Morocco revamps its securitization legal framework to ease Sukuk issuance

One of the final steps before Morocco’s debut Sukuk issuance, which was initially planned for 2017, is the vote in the next two months of a bill on amending the securitization law with the aim of offering a wider range of Sukuk structures and facilitating the sale of these instruments. MARC ROUSSOT reports.

Morocco, which had already twice fallen behind on its maiden Sukuk auction schedule, continues reviewing its legal framework with the vote in early February by the House of Representatives of a bill amending the securitization law in a bid to smoothen its issuance process.

The draft law, submitted by the Ministry of Finance, is now with the House of Councilors, the upper house of the Moroccan parliament, which is expected to vote on it by the end of April.

The bill accommodates all kinds of Sukuk including Murabahah, Salam, Istisnah, Mudarabah, Wakalah and Musharakah, while the previous amendment, passed back in 2013 and introducing for the first time a relatively vague definition of Sukuk, led to a restrictive interpretation by the Higher Council of Ulemas which limited the structure to Sukuk Ijarah; a too narrow definition for the Moroccan authorities that wanted to have a wider range of options for their first sovereign Sukuk.

The bill also tackles other technical issues and introduces a clear procedure to follow upon issuing Sukuk. As an example, it mandates the originator to obtain approval from the Higher Council of Ulemas, as well as the establishment of an SPV.

“Amending the securitization law is critical for the future of Morocco’s Islamic capital market as it will identically regulate both sovereign and corporate Sukuk issuances. The need of revamping it is one of the reasons why Morocco did not issue last year as initially planned,” explains Hicham Talby, the head of the Sectoral Finance and Financial Inclusion Division at the Ministry of Finance.

Following the vote of the House of Councilors, decrees defining precisely each Sukuk structure are expected to be gazetted by the end of May as the Ministry of Finance and the Higher Council of Ulemas have been working on them since last year.

Morocco, which wants its domestic sovereign Sukuk market to be as developed as its treasury bond market, expects to see its relatively undeveloped securitization sector boosted by Sukuk issuance once it is fully accommodated.

Although securitization activities have been growing since 1999 after Morocco’s securitization law was first introduced, it only amounts to MAD15 billion (US$1.63 billion).

This article first appeared in IFN Volume 15 Issue 12 on the 21st of March 2018

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