Morocco's Participative Banking Sector: A Cross-Analysis of Current State, Opportunities and Challenges of Its Five Banks and Three Windows

Abstract

Launched two and a half years ago, the model of Islamic banking adopted by Morocco consists of five banks and three windows. This paper aims to present an exploratory case study of the performance of the eight actors of Morocco participative banking. The study reveals an increase of Murabaha funding and deposits while the total net profit remains negative (MAD -420 million) mainly due to the start-up costs absorbing an enormous amount of resources. Presented in a SWOT Analysis, the study’s results confirm that the sector is facing many difficulties and gaps that negatively affect the business especially the incomplete participative financial ecosystem. Then, the paper presents a benchmark study of Turkey’s participation in banking. Findings show that the financial ecosystem in Turkey is much more developed compared to Morocco. Consequently, this situation favored the rise of the five operational participation banks whose asset growth rate reached 99%, between 2014 and 2018, and recorded positive net profits which exceeded TL 2 billion. Nevertheless, both Morocco and Turkey participation banks are still too young and can make headway only if the regulators and the operators properly address the challenges which hamper their development. JEL Classification: G21, 057.