morocco.Tisgui Ntknt is a village of around
seventeen families in the High Atlas Mountains of Morocco. The
Berber people of the Atlas have a strong sense offamily and each
village will consist of a number of families ranging from five to
around thirty or forty. Tisgui Ntknt does not have electricity but
KingMohammed VI has pledged that the whole of Morocco will be
electrified in six years time. (Photo by Chris Jackson/Getty
Images)the Development of the Private Sector (ICD) in March 2011.
Cumulative operations of the ITFC forMorocco stands at US$ 2.67
billion. ICIEC has also managed to insure exports and imports
busi-nessesworth US$ 201.5 million.Economic growth and
developmentThe Moroccan economy has made significant gains over the
past decade with a sustained averagegrowth rate of 4.7% since 2000
compared to an average of 2.6% from 1990 to 1999, giving riseto
higher GDP per capita (US$ 2,955.86) in 2012. Both inflation and
external debts have signifi-cantlydeclined and external reserves
have significantly increased. Private sector investment hasalso
soared to a comparable level of the East Asian economies to reach
36.3% of GDP in 2008.Overall, unemployment rate was brought down to
9.1% in 2010 while the rate of poverty declinedfrom 16.3% in 1999
to 9% in 2010.However, despite all these achievements, the Moroccan
economy still faces several challengesincluding a high rate of
rural poverty and a high rate of youth unemployment especially
amongeducated youth in the urban areas.Challenges: poverty and
unemploymentPoverty in Morocco is a predominantly rural phenomenon;
70% of the poor live in rural areas, and75% of them depend on
agriculture for their livelihood. Since poverty alleviation and
human de-velopmentis the key strategic objective of the IDB Group,
food security and rural development areat the center of the Banks
operations.50MACRO-ECONOMIC FUNDAMENTALS 49. The IDB has financed
several projects in Moroccos rural areas including electrification
and agri-cultureand rural development. To date, IDB interventions
in the agricultural sector has accountedfor US$ 147.8 million,
which represents 8% of the IDB portfolio in Morocco. IDB
interventions inother sectors including energy, water and
sanitation and infrastructure have also focused on therural
areas.Main cause of youth unemployment: Education-Labour
Requirements MismatchAnother key challenge facing Morocco in recent
years is high unemployment among educatedyouth especially in the
urban areas. The overall unemployment rate stands at 17.9% among
theyouth aged 15-24 and 32.2% among urban youth. It is estimated
that 61% of young people withsecondary education or above are
unemployed. The majority of the 1.5 million jobs created by
theeconomy during the last two decades were in the construction
sector which requires low skilledlabourers. An IDB study of the
situation in the country has detected that a large skills
mismatchis the major cause of the high unemployment among the young
educated demographic. Thisreflects a disconnect between the
education system and the major forces driving the economy.High
unemployment rates among the educated also reflect the failure of
the economy to ef-fectivelyallocate resources especially labour
from the agricultural sector which is necessary forstructural
transformation and sustainable growth of the economy.Meanwhile, the
recent episodes of the Arab Spring in the MENA region which was
triggeredto some extent by the problem of high youth unemployment
in the region, has posed a greatchallenge to both the government
and other development partners. In this context, the IDB hasdevoted
a US$ 250 million facility to support youth employment in the
affected Arab countries.The Bank is now considering approval of the
Youth Employment Support Program in Morocco.Recently, the IDB Group
finalised the Member Country Partnership Strategy (MCPS) for
Moroccofor the period 2013 2016. The strategy is based on extensive
consultations with main stakehold-ersin the country. The MCPS has
identified four pillars for IDB Group interventions in Morocco:
(i)Enhancing Trade Competitiveness and (ii) Integrated Rural
Development and two CrosscuttingThemes: (iii) Private Sector
Development and (iv) Reverse Linkages. All target at improving
efficiencyin the economy, thereby creating more job opportunities
especially for the youth.Dr. Ismaeel Ibrahim Naiya previously
worked as a lecturer in the Department ofEconomics, Bayero
University and joined the Economic Research and Policy
Department,Islamic Development Bank (IsDB) in 2007 as an Assistant
Researcher. He was educated inhis native Nigeria, as well as in
Saudi Arabia and Malaysia. He obtained his Ph.D. from
theInternational Islamic University Malaysia, in 2012.Dr. Rami
Abdelkafi joined the Islamic Development Bank in 2008 as an
economicresearcher and currently serves as a Senior Country Program
Manager in the CountryPrograms Department. He obtained his PhD from
the University of Nice Sophia Antipolis,France, in 2002.512014
ISLAMIC FINANCE COUNTRY REPORT | Morocco 50. GENERAL BUSINES
ENVIRONMENTCorruption continues to be a serious problem
despiteefforts to combat it. The government established theCentral
Authority for Corruption Prevention (official name Instance
Centrale de Prevention de la Corruption, ICPC)in 2008 to
coordinate, supervise and monitor corruptionprevention policies.
The new government post-2011 hasalso addressed the need to combat
corruption and increasetransparency. It has passed a law to protect
whistle-blowersas well as trial witnesses and experts, and in
December2012 it launched an anti-corruption awareness
campaign.Mediterranean Governance Indicators2743 4132Egypt Morocco
Tunisia Turkey Algeria121651 49 503631 2953 5146573936615865
65184435251129918C ontrol of Corruption Rule o f Law Regulatory
Quality GovernmentEffectivenessPolitical Stabilityand Absence
ofViolenceVoice andAccountabilitySource: The World Bank Worldwide
Governance Indicators 2012.52MACRO-ECONOMIC FUNDAMENTALS 51.
Despite national efforts, the kingdoms rankingon Transparency
Internationals CorruptionPerceptions Index has not improved for the
lastcouple of years, and only time will tell if nationalefforts
will bear fruit. While the countrys scoreof 37 remained unchanged
for 2012 and 2013its ranking dropped from 88th in 2012 to 91stin
2013. Comparatively for 2013 (2012) Tunisiawas 77th (75th), Algeria
94th (105th), andEgypt 114th (118th). South Africa also
slipped,from 69th in 2012 to 72nd in 2013.Improved position in
global rankingsand indexesa. The World Economic Forums
GlobalCompetitiveness Report 2013-2014 ranksMorocco 70 out of 148
countries. Thekingdom remains ahead of its fellow NorthAfrican
countries Egypt (118), Algeria (100),and Libya (108).b. Morocco is
ranked 87 out of 185 countriesin the 2014 World Bank Doing
Business(DB) Report. The kingdom has the mostimproved business
regulation (on the easeof starting a business) compared to other
re-gionaleconomies, ranking 39 compared tothe regional average
(MENA) of 112. Moroccohas started eliminating the minimum
capitalrequirement for limited liability companies,simplifying the
construction permittingprocess, easing the administrative burden
oftax compliance, and providing greater pro-tectionsto minority
shareholders. HoweverMorocco has made registering propertymore
expensive by increasing property reg-istrationfees.c. The Economist
Intelligence Units Businessenvironment rankings place Morocco 69
outof 82. According to the EIUs 2012 index ofeconomic freedom
Morocco scores 60.2 outof 100, making its economy the 87th out
of186 freest countries in the 2012 Index. Its2012 score is 0.6
points better than 2011s asa result of modest improvements in most
ofthe categories of economic freedom. Moroccois ranked 9th out of
17 countries in the MiddleEast/North Africa region, and its overall
scoreis just above the world average.d. The World Bank Knowledge
Economy Indexranks Morocco 102 out of 1