Morocco’s Central Bank to Tighten Loan Requirements in 2021 Amid Rising Household Debt

The debt of Moroccan households, encouraged by the expansion of the credit offer and the drop in interest rates, shows a negative result, reports La Map. A survey carried out at the beginning of the year had made it possible to assess the over-indebtedness of households. In detail, the outstanding bank debt of households stood at the end of December 2019 at 359 billion DH, including 132 billion DH of consumer loans. The share of household debt reached 31% while the average in emerging countries is only 20%.

In a statement to the press, Hicham Sadok, professor of economics and finance at the University Mohamed V of Rabat, justified this over-indebtedness by the mismatch between the income scale and the price of real estate in Morocco. According to him, Moroccan bank debt stands at nearly 219 billion DH, including 4.2 billion DH in the form of real estate murabaha financing, which represents two-thirds of housing loans. As for the 1/3, it takes into account consumer credit, or nearly 123 billion DH.

For the Wali of BAM, it would be caused by the pandemic and its impacts on certain activities, the rise in unemployment and the drop in incomes. The exponential increase in debt, until 2018, was ensured by a lower default rate. In the absence of this measure, the recovery announced by the bankers could be a source of tension.

To remedy this situation, the new recommendations on the conditions for granting will now be more stringent with the exclusion of a significant part of the population. The objective of this measure is to tighten the conditions for granting for fear of further exposing the most vulnerable households to over-indebtedness.