Regulatory Alerts2018-05-02
BCEAO Instruction No. 005-05-2018 on Technical Characteristics of Islamic Finance Operations by Decentralized Financial Systems
The Governor of the West African Central Bank (BCEAO) issued Instruction No. 005-05-2018 to define the technical characteristics and permissible contracts for Islamic finance operations conducted by Decentralized Financial Systems (SFDs) within the West African Monetary Union (UMOA). The regulation mandates that all Islamic microfinance activities require prior certification from an internal Compliance Council, explicitly prohibits using regulatory approval as a commercial compliance claim, and establishes strict rules for non-participatory financing (e.g., Murabaha, Ijara, Istisna, Salam) and participatory financing (e.g., Mudaraba, Musharaka). Furthermore, it governs investment deposit accounts, stipulating that returns cannot be contractually guaranteed, must reflect actual investment performance, and require clients to possess adequate financial knowledge and risk tolerance.