Rabat — As part of efforts to show solidarity with the nation's poor, the Moroccan government is preparing to set up a public zakat fund.
Morocco is moving closer towards the creation of a national zakat fund. The idea was put forward by the late King Hassan II when he called for an entity responsible for collecting alms, but the proposal was never implemented.
Najib Boulif, the Minister Delegate of General Affairs and Governance, recently said that preparations for such a fund were now being made by the Islamic Affairs Ministry, which is working on a management model. The government will then examine implementation mechanisms, the minister told Magharebia on October 24th.
Boulif said that given the very tough economic situation, stakeholders unanimously agreed that the practice of zakat must be expanded.
A zakat fund would enable the government to manage the sizeable sums currently donated by benefactors to organisations outside state control, according to economist Nacer Yahyaoui.
"Streamlining and channelling zakat funds will enable the state to pour large amounts of money into social welfare. Funds could be used to incorporate social aspects into many fields, such as employment, health and education," he said.
Samira Kassimi, a sociologist, argued that such funds exist in many Muslim countries and that it is now Morocco's turn to launch one, especially as there are many benefactors who would be willing to pay into it. She said that some members of the public would like to see their zakat money managed by the state so that it could be used for projects that really make a difference. In her view, public mistrust of the authorities is largely a thing of the past.
"The Benkirane administration is inspiring confidence, if only in terms of transparency and efforts to combat immorality. As a result, charitable people would not hesitate to give their zakat to it," she claimed.
Zakat was mentioned in the Party of Justice and Development's election manifesto. Before the elections, Abdelilah Benkirane said that Moroccans did not yet feel that they could trust a state body with their zakat as they saw this as a matter between themselves and God, but that the party was determined to examine the issue.
From a religious perspective, zakat is compulsory and a right of the poor, according to Hmida Merroukh, a professor of Islamic education. Every year, Muslims must calculate the amount they will give according to their means and give it to the poorest in society, he said. The donation given must be worth at least 85 grams of gold (2.5% of assets). Zakat is payable by livestock, goods, metals and minerals, fruit, vegetables and cereals.
Public opinion is divided. Some people feel that an institution should be created to manage the charitable giving, while others reject the idea.
Safae Meliani, who works for a private company, subscribed to the former view. She said that some fraudsters embezzle zakat money and use it for their own ends, whereas the creation of a public fund would make it possible to manage donations.
That view was not shared by Ahmed J., a public-sector worker, who said that zakat was an entirely personal matter. He said he feared the prospect of zakat being made compulsory for all citizens at a time when Moroccans are already weighed down by taxes. "Income tax is deducted at source. It accounts for 38% of people's incomes. Can't that tax be counted as zakat?" he wondered.
KUALA LUMPUR: The Finance Ministry paid a 50 basis-point premium for a 20-year sukuk over non-Islamic sovereign debt, the biggest spread this year for government-guaranteed syariah-compliant notes.
Turus Pesawat Sdn, a company set up to sell the securities that will fund aircraft purchases on behalf of loss-making carrier Malaysian Airlined, sold RM3.4bil of debt in total, said two people familiar with the deal who declined to be named because the details are private. The RM1.65bil portion of 2032 notes yielded 4.36%, the top end of the 40 basis-point to 50 basis-point guidance, they said.
“The higher pricing reflects the lower risk-appetite for the aviation business, which is very volatile, as well as the increase in supply of sukuk,” Michael Chang, who oversees US$1bil as head of fixed-income at MCIS Zurich Insurance Bhd, said in an interview yesterday. “Fifty basis points for a low-risk government-guaranteed paper is attractive, and is definitely worth holding.”
Falling yields on Islamic bonds have spurred a surge in issuance this year in the world’s biggest market for the debt. Sales more than doubled to a record RM84bil from RM35.4bil in the same period in 2011, according to data compiled by Bloomberg.
Turus Pesawat’s offering of sukuk, which pay returns on assets to comply with Islam’s ban on interest, is part of a RM5.3bil 20-year programme.
The company also sold RM500mil each of 10- and 12-year syariah debt yesterday at yields of 3.74% and 3.93%, representing premiums of 30 basis points and 40 basis points,. It issued RM750mil of 15-year notes at 4.12%, a 45 basis-point spread, they said. A basis point is 0.01 percentage point.
MAS sold RM1bil of Islamic bonds with no fixed maturity in June via a private placement at a yield of 6.9%. It also issued RM500mil in September at the same rate.
MAS announced in May it planned to lease six Airbus A380s and two A330s from the government for RM5.3bil.
The airline is seeking to win back business from budget carrier AirAsia Bhd by expanding its fleet after reporting losses for six straight quarters through June.
The sukuk are based on the syariah principle of Murabaha, a three-party transaction where a financial institution buys the goods from the supplier on behalf of the customer and sells them back at a markup.
Egypt may struggle to meet its Islamic finance targets. The new Muslim Brotherhood government aims to boost the sharia-compliant share of total banking assets from 5 to 35 percent within five years.
The potential is undoubtedly big. Egypt is predominantly Muslim and only 10 percent of the 80 million people have bank accounts. But the rise of Islamic finance in Egypt might be slow.
Hosni Mubarak, the long-time former president, didn't hold back Islamic finance, although he didn't encourage it either. However the nascent sector was badly tarnished in the 1990s by a series of investment scams.
Demand was also restrained by a 1989 declaration from a top Egyptian scholar and preacher that some forms of financial interest on deposits were permissible to Muslims. Out of Egypt's more than 30 banks, only three are full-fledged Islamic institutions.
The government can gain from developing Islamic finance. New regulatory structures will allow it to tap a new pool of capital by issuing sukuks, or Islamic bonds. Still, the Brotherhood's ambition to grow Islamic banking seems to be mostly driven by ideology. In a country with so many pressing economic needs and where the banking sector is in good shape, it seems an odd thing to prioritise.
In any case, the goal looks ambitious. The uptake of Islamic banking has been gradual in other countries where it co-exists with conventional finance. Islamic banking assets account for an average of 25 percent of the total in the Gulf region, according to Ernst and Young.
The International Monetary Fund says it took Malaysia, now the world's biggest market for Islamic bonds, six years and a relaxation of its foreign ownership rules to almost double its Islamic finance share to 22 percent.
The only way to give Islamic finance a big boost in Egypt would be to issue new banking licences and offer tax incentives to institutions managing Islamic funds. For a weak government in need of more revenue, that hardly sounds like the way to go. The Brotherhood would be better off spending its limited political capital elsewhere.
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