Legal framework for Shariah compliance of Moroccan Islamic banks

Abstract EN

Morocco has adopted, in 2014, a new banking regulation (law 103- 12), which introduced a specific title related to Islamic banking.

The new banking regulation gives the Higher Council of Ulema (HCU) the exclusive prerogative to set the rules and serve as the final arbiter for Shariah compliance of Moroccan Islamic banks.

Furthermore, the law 103-12 requires Moroccan Islamic banks to create, within them, independant functions that will be responsible for ensuring compliance with the decisions and advices of the Supreme Council of Ulemas.

In this paper, we provide an analytical study of the Sharia compliance model introduced by the Moroccan legislature for Moroccan Islamic banks.

As such, the paper analyzes the basis of the choice made by the Moroccan legislature, the missions, roles and responsibilities of the different actors of the Moroccan Shariah compliance model and, finally, its perspectives.

A benchmark is also carried out in order to draw lessons from the best practices of other jurisdictions.

The reaserch main conclusion is that in spite of some gray areas that have to be addressed by the legislature, the Moroccan model will allow developing national Shariah standards and ensure a perfect mitigation of conflict of interests.

Furthermore, the Moroccan model will help particpatives banks to be cost-effective, mitigate reputation risk.