Limited awareness impedes Islamic finance market in Morocco, estimates Fitch Ratings

Limited awareness impedes Islamic finance market in Morocco, estimates Fitch Ratings

The level of public awareness, sensitivity to Sharia law, confidence, and competitiveness of the product offering are the main factors influencing the demand, growth, and market shares of Islamic finance in any specific jurisdiction and in various nations, including Morocco.

In a document issued this week, Fitch Ratings agency explained how supply drivers also influence the demand in question.

“These include enabling regulations for Islamic finance, political will, a viable and profitable business model, the availability of diverse financing products that meet customers’ needs, adequate branch and digital banking networks and the presence of Islamic investors and other stakeholders,” stated the same source.

“Limited awareness is an impediment in many markets,” said Fitch. 

The world’s largest Muslim nation, Indonesia, had a low rate of Sharia financial literacy in 2022, at just 9.1%. 

The Turkish government announced in 2021 that 60% of people in Turkiye did not know what “participation banking” (the Turkish word for Islamic banking) meant. Only 18% of those polled in Morocco by Sunergia believed that the financial services offered by Islamic banks were halal.

Many bank costumers lack faith in the institutions’ products’ adherence to Sharia law and think that conventional and Islamic banking is essentially equivalent. 

According to Fitch, Islamic banks often face greater operational and reputational risks than conventional banks since they must ensure that all of their operations and activities are compliant with Sharia rules. 

This comes with extra fees, procedures, disclosures, rules, reporting, sharia reviews, and audits, which affects their credit profiles negatively and is important to their ratings when combined with other criteria.

In the first half of 2023, assets related to Islamic finance are predicted to have surpassed USD 3.3 trillion. 

Fitch anticipates robust long-term growth, however, it is expected to be concentrated in a small number of markets, if obstacles in the demand and supply drivers are removed.

With domestic market shares ranging from 85% to 15%, the GCC (Golf Cooperation Council) nations of Malaysia, Bangladesh, Jordan, and Pakistan account for more than 70% of all global Islamic banking assets. 

Due to the supply-side forces and lengthy history, Sharia sensitivity, awareness, and confidence are significantly greater in these markets. 

However, in several nations with sizable Muslim populations, such as Indonesia, Turkey, Egypt, Nigeria, Algeria, and Morocco, Islamic banks only make up a small portion of the domestic market, less than 10%.


Please enter your comment!
Please enter your name here