Unpaid debts, or non-performing loans (NPLs), are on the rise in Morocco, weighing on banks’ profits and stability. Economists like Mohamed Jedri point to potential causes such as poor management of companies or companies in financial difficulty.
These unpaid loans are a problem for banks. They would normally have to go to court to recover the money, but it is a long and costly process,” he told Hespress.
Non-performing loans in Morocco have fluctuated over time. In March 2002, they were at their lowest level, recorded at $2.85 billion. However, by July 2021, they had increased significantly to $10.56 billion, the highest level ever recorded.
To address this situation, Morocco is exploring a new marketplace where banks can sell these NPLs.
“The new marketplace where banks can sell these unpaid loans would allow them to avoid going to court. The loans would be sold at a discount to their original value and would include loans to individuals and businesses,” the economist said, acknowledging, however, that this new marketplace will be difficult to set up in Morocco. Traditionally, the relationship between a bank and its customer is confidential and based on trust. Laws would have to be changed to allow banks to sell unpaid loans.
According to the Central Bank of Morocco, unpaid loans reached 94.1 billion dirhams (about $9.9 billion) at the end of January 2024, or 8.8% of total outstanding bank loans. The value of bad debts in household liabilities increased to 38.7 billion dirhams.
To address the problem of non-performing loans, Morocco has been working to establish a secondary market for unpaid receivables. This market would allow banks to sell their non-performing loans to local or international investors, who could then attempt to recover the debts or restructure them to make them more repayable.
The creation of a secondary market for non-performing loans (NPLs) in Morocco is progressing. However, establishing a functional market requires addressing several major challenges.
