Morocco issues maiden sovereign Sukuk adding a new brick into its Islamic finance wall

In a major breakthrough for Islamic finance in North Africa, Morocco has issued a maiden Sukuk facility, taking a new step toward achieving the construction of a comprehensive and holistic Islamic finance ecosystem which is now only missing Takaful. MARC ROUSSOT has the story.

The five-year MAD1 billion (US$105.28 million) Ijarah certificates carrying a 2.66% annual coupon rate were exclusively offered to domestic investors and received overwhelming demand amounting to MAD3.6 billion (US$379 million).

Sophisticated investors, including conventional and Islamic banks, insurance companies, pension funds and undertakings for collective investments in transferable securities — mutual funds regulated by the EU — took the lion’s share of this first issuance with Shariah compliant financial institutions representing 35% of Sukukholders.

In a dire need for liquidity management tools and refinancing solutions, the eight Islamic banks allowed to operate in Morocco since July last year had long been waiting for the debut issuance from the government, which fell behind its schedule three successive times. The Higher Council of Ulemas, in particular, took some time to give its greenlight.

“These certificates are a reference for financial players in general and players in participatory finance in particular. For the state, this new instrument will allow it to diversify its financing tools and broaden its investor base,” the Ministry of Finance said in a statement adding that government-owned real estate assets have been utilized as the underlying assets of the Sukuk facility with rents to be used to pay Sukukholders.

The Sukuk facility, auctioned through an SPV established by Maghreb Titrisation, a company specializing in financial engineering, is the first of a series of four planned by the Kingdom. Worth MAD1 billion to MAD2 billion (US$210.84 million) each, the facilities should follow the Wakalah, Musharakah and Murabahah structures. No precise timeline has been announced yet for the remaining three facilities.

In Maghreb, two other sovereigns are reportedly considering tapping the Islamic capital market. Tunisia has been mulling a debut Sukuk issuance amounting to US$500 million for this year while Algeria has not indicated an amount nor timeline.

Overall, Moody’s Investors Service expects at least US$1 billion equivalent of Sukuk issuance in Africa over the next 18 months with the Shariah papers to be denominated in both US dollars and local currencies.

This article first appeared in IFN Volume 15 Issue 41 on the 10th of October 2018


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