Islamic Banks in Morocco Face Setbacks Amid COVID-19 Crisis

After a good performance at the end of April 2020 (10 billion dirhams in outstanding loans), Islamic banks are experiencing a downward spiral. The Real Estate Murabaha product, one of the flagship activities of Islamic finance, has been hit hard by the health crisis related to the coronavirus. No transaction has been made for more than a month due to the closure of notary offices, reports Jeune Afrique. The same is true for the automotive sector where dealership activities have been suspended. As a result, there is a drop in auto loans in general, including auto Murabaha.

The outstanding loans of participatory banks had appreciated by nearly 1.5 billion, i.e. a 6% increase in the first four months of 2019 compared to 1 billion, i.e. a 3.8% increase between January and April 2020. "Business is picking up, but slowly, like the pace of the return to normal throughout the country," observes the CEO of Umnia Bank.

To reverse the trend, the monetary authorities and the Supreme Council of Ulema have decided to put in place guarantee products exclusively dedicated to Islamic banks. The Central Guarantee Fund (CCG) of Morocco - through its participatory window, Sanad Tamwil - has launched "Damane Moubachir" and "Damane Dayn". "These new guarantees allow us to open up more to a corporate clientele, whereas until now the activity has been concentrated on the individual segment," explains the director.