Morocco’s Islamic Banking Sector Faces Growth Challenges Despite Initial Surge

In its annual report, Bank Al-Maghrib (BAM) indicated that the Islamic finance sector is on a clear upward trend. Indeed, outstanding loans to the economy reached 4.6 billion dirhams at the end of December 2018. The achievement of this performance is explained by the start of activities of five participatory banks.

For its part, Flitch Ratings Ltd., in an analysis note published on July 30, 2019, reveals that the Islamic finance sector recorded growth of 110% from June 2018 to April 2019.

However, this good performance is unlikely to last over time. According to this international rating agency, the sector will face difficulties in maintaining its current pace of growth. The reason is that Islamic banking accounts for only 1% of the total outstanding bank loans to the Moroccan economy at the end of 2018.

The other no less negligible reason is the maturity of the banking market: more than 70% of the population has a bank account. Added to this is the reduction in the ability of Islamic banks to have more customers due to their increased intervention in the mortgage loan market.