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Tunis:
Islamic finance in Tunisia is only a recent trend, and one that is
still working through the hurdles to meet the competition in the
domestic banking sector.
In 2009, the Islamic Bank of Zitouna was established by Mohamed
Sakher El Materi – a Tunisian business magnate at the time, and
the thirty-year-old son-in-law of former President Zine el-Abidine
Ben Ali. Mention El Materi’s name, and most Tunisians will wince
with distaste at the memory of the Ben Ali-era corruption and the
excesses of which he was so intimately a part of.
Ever since the Tunisian revolution wrested the Ben Ali clan’s
control over the domestic economy, El Materi has been holed up in
Dubai, and the post-revolutionary government has since assumed
ownership of Zitouna, the country’s first Islamic bank.
Nowadays, Zitouna no longer appears muddled by its genesis with El
Materi, and is seeing its market share in the banking sector
increase, say Islamic finance experts.
The absence of any coherent legal framework to support Islamic
finance, though, is a major constraint for its future expansion in
Tunisia, according to Amine Ben Salah, a member of the Council on
Islamic Finance in Tunisia.
To understand why this is so, one should look closely at the
following fundamental in Islamic finance: murabaha. Any Tunisian
customer wishing to receive financing from Zitouna, for example,
would initially specify the good for which they lack funds to
purchase. Once Zitouna agrees, it then buys the good from the
vendor and immediately assumes the title of ownership over it. The
customer then makes the offer to purchase the good from the bank
and draws up a pay schedule with Zitouna. When the contract has
been signed between Zitouna and the customer, the title then
transfers over to the client.
What is interesting is that an Islamic bank charges a fixed
percentage of the good as its profit margin, since interest rates
are forbidden in Islam.
Murabaha essentially entails two transactions – one from the
original vendor to the bank, and then from the bank to the
customer. In Tunisia’s case, the existing law taxes both of these
transactions at the expense of not only the Islamic bank, but its
client as well.
Burdened by such taxes, Zitouna must raise the percentage that it
charges its customer in order to compensate for such taxation.
With higher rates, it will inevitably find itself losing ground to
conventional banks that do not experience such high levels of
taxation.
Istisna’ is one of many notable Islamic financial products that
are rooted in murabaha. It generally relates to the construction
of buildings as well as the manufacture of machinery and vehicles.
An investor seeking financing for the construction of hotel, for
example, would agree with the bank that the latter will build the
hotel and even provide the expertise to do so. The investor,
according to the specific pay schedule, will then pay back the
bank up-front or in installments until a certain maturity date.
The Lac Palace in Tunis was financed through Istisna’ and the
planned financial harbor in Raouad is set to be so as well.
The Tunisian government is aware of the challenges facing Islamic
finance. Article 13 of the 2012 complementary budget – currently
under review by the Constituent Assembly (CA) – precisely supports
a legal framework to bolster the competitiveness of Islamic
finance vis-à-vis conventional banking. According to Lobna Jeribi,
a CA member from Ettakatol party, the goal is to reduce these
taxes on the dual transactions undertaken by Islamic banks in most
of their financial transactions, so that they can charge rates
competitive with the interest rates imposed by conventional banks.
The Ministry of Finance is prepared to draw up a clear legal
framework to allow more Islamic financial products to be
commercialized in the financial services market, said Jeribi.
The government has good motivation to brush aside obstructions to
Islamic finance in the current economic context. With not enough
money circulating in the Tunisian economy, an expansion of Islamic
finance could attract funds from oil-rich Gulf nations as well as
Malaysia, suggested Jeribi.
Besides Zitouna, Al Baraka bank is the only other Islamic
financial institution operating in Tunisia. However, it only
offers offshore services to this date.
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