Interview: Abdellatif Jouahri
What has been done to increase the credit available to small and medium-sized enterprises (SMEs)?
ABDELLATIF JOUAHRI: The percentage of credit issued to SMEs increased from 18% to 30% since 2008 and there are many reasons behind this. First, the financial reporting environment has been improved. In this regard, the central bank published a directive in 2005 that defined the information all firms must disclose when submitting a credit application. The establishment of a credit bureau in 2009 has given banks better insight into creditworthiness. Also, the credit policies of banks have been able to rely on organised rating systems and a more decentralised credit decision structure. The national guarantee system has contributed to increasing credit availability to SMEs. Taking into account the difficult economic situation, the central bank recently introduced a bank refinancing mechanism collateralised by SMEs loans portfolio to further support SMEs.
In addition, the central bank, in cooperation with the General Confederation of Enterprises in Morocco, banks, the National Agency for SMEs and other local partners established an Observatory of SMEs and very small enterprises to jointly tackle funding issues of these categories of businesses.
How do you assess the increasing need for liquidity, and what can be done to meet demand?
JOUAHRI: The main factor causing the deteriorating liquidity position among Moroccan banks is the autonomous impact of dwindling net foreign assets since 2007, in the wake of the increasing trade deficit.
In this context, Bank Al Maghrib has aimed to maintain adequate liquidity levels among banks in order to allow for the financing of economic activity, while at the same time ensuring better transmission of monetary policy. The central bank has opted for an accommodating policy that includes lower ratios for required reserves, going down from 16.5% in 2007 to 4% in 2012. Monetary instruments have also been enlarged, as has the list of assets which act as eligible collateral.
The problems related to the reduction of net foreign assets have to be resolved through measures that can help to swiftly mitigate the structural deficit and improve the balance of trade. One barrier to increasing exports is the predominance of the EU as the principal export market and the fact that exports mostly consist of products with minimal value added. Indeed, more benefit could be drawn from further developing new value-added sectors with a global impact, such as IT, which would help boost the country’s competitiveness.
This strategy should be completed by diversifying our export markets in the direction of emerging markets – in particular in Africa. To take advantage of this openness, an evolution towards a more flexible exchange regime appears desirable, but this should be balanced against budget sustainability in the medium term. All concerned actors would need to be prepared to account for these changes in their daily operations.
To what extent can Islamic finance products contribute to the diversification of sector services?
JOUAHRI: In fact, many reforms should be carried out under the new banking law starting with the establishment of a National Sharia Committee to endorse the compliance of products and services with Islamic principles. The central bank should also set the requirements for the establishment of participative banks and prepare circulars on the prudential and accounting standards that must be complied with.
Furthermore, the central bank will define the conditions for collecting deposits and carrying out other banking activities in accordance with sharia principles. This new regulatory framework should allow new actors to offer products and services catering to the needs of a category of customers who are still unbanked.
Moreover, the new financial instruments introduced by participative banks can help cover SMEs’ needs in terms of project financing. The reforms in the new banking law will contribute to the extension of the financial sector and to enhance financial inclusion.
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