Morocco's participatory banking sector turns profitable after six years of losses

Morocco’s participatory banking achieved its first profit in 2023  after it suffered six consecutive years of losses since its inception in 2017.

The five participatory banks and three participatory windows operating in the Kingdom collectively generated 5.3 million dirhams in profits last year, a substantial turnaround from the 129.3 million dirham loss recorded in 2022 and the 206.8 million dirham loss in 2021.

These participatory banks, affiliated with major traditional Moroccan banks, now boast a network of 196 branches primarily concentrated in Casablanca-Settat, Rabat-Salé-Kénitra, and Fez-Meknes, employing over 10,000 staff.

The sector’s profitability was driven by a 23.4% increase in net banking income to 882.6 million dirhams. Moreover, participatory banks distributed 21.4 billion dirhams in financing in 2023, a 22% year-on-year growth primarily funded by customer deposits (12.1 billion dirhams) and support from affiliated banking groups.

Real estate financing through Murabaha contracts remains the dominant product, accounting for 80.4% of total financing, while equipment financing represents 13.5%, and consumption and treasury financing comprise the remaining 6.1%.

The sector’s initial losses were attributed to the establishment phase, which required significant investments in branches, staffing, and infrastructure. As the sector matures, it is expected to expand its branch network, introduce new financing products, and benefit from the growing popularity of Takaful insurance.