Morocco is finalising the publication of a new securitisation law that will allow the state and companies to issue sukuk, the Islamic equivalent of bonds, and preparations for a corporate and a sovereign bond are already underway, according to Islamic finance experts.
Sukuk are Islamic financial certificates that represent undivided shares in the ownership of tangible assets. Global sukuk issuance increased by 64 percent last year to reach $138bn, according to Standard & Poor’s, the rating agency.
Only a few African countries such as Sudan and the Gambia have issued sovereign sukuk, according to S&P, but several have started considering the financial instruments, including South Africa, Egypt and Tunisia.
The introduction of sukuk in Morocco will pass through the reform of the country’s securitisation law, which was enacted in 2002 and amended in 2010 to broaden the range of eligible assets and allow institutions other than banks to use securitisation, according to Al-Khawarizmi Group, an independent Islamic finance consultancy that published a study on the potential of sukuk in Morocco in December 2012.
The Moroccan government submitted to the parliament a new a project of amendment of the securitisation law for the introduction of sukuk at the end of last year as part of a broader financial reform aimed at developing the role of securitisation in funding the economy, says Nouaman Al Aissami, head of the credit division at Morocco’s ministry of economy and finance. The law was adopted in January and will come into effect once it is published in country’s official gazette, which is expected to happen in the coming months after some related regulations are finalised.
Morocco became interested in sukuk after a moderate Islamist party won the majority of seats in the 2011 parliamentary elections, according to Fayçal Jamali, co-author of the Al-Khawarizmi Group study. “Also as a result of worsening economic conditions in Europe, which is Morocco’s traditional trading partner, the country wants to diversify its funding instruments and attract Middle Eastern investors,” he argues.
One Moroccan “large corporate” has already planned a $500m sukuk, which has been put on standby until the enactment of the law, according to Mr Jamali. A sovereign sukuk is also in preparation, he says.