Participative Banking in Morocco: History, Impact, and Challenges

Discussions about Islamic banking in Morocco started in the early 80s but nothing came to fruition until 2007 with the "alternative products" initiative that ended, for most, as a failure but served as a practical knowledge foundational to the creation of participative banks in 2017. The primary objective of this paper is to provide a clear historical analysis of the development of participative banking in Morocco. This includes following its development from early 1980s debates to the 2007 "alternative products" effort and the 2017 creation of participatory banks. Furthermore, the paper aims to highlight the present impact and ongoing challenges faced by this emerging industrie within the Moroccan financial system. Through a qualitative historical research approach and a comprehensive review of academic articles, financial reports, and other sources we found that participative banks are growing within the Moroccan banking system with a potential of impacting funds allocation, money creation, and financial inclusion. Nonetheless, they face many challenges notably the over-reliance on debt-based financing, the absence of profit and loss sharing, and a lack of a comprehensive regulatory framework. Facing these problems is crucial to the development of participative banks to provide a larger sectorial impact and fulfill their potential.