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Participatory banks: New products for 2019 and 2020

Currently only Murabaha real estate and movable is marketed

It is by far the best-known product of the five approved products and the most popular among Moroccans. It is a sales contract whereby the participating bank acquires movable or immovable property with a view to reselling it to its client at its cost of acquisition plus a profit margin agreed upon in advance. The profit (profit margin) and the repayment period (installments in general) are specified in an initial contract. Thus, this transaction includes an order accompanied by a promise to purchase and two sales contracts.

The first contract is between the Islamic bank and the supplier of the property. The second contract is between the bank and the customer who issues the purchase order and accepts the deferred payment of a price, plus a margin, which constitutes the bank’s profit in this transaction. This allows the client to acquire property without taking out a loan with interest. Note that the funding can go up to 25 years. And unlike the conventional system, Murabaha provides for a double assignment, with a financial owner of the financed property. The terms of sale such as the profit margin for the seller or the repayment details of the due dates are predefined between the different parties. For now, the Murabaha real estate contract has no insurance pending the establishment of the Takaful.

Musharaka

According to the Bank Al-Maghrib circular, the Moucharaka is a partnership agreement whose purpose is the participation of a participating bank in the “capital of a new or existing project for the purpose of making a profit”. The Moucharaka differs from the Mudaraba. Starting with the capital that is not provided exclusively by the bank, the customer also contributes. Similarly, losses are borne by all partners in proportion to the capital invested. On another level, management is not the exclusive domain of the client – as it is the case for the Moudaraba- and it can be entrusted to a third person. As for profits, they are distributed among the partners on the basis of the profits actually made and not in the form of an amount fixed in advance or a percentage of the capital of the company. There are two types of Moucharaka: the indefinite (or fixed) and the degressive. In the case of the former, the bank retains its equity interest throughout the life of the company. As for the degressive Moucharaka (also called Moucharaka Moutanaqissa), the bank is not intended to keep its stake for the duration of the company. It grants its partner the right to gradually buy his share until he becomes the sole owner of the capital.

Ijara

Ijara is a contract by which a participating bank places, for rental purposes, movable or immovable property and property of this bank, at the disposal of a client for a use authorized by law. This rental can be simple – that is to say set a rental period at the end of which the user returns the property – or can be accompanied by a call option at the end of the defined period. In this case, we speak of “Ijara mountahia bitamlik”.

Mudaraba

This type of contract directly involves the bank in the project of the investor. Indeed, the latter provides its client with the necessary capital to carry out his project by giving him the freedom to manage the funds invested. However, she can oversee the management of the portfolio. If the project is completed and makes a profit, it is divided between the participating bank and the client. Otherwise, the bank will pay the losses, unless the contractor has committed a fraudulent act or serious misconduct in direct breach of the contract terms.

Salam

To use the definition adopted by the Central Bank, Salam is a contract whereby one party (the bank or the customer), as buyer, advances a fixed amount to the other party seller, to deliver goods duly identified on a fixed date. In other words, Salam is a forward payment forward sale. The BAM circular specifies that the Salam contract must fix the characteristics of the goods, particularly in terms of their nature, type, quantity and quality. In addition, it is not mandatory that the merchandise be available and the property of the seller at the time of the conclusion of the Salam contract.

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