Moroccan Parliament Pushes Forward Sharia-Compliant Legislation


Rabat – The law is the latest step in the development of Islamic finance in Morocco.

Sharia insurance, known as Takaful, is a growing industry in the Middle East, North Africa, and beyond. Over the past four decades hundreds of Takaful companies have opened, proving insurance coverage for Muslims in accordance with Islamic law. Starting in 2017, Morocco began to pave the legal path for Takaful companies looking to establish themselves in the North African country.

The legislation still needs to pass through the 395-member House of Representatives in Rabat. Islamic banking professionals in Morocco told Reuters that once the law is enacted, insurance companies will then be able to launch Takaful subsidiaries.

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Said Amaghdir, President of the Moroccan Association for Participatory Finance Professionals told Reuters that after the law has been passed, Islamic banks in Morocco will be able to offer life and general insurance policies.

Morocco’s efforts to strengthen Islamic finance may be relatively recent, but elsewhere in the Muslim world Takaful companies have been in operation for decades.

The first Takaful company, the Islamic Insurance Company of Sudan, was established in 1979. 

In 1985, the Grand Council of Islamic Scholars in Saudia Arabia passed a resolution stating that conventional insurance is not acceptable from a Sharia point of view.

The industry continued to expand as Takaful companies sprung up around the Arabian peninsula. By the mid 1990s, seven companies were in operation in several Muslim countries including Jordan, Saudi Arabia, and Bahrain.

By 2016 over 300 Takaful companies operated worldwide in an industry valued at over 33 billion dollars, according to a 2016 World Takaful Report.

However, the initial foundation for Sharia-compliant companies stretches back much earlier. 

Islamic scholars first forbade conventional insurance over a century ago, citing passages in the Quran that outlawed practices such as gambling and usury.

Sharia insurance differs from conventional insurance primarily in that it operates on the basis of solidarity and mutual assistance. Muslim countries wanting to stay in accordance with Islamic law have chosen to enact legislation regulating the operation of Takaful companies.

While conventional insurance companies rely on each individual member paying a premium for coverage, members of Takaful companies all contribute financially to a fund to provide mutual assistance to anyone in need.

The practice of high premiums, interpreted as usury by most Islamic scholars, is also forbidden. As are uncertainty and gambling, which some scholars also allege are characteristics of conventional insurance coverage.

This unilateral contract allows members to retain a right to collect the surplus on funds they have contributed, should no insurance claims be made.

However, Amaghdi told Reuters in order for Sharia-compliant insurers to thrive, they still need access to capital markets.

Despite the growing number of Takaful companies, some Islamic scholars have questioned the legitimacy of the industry. 

“We can make insurance a not-for-profit activity,” said Islamic economist Mohammad Najatuallah Siddiqui. “But it does not change the essential nature of what is being done.”