Bank Al-Maghrib reports surge in unpaid debts, raising concerns

Unpaid debts in Morocco have reached 94.8 billion dirhams, marking a 6.7% increase from the previous year, according to a recent report by Bank Al-Maghrib. This rise has heightened concerns among financial regulators, with the risk ratio from these debts climbing from 8.4% to 8.5%.

The report, which highlights the current state of the banking sector, notes a mixed trend in loan categories. Special Mention Loans decreased by 5.6% to 6.2 billion dirhams. However, Substandard Loans increased by 5.2% to 8.9 billion dirhams, and Doubtful Loans, which are less likely to be repaid, surged by 8% to 79.7 billion dirhams.

The share of Substandard Loans within total non-performing loans fell slightly to 7%, while Doubtful Loans now constitute 84% of the non-performing loans.

The report also indicates a significant concentration of credit risks in Morocco’s major cities. Over 60% of loans are concentrated in Casablanca, with 77% located in Casablanca, Rabat, and Marrakech combined. In contrast, only 3.5% of loans are distributed across 50 smaller regions.

Bank Al-Maghrib’s growing concern over the rising level of non-performing loans, now totaling nearly 95 billion dirhams, or 8.7% of all distributed loans, has led to increased demand for factoring and private debt collection services. This heightened demand comes despite ongoing legal and consumer protection issues.

Economist Ismail Idrissi Kittouni stressed the importance of efficient debt recovery methods in managing the growing volume of non-performing loans. In an interview with Hespress, Kittouni noted that the effectiveness of these methods is affected by high interest rates and economic conditions. He explained that debt recovery is generally easier during economic growth periods compared to recessions, and inflation can diminish the value of recovered debts.

The concept of establishing a secondary market for non-performing loans is gaining traction. Banking and finance expert Wissal Mandour discussed the potential benefits of such a market with Hespress.

Mandour suggested that allowing banks to transfer non-performing loans to other parties through a secondary market could enhance financial stability by improving loan management and protecting consumer information.

She highlighted that global evidence supports the advantages of secondary markets in reducing credit risks and facilitating portfolio diversification, despite some development challenges and disputes.

Bank Al-Maghrib continues to monitor the situation closely, aiming to address the rising levels of non-performing loans and their impact on the Moroccan financial system.