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Mideast money morocco hopes regulation will aid second islamic finance dri


´╗┐Morocco is set to give Islamic finance a second try, counting on closer regulation and a clearer legislative framework to resolve problems which plagued its first attempt. Banks in the country began introducing a range of Islamic finance products in 2007, calling them "alternative finance", but they drew little response from the majority Muslim population. Both consumers and the banks themselves were unfamiliar with the products, while the lack of a detailed legal framework for Islamic finance also kept uncertainty and costs high. This time, the environment is different. Morocco's parliament is considering a detailed bill that would regulate Islamic banks and issues of sukuk (Islamic bonds), and its passage - which could occur this year - is expected to prompt some Moroccan banks to establish dedicated sharia-compliant subsidiaries. Meanwhile, Morocco's central bank plans to set up a central sharia board to oversee the sector. Sources aware of the plan told Reuters that seven scholars and financial experts had started training to become members of the board. The political momentum behind Islamic finance has increased since a moderate Islamist-led government took power through elections in late 2011, and as the government struggles with a large budget deficit; sukuk issues could attract money from wealthy Islamic funds in the Gulf. Said Amaghdir, chairman of the Moroccan Association for Participative Finance Professionals, an Islamic finance business association, said the tax treatment of sharia-compliant products would be crucial for the industry's development."We are fighting to get fair taxation for the participative products - that's how their prices would be closer to conventional ones," he said. "It is a matter of political will."In its current form, the proposed legislation appears to address the tax issue well. It provides for the use of special purpose vehicles (SPVs), while transfers of real estate between sukuk originators and SPVs would not face double taxation, said Houda Chafil, managing director at Maghreb Securitization, a financial firm. This is expected to favour the use of ijara sukuk based on sale and lease-back arrangements. POTENTIAL

As several countries in the Middle East, including Oman and Libya, open up to Islamic finance, Morocco appears to be one of those with the most long-term potential; almost half of the population of about 33 million is believed to be outside the formal banking system. A Thomson Reuters study of Morocco, released this month, estimated Islamic banks could account for between 3 and 5 percent of its total banking assets by 2018, or about $5.2-8.6 billion - still far below the proportion of roughly a quarter seen in the developed markets of the Gulf. Moroccan banks have expressed cautious interest in the opportunities. AttijariWafa, Morocco's largest bank and the first to establish an Islamic unit, has said it will expand the unit after the bill passes. Local lenders BCP, BMCE and BMCI , a subsidiary of BNP Paribas, may launch Islamic units of their own once the legislation is in place. BCP, Morocco's second largest bank, aims to open an Islamic subsidiary alongside a partner with Islamic banking expertise, said Laidi El Wardi, BCP's general director for retail banking."First we want the new bank to create its own network, even though it will not be very large. I believe in the next four to five years, we will have at least 60 branches. For the second phase we will start using the conventional bank networks."

BMCE Bank, Morocco's third largest, is eyeing opportunities in sharia-compliant investment banking, takaful (Islamic insurance) and sukuk, said Mohamed Maarouf, director of participatory development finance at BMCE. Foreign banks look likely to play an important role in developing the market; Moroccan authorities may guide them towards partnering local banks rather than establishing fully owned Islamic subsidiaries, bankers believe. Gulf banks from Kuwait, Bahrain and the United Arab Emirates have expressed interest in entering the market when the bill comes into force, said Lhassane Benhalima, the central bank's deputy head of banking supervision."We remain open-minded in our vision, and joint ventures between local banks and foreign investors are encouraged."One banking industry source, speaking on condition of anonymity because of the sensitivity of the issue, said he expected the Moroccan central bank to approve the creation of only four to six Islamic banks, to avoid crowding in the sector."Most of the Moroccan banks interested in Islamic finance have already started talks with foreigners to make up joint ventures," the source said.

The ventures will face considerable obstacles, however, in particular a lack of consumer awareness of Islamic financial concepts, seen in consumer surveys conducted by BMCE."I think that it is natural to say that they want Islamic products, but nobody knows what Islamic finance is: they think that Islamic finance is qard hasan (benevolent interest-free loans)," Maarouf said. INDEX Moroccan officials are also looking to develop Islamic finance in areas outside banking. The Casablanca Stock Exchange is preparing to roll out a sharia-compliant index with around 35 companies, and will seek to list sukuk, said Karim Hajji, general director and chief executive of the exchange. In the takaful sector, insurance companies are expected not to be allowed to open Islamic windows and instead will have to set up separate units, a move which could help differentiate the firms in an insurance market that is currently dominated by the largest four firms, the Thomson Reuters study said. There is also a push to make the management of awqaf (Islamic endowments) more efficient, a process started in 2012 by the Ministry of Endowments and Islamic Affairs. The country's awqaf own about 80,000 pieces of real estate across the country, but these tend to command low rental prices rather than competitive market rates, said Mohammed AlKawrari, awqaf president at the ministry."Moroccan awqaf are old awqaf; we have endowments that are twelve and a half centuries old. We have inherited the old awqaf in the historically rich old cities, such as Fez and Marrakesh," he said. The ministry is studying the operations of real estate investment funds and the possibility of engaging private companies to help in the management of some of the properties. However, AlKawrari conceded that the ministry faced a challenge: modernising awqaf and maximising their returns while avoiding a hike in rental prices, which could hurt low-income families occupying the properties.

Money edges back to greece as euro exit fear wanes


´╗┐Oct 22 After scrambling to get their money out of Greece as the economy collapsed, Greeks abroad are regaining an appetite for shares and property at home, spurred on by bargain prices and a bet that their country will stay in the euro zone after all. Property investors and agents say interest in real estate has jumped since the summer and there are tentative signs the financial exodus is slowing, according to central bank, stock market and investment flow data."There are deals that didn't make sense but do now as the outside world takes the government more seriously," said Kostas Kazolides, a London-based investor who has been investing in and advising on property deals in Greece and Cyprus for 35 years."People are talking about going back in and buying. There are villas in Mykonos going at 30 percent of their value because sellers are feeling the pinch," he said. A 30 percent fall in construction costs was another attraction. Fears that investments and bank deposits would be redenominated in a rapidly devaluing new Greek currency if Greece left the euro had put the brakes on international investors buying assets like property and shares on the cheap in recent years. But a coalition government led by conservative Prime Minister Antonis Samaras that came to power in June has made a positive initial impression on some investors by pledging to do everything needed to keep bailout funds flowing, easing fears of bankruptcy and euro zone exit. There are signs European policymakers are becoming more conciliatory towards Greece, including German Chancellor Angela Merkel ruling out letting the country default on its debt, making the country's exit from the single currency look less likely for now. Analysts at U.S. bank Citigroup changed their view earlier this month that Greece would almost certainly leave the euro, lowering its probability of such an event to 60 percent from 90 percent, mainly due to a change of attitude by other euro zone governments. [ID: nL5E8LCPE0]

Data from Lipper, a Thomson Reuters company that tracks the funds industry, shows the amount of money flowing out of Greek equity funds is slower in 2012 than previous years and turned positive in August. The net outflow from funds investing in Greek equities during 2012 was 17 million euros at the end of August, out of a total asset base of 690 million euros, which indicates a slowdown in investors running for the exit from the 50 million euros of 2011 and 42 million euros lost in 2010."You might see more inflows (in future) because the rhetoric changed from the German side," said Georgios Tsapouris, an investment strategist at British private bank Coutts. "At some point you have to move before the market so there is going to have to be some opportunity," he said. Investors dabbling in the Greek stock market have reaped rewards for their bravado in recent months, with the Athex equity index up nearly 30 percent since early May, outperforming other asset classes such as gold, emerging market equities, oil and some government bonds.

Central bank data suggests sentiment is stabilising after the country's banking system spent years suffering the severe strain from capital flight as savers moved money abroad to protect it from bank failures and possible currency devaluation. Deposits held by businesses and households climbed slightly during the summer from a five-year low of 150.58 billion euros in June to 153.89 billion euros a month later, the biggest monthly jump in more than three years, before slipping by 0.33 percent in August. Despite some grounds for optimism, there is still much to deter jittery investors, including a decision by the country's biggest company, Coca Cola Hellenic, to relocate its headquarters to Switzerland and its shares to London this month, citing better access to capital markets.

While Greeks abroad are more prepared than others to invest in their country now, many pulled their money out as the economy turned bad and their willingness to put it back in again still depends on the circumstances being favourable."It's important not to underestimate the emotional pull," said Chris Groves, a London-based partner at law firm Withers who advises private clients. He defended the motivation of expatriate Greek investors."There's a sense of duty and it's not right to say rich Greeks are purely motivated by greed. There are much more complex motives," he said. Property investors will become more confident of paying a fair price as the Greek government begins selling state assets including real estate as a condition of its bailout over the next several months, said Dimitris Manoussakis, head of the Athens office of real estate consultant Savills."After the August holidays there was a change," he said, noting Greek investors had become more interested in commercial property like hotels and retail schemes than before and that demand was coming from countries including the US, South Africa and Australia."We are now taking emails and calls to request information for property that's on the market. Six months ago it was frozen and we weren't taking those calls."