Interview: Abdulbasit Ahmad Al Shaibei
How will the introduction of Islamic banking impact the existing banking sector?
ABDULBASIT AHMAD AL SHAIBEI: The impact of Islamic banking is clear, competition will be stronger and each bank will try to provide the best services to its customers. Moroccan customers will definitely benefit from increased competitiveness. In addition, the banking sector in Morocco will offer a new experience to meet the customers’ need for Islamic finance products.
Since a proportion of Moroccan customers show reluctance in dealing with conventional banks, the introduction of participative banking will help banking services further penetrate this segment, thereby increasing the penetration of banking levels in the country. However, the success of participative banking penetration will be inextricably linked to both the quality of services provided by the participative banks and technology investments to improve the communication tools used by customers and banks.
How significant is the potential for new investment flows from Qatar and the Gulf to Morocco?
AL SHAIBEI: There are many businesses and organisations in Qatar and the Gulf Cooperation Council (GCC) countries that demand shariah-compliant vehicles. There is a high level of expectation in Morocco that these investment vehicles will attract significant financial flows, not only from Qatar and the GCC countries but also from Moroccans living abroad, particularly Moroccans who may have reservations about dealing with conventional banks.
Due to the nature of Islamic investment products, which is based on real underlying assets and not speculation on debt or synthetic financial products, investors feel shariah-compliant investment vehicles will meet their appetite for real investments. These products have a sound legal ground in light of the Islamic banking experience in the rest of the Arab and Islamic countries over the past 40 years.
What are the main challenges facing the introduction of Islamic banking?
AL SHAIBEI: Islamic banks will be able to provide a variety of products and services that will meet the real need of customers. However, any newcomer in any market will face challenges, especially when providing a new product or service such as participative banking to meet customer needs.
The challenges, which are many, include the standing restrictions on some Islamic finance products, the public perception about Islamic finance that it has no profit or fees (free of interest), competition from the traditional or conventional banking sector, and human resources to run Islamic banks.
How can Islamic banking contribute to small and medium-sized enterprise (SME) lending?
AL SHAIBEI: Islamic banking, similar to conventional banks, can work to improve SME lending in many ways. Islamic banks can work with government agencies to provide guarantees to SME owners and with professional organisations in Morocco to provide financial education to SME lenders so they can make proper project feasibility studies.
Islamic banks can collaborate with other banks to provide funds to finance working capital and fixed assets for SME lenders. In addition, banks can work with international organisations that focus on promoting SME business, and learn from others’ experiences of promoting SMEs.
For Islamic banks, as mentioned earlier, there is a segment of the Moroccan populace who may have some reservations about dealing with more conventional banks, and these reservations may cross over into their businesses. Hence, participative banking provides access to banking facilities for such businesses, which, by and large, tend to be SME-type operations. Increased penetration will help to encourage further growth in the SME sector in Morocco.
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