Plan:

Introduction

Chapter 1: the foundations of the

participatory finance

Section 1: the sources of finance

participative
Section 2: the principles of finance
participative

Chapter 2: The Products of

banks
Chapter 3: The Banks
participative in Morocco

The finance law 2015

The finance law 2016
Fiscal frictions
Chapter 4: Succeeding in Promotion of
Islamic finance in Morocco:
what conditions?

Chapter 5: Do banks
participative represent a
hypocrisy?

Frequently Asked Questions

Conclusion
Bibliography
Introduction :
The development of alternative finance during
of the last two decades is one of the
the most interesting developments in history
recent developments in the global financial services sector.

The specialized institutions in alternative finance

now recognize that their market is not
limited to certain regions of the Muslim world but
begin to expand internationally.
Currently, the institutions financial
participatives operate in more than 75 countries. The assets
financial institutions that meet Islamic criteria have
increased by more than forty times since 1982 for
exceed 1000 billion dollars in 2010 with a
double-digit growth rate over the last five years
years.
The January 2015 law gives Morocco a legal framework
necessary for the establishment of Islamic banks.
The kingdom aims to become one of the main
Islamic financial institutions on the African continent.
Sharia Board:
This committee is a collegiate body generally composed of
from 4 to 7 scholars (Sharia scholars), all of whom
an advanced skill in banking and
financial, which independently establishes the
validity conditions for transactions in relation to
rules and principles of Sharia.
Chapter 1: The Foundations of the
finance alternative
Section 1: the sources of finance
participative
Islamic economy is surely guided by
values of Islam, man is not in a position of
distribute the resources as he wants.
To explain and better understand the dynamics.
from Islamic law, it is important to talk about the
sources and foundations of this law.
The four main sources of alternative finance
are, in order of importance, the following:
The Quran: It is the primary source in terms of
law..
The Sunnah: This term is used to designate this
that has been reported from the prophet as a word, act or
approval.
The difference between the Sunnah and Hadith is what this
the latter is narrative, while the Sunnah is the practice
you prophet.
Al Ijmaa: Ijmaa is a consensus of the entire
Muslim scholars and jurists on a fact that does not have
found answers in the Quran and the Sunnah.
Ijtihad: refers to the effort of reflection that jurists
Muslims undertake to interpret the texts
founders of Islam.
Section 2: the principles of alternative finance
Islamic financing contracts must not
go against the fundamental principles of
Charia.
The fundamental principles of this model of
financing are:

1-The prohibition of interest (Riba):

For Islam, charging or receiving interest is
strictly prohibited. The term riba means,
augmentation, increase, encompasses all profit without
counterpart in a loan transaction.
O Believers! Do not engage in usury, by multiplying
abusive your profits. Fear God, you will not be
What happier.
God has made trade lawful and interest unlawful.
(Quran, 2. 275)
2- The principle of Sharing Losses and Profits
(PPP/3P) :
The notion of sharing losses and profits is one of
key elements in the concept of participatory finance.
It is a process that allows for the sharing of risks.
between entrepreneurs and investors.
3-The prohibition of uncertainty and of
speculation (Gharar and Maysir):
According to Sharia, activities containing elements
of excessive uncertainty or that rely on the
Speculation in order to make a profit is prohibited.
A contract in accordance with Sharia is one where all
the fundamental characteristics are clear.
4- The tangibility of the asset (asset backing):

Every Islamic financial transaction must be

backed by a real and tangible asset.
5- Illegal activities:
Islamic financing cannot be aimed at a
investment in an activity prohibited by Sharia

CHAPTER 2: The products of

financing of the banks
participative
Short-term financing:

Al quard AL Hassan or interest-free loan:

In Islam, it is permissible to lend money without
receive surplus. At maturity, the debtor will have to
reimburse the exact amount of the capital he has
borrowed. The lender, who does not expect any gain
material, mainly for moral reasons.
Subcontracting financing:
 In subcontracting, (Istisâa), a buyer (client
(order) places an order with its supplier (under-
(contractor) to deliver a product to him, according to
specificities detailed in the contract, at a purchase price
and according to delivery and payment deadlines
who are also agreed upon in the contract.
The Salam sale:
The Salam sale is a forward sale that consists of
pay in advance for goods that will be delivered at a later date.
Thus, unlike the murabaha, the bank
does not act as a credit seller of the
merchandise acquired on order, but as
buyer, with cash payment for a merchandise
which will be delivered to him in due course by his partner.

Medium-term financing:
Mourabaha (commercial financing with margin)
beneficiary):
Flagship product financing the operation of a business
and/or its production cycle or the
consumption.
Leasing
This formula corresponds exactly to the technique
of leasing where the bank purchases movable goods and
buildings desired by the developer(s) of a
project in order to rent them out.

Long-term financing:
Moucharaka or moussahama (participation in
the capital)
In this formula, the bank finances a project.
investment or the restructuring of a company in
entering the capital of the company (contributions in
equity and in associated current accounts
like a shareholder.
Mudarabah (total contribution of capital against the
workforce
In this formula, the bank provides the totality of the
capital required for the entrepreneur, in return
he contributes to the project through his work and
his skills.
Insurance products:
According to the oulamas (Muslim scholars), the system of
Western-style assurances are not compatible.
with the precepts of Islam.
This has led to the creation of pooling systems
solidarity (takafoul) where participants protect themselves
mutually against the various claims by putting
in common a certain sum of money, which
varies according to the noted loss ratio.

Chapter 3: Participatory finance at

Morocco
Although they have been marketed since 2007, the
new banking products are poorly known to the
public, too expensive, surcharges and with low quality
satisfactory, which results in the management of these
products require a reassessment by introducing
deep adjustments aimed at performance and
revival of this promising market.

The law of January 2015:

The January 2015 law provides Morocco with a legal framework
necessary for the establishment of Islamic banks.
The kingdom aims to become one of the main ones
Islamic financial institutions on the African continent.
After the reforms of 1995 and 2006, the law on the
credit establishments and equivalent organizations have been
a newly reformed and officially
promulgated in January 2015 after nearly a year
of examination and discussions within the two chambers
of the Moroccan parliament. Among other developments
aimed at modernizing the Moroccan financial system
and ensure its stability, the main novelty
brought by this new law. If some consider
this denomination as the symptom of a certain
the 'sensitivity' of the subject, it remains nonetheless
that highlights the values of participation and
share that underpins economic relations and
financial in Islam.
Moreover, this designation helps to avoid the risk
of amalgamation between religion, on one hand, and
the human experience that is made of it, on the other hand, that
can have its own advantages and limitations.
Furthermore, the fact that the provisions relating to
participatory banks should be integrated within the
new banking law and have not been subject to a
regulations specifically dedicated to banks
participatory as an integral part of the system
Moroccan banking and finance and helps to strengthen the
regulatory coherence and the stability of the system
financier.
Thus, after decades of waiting, the kingdom is
officially endowed with a legal and regulatory framework that
authorize the banks participative à
officially exercised on the Moroccan market. If this
delayed compared to neighboring countries, particularly the
Tunisia and Algeria may be attributed to reluctance
institutional, even 'political', it is possible
to advance that the law has tried to take advantage of
lessons from over 40 years of existence of
Islamic banks around the world. Moreover, this
law comes after the major banking and financial crisis of
2008, which highlighted the significant shortcomings of
interest-based banking system and posed the problem
of the role of credit as a driver of activity
economic.
In this context, Islamic finance is likely to
create a true alternative model or at least
a major vector for diversification capable of limiting
the systemic risks to stability
financial.
Once adopted, the new banking law will pave the way
to the establishment of banks and financial institutions
participatory.
 When it comes to Islamic products, the
banks are not really up to date. Only Dar
Assafaa, a subsidiary of the Attijariwafabank group, offers a
Islamic alternative to traditional products of the
bank. Even if it only markets one of the three
products authorized by BAM, namely Mourabaha for the
real estate credit, automobile and furniture equipment.
As for the banks, they haven't really responded.
present at the call. Some have completely stopped it.
commercialization of participatory products. Hence the
drop in the overall score recorded in recent times
years. What is the cause of this flop? It is partly attributable to
in the absence of a dedicated regulatory framework for banking
participative. Moreover, several establishments
estimate having a range of participative products, but
they are all waiting for the new banking law to
best redeploy this activity. Once adopted,
this law will pave the way for the establishment of banks and
of participatory financial institutions.
Today, almost the entire (94%) of the
The Moroccan population would be interested in finance.
participative according to a survey conducted by the Islamic
Finance Advisory & Assurance Services (IFAAS) on the
Islamic finance in Morocco.
Finance Law 2016:
In the 2016 Finance Bill, the legislator
set the tax regime of the IjaraMountahiaBitamlik contract
and aligns it with that of the Mourabaha, but omits the
other contracts provided for in the new banking law.
A first sigh of relief for the future
participatory banks. The Murabaha contract, introduced
on the Moroccan market in 2007 alongside the
Ijara and Musharaka contracts were the first and the only
to take advantage of a few privileges to ensure him a
fiscal neutrality. Today, it is the turn of a
new contract to follow the same path. It is about,
the occurrence of the IjaraMountahiaBitamlik contract (contract
the location ending with appropriation). It is about
of a lease equivalent with an option
purchase, with the difference that the purchase is here a
obligation. Thus, the 2016 Finance Bill
allows the one who chooses the contract
Ijara Mountahia Bitamlik can deduct from its revenues.
taxable, up to 10% of total income
taxable, the amount of the rental margin defined in
the framework of said contract. The deduction, which is possible
during the entire rental period, it only takes place at
condition that the housing thus acquired or constructed is
the main residence of the contractor. Failing that, the client
should refund the unpaid tax. For employees
contractors, benefiting from this contract is conditional upon
the withholding tax on the amount of the rental margin,
made by the employer who transfers it to the bank,
while the self-employed will have to provide the
payment receipts with their statements of
tax revenues.
Tax issues:
The taxation surrounding alternative products
the moment of the launch was very restrictive if not
dissuasive
Indeed, and before the entry into force of the law of
finances 2009, the acquisitions of buildings in
Murabaha formula was subject to double the
registration fees: a first time during
the bank's acquisition of the property at
financing for a tax equivalent to 3% of the property's price
and a second time during the resale to the customer, for
a tax of 3% as well, but based on the cost
final acquisition (in other words, the price of the property increased)
of initial expenses and the commercial margin of the
bank). The tax burden being fully
supported by the end customer, this translated to
necessarily by a prohibitive global credit court
compared to a traditional credit formula
which does not give rise to a double transaction.
The same observation applies to the Ijara formula, which leads to
also double transfers:
Acquisition of the asset by the bank with fees of
first transaction (transfer fees, tax
notarial...) which are the responsibility of the tenant then to the
contract terms of second transaction fees on
the residual value (registration, transfer, tax)
notarial, notary fees). The finance law of 2009 has
to address this problem by planning within the framework of
Mourabaha contracts the application of rights
registering only once on the acquisitions of
real estate by the banking institution (without
count the remuneration that he will apply)
consecration of the principle of tax neutrality.
it brought a significant change to the code
general tax20 specifying that: the base
taxable is determined as follows: for sales
and other transmissions for a fee, by the price
expressed and the charges that may be added to the price.
However, the acquisitions of real estate or funds of
commerce within the framework of a Murabaha contract,
by the acquisition price of said goods by
the credit institution.
Furthermore, 'when a single act includes several
conventions deriving from or dependent on each other,
only the applicable law to the agreement is perceived
giving rise to the highest perception. But
when, in any act, there are several
independent dispositions, it is due for each one
from them and according to its nature a particular right. For the
Murabaha contracts referred to in Article 131-1° herein
above, the rights are settled as indicated in
first paragraph of this II.

Thus, the problem of double taxation in terms of

registration rights have been resolved by the law of
finances 2009, however this new provision has
not enough to make the real estate murabaha product more
competitive, the differential in rates between the Mourabaha and
the conventional credit having been only reduced and
not eliminated.
This persistent gap is partly explained by the fact that it
there is another tax that continued to be collected two
times due to the double transaction. This concerns the
transfer duties amounting to 1% of the price
from acquisition to the purchase of the property by the bank in the
framework of the transfer of ownership.

But assuming this issue is resolved, it

remained one that was all the more detrimental, it concerns
of VAT. Regarding this tax, murabaha is
doubly penalized.
Due to a differential in rates first, since the
the current rate for alternative financing is
20% against 10% for a traditional mortgage.
this adds to the calculation basis of this tax: then
that it applies only to interest in the case of a
classic credit, it fully impacts the due date
in the case of alternative funding. A final
injustice delivers the final blow to murabaha for this type of
financing the banks are not explicitly
authorized by the general tax department to spread
the imposition of their profit margin over the entire duration
of credit they find themselves compelled, indeed, to pay
the tax in full at the beginning of the contract, even before
to perceive the benefit from which it is deducted.
But fortunately, this heavy fiscal constraint
seems to be eliminated, indeed the finance law 2010
indicates that the Mourabaha formula will no longer be
sanctioned by VAT since it will no longer bear the
VAT on the total due, but only on the profit
from the bank and at a rate of only 10% compared to 20%
previously, the finance law 2010 thus puts an end to the
surcharge on murabaha.
Chapter 4: Successfully Promoting the
Islamic finance in Morocco: what
conditions?
Currently, everyone is interested in finance.
Islamic
Government investors researchers,
savers,... all these participants have great
expectations regarding Islamic finance. Indeed,
Should measures be taken and ensure good ones?
conditions to ensure the success of this young person
industry. We can primarily mention without
pretend to be exhaustive:
Having a true political will and definition of a
global strategy for the promotion of the industry
Islamic finance through the different
components of the system: banks, Takaful company,
investment funds...with an involvement of
public authorities in this strategy, notably the
central bank.
The preparation of the different actors (political,
economists, banking executives, scholars, ...) by a
appropriate training in various fields of
Islamic finance, both in technical terms in order to
strengthen their skills.
The definition of the operating mechanisms and
of money market instruments and management of
cash management that complies with the principles of the
Islamic finance.
Encouraging reluctant banks by the
mobilization of grants, of rewards and of
protection against unfair competition.
The necessity to comply with rules, standards and
standards defined by the oversight bodies and
regulations such as AAOIFI, CIBAFI, IICRA...
The necessity of avoiding the transposition of experiences
all ready from other countries without taking into account the
specificities and the local context.

Adoption of incentive marketing and launch of

campaign to raise awareness of the importance of these
products in dynamism economic and
social of the country, using all available media.
The definition and implementation of a framework
appropriate and complete regulatory framework (revision of the law
banking, appropriate legal and fiscal framework...
allowing Islamic finance to forge its path
towards performance; etc.
All these measures are capable of giving life.
and the dynamism of product marketing
Islamic and ensure their success with a
welcoming population (7 out of 10 Moroccans say they are
favorable to financial products compliant with
precepts of Islam.
Chapter 5: Participatory Banks
do they represent hypocrisy?
Participatory banks participate in financing
from the acquisition of a company. The main part of the funds
is provided by the bank and the rest by the investor.
The repayment is done over a fairly short period.
thanks to the increase in dividends that will be used to
repay the capital and the banks' share in the
benefits. The bank's share of the profits is
fixed in advance in the contract, so what he calls
profit is actually an interest rate
In this case, the participatory bank is satisfied with
change the term 'interest' to 'fixed benefit in advance'
if the project does not generate enough profitability for
reimburse the principal and the required profit, the reaction
the participatory bank will be exactly like a
commercial bank. She will try by all means
to recover its funds according to the order established by law.

Frequently Asked Questions:

Do Islamic banks work only
with Muslims?
No. Islamic banks work with everyone.
person or company willing to follow the rules
and to apply the structures of Islamic banks,
these involve both moral rules and
business rules.
Q: Are my deposits in an Islamic bank?
exposed to a risk of loss?
R: No. Some investments in banks
Islamic ones aim to protect the depositor against
the risk of loss. Others may be covered by
special reserves held by the bank for
to protect you against the risk of underperformance
or loss, and their impact on you.
Q: The regulatory bodies in my country
Do they need to amend the law to allow the instruments?
Islamic financiers?
In some cases, the laws and regulations
The scale of a country can penalize the different
Islamic instruments. Nevertheless,
Very often, Islamic institutions have
with limited leeway without the country
has to modify its laws and regulations. The
the performances of Islamic banks are maximized
when they have a regulatory and tax framework
which grants them the same treatment as that reserved
to conventional banks and their arrangements
financiers.
Q: Do Islamic banks have the right to take
Are there any guarantees? If so, do they have the right to
to keep more than the obligation I owe in
case of seizing the guarantee?
R: No. In a number of transactions, like the
Murabaha contract, the Islamic bank requires a
guarantee. If she finds herself compelled to seize it, she has
the right to recover only the amount that is due to him
thus as well as the related costs, such as legal fees,
for example.
Q: International Islamic banks can-
they operate in the countries where they do not have
of subsidiaries or branches?
R: Over the years, Islamic banks have
intervened in different capacities as
offshore financiers, fund investors and
asset managers in countries where they
did not have a physical presence.
Q: Can conventional banks...
offer financial services and products
Islamic?
R: Since the emergence of Islamic banks
modern, the major international banks such as
Citibank, HSBC, Deutsche Bank, and Development
Bank of Singapore offers financial products.
Islamic on the global market. The jurists
Islamic people are happy that these establishments and
numerous more modest conventional banks
offer these services that contribute to growth of
market.
CONCLUSION:
The crowdfunding industry has managed to
transform over the course of thirty years from an activity
device to a financial management system
large alternative with potential
real expansion particularly in services
banking and consumer loans in
particularly in Muslim countries. Compared to the
traditional finance, the sector is still very young
but the learning curve remains steep. The challenge
is to achieve an appropriate level of support from the
governments and market regulators.
BIBLIOGRAPHY:

The techniques of credit and commercial banking

outside - BERRADA Mohamed Azzdine.
Thesis for the final study project for obtaining the
Master's degree: The stakes of participatory banks
and challenges.

Islamic finance: Ethical Values Council

Securities (CDVM).
The holy Quran.
End of studies thesis on participatory finance:
Evolution and perspectives.
Islamic Finance in Morocco amid reluctance from the
demand and development perspectives - Said EL
MEZOUARI, Mohamed LOTFI, Youness BOUTHIR.