Financing companies in Morocco: between questions and actions

Has the health crisis opened up opportunities or, on the contrary, has it clarified or even exacerbated certain threats to the financing business? Has it revealed shortcomings in the intrinsic capacity of certain businesses to support customers in times of crisis? Among finance companies, the atmosphere that characterized the management of the crisis was tense, against the backdrop of the debates that arose around the decisions of the Business Intelligence Committee.

Recriminations, questions and hesitations, eagerness to obtain certain decisions, or even taking into account new threats (but also their satisfaction) marked the year 2020 for finance companies. At the end of its annual general meeting held on December 18th, the Association professionnelle des sociétés de financement (APSF) gave an update on its activities. Among the recriminations, the failure to take into account the specificities of the leasing business in the decisions of the CVE, and therefore, the non-representation of the APSF within the authorized bodies. 

On the one hand, the implementation of the moratorium to be granted to clients has raised questions about practical aspects. On the other hand, the threats and risks linked to the debate on the cost of maturity extensions, and on the “doubt about the real solidarity effort” expressed by certain clients towards leasing companies, have brought to light new threats to finance companies, in terms of image and reputation. Moreover, professionals in the sector say they are satisfied to have been heard on the unprecedented proposal, in Morocco and elsewhere, to suspend depreciation of assets given in leasing.

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Application of the moratoria at the end of June: $145,500 (1.3 MMDH) materialized 

The moratorium granted by leasing companies, at the end of June 2020, concerned $1,51 million (13.5 MMD)H out of a total outstanding amount of $5.6 million (50.1 MMDH) that leasing companies carry, and totaled $145,500 (1.3 MMDH). The Leasing Section agreed to rearrange the rents of the current contracts with customers, deciding to propose to those who request it, amendments to these contracts with capitalization of interests. 

It should be noted that customers did not request a moratorium for several reasons. The Leasing Section finally held a meeting, on Friday, October 2nd, 2020 at the APSF headquarters, with the National Federation of Tourist Transport (FNTT). During this meeting, the exchanges concerned the moratorium of the leasing maturities at the end of December 2020 and the prospects of the tourist sector at the end of March 2021. The section explained the conditions of refinancing and that in fact of the cost of deferral applied to the customers, it is not a question of an increase or the application of complementary rents, but of a recalculation of the maturities on the basis of the conditions of the contract. As a result, it is not possible for customers to defer their payments “free of charge”. On this occasion, the FNTT representatives expressed the wish to also talk to consumer credit companies that finance “professional” vehicles. Acceding to this wish, the delegation of the APSF promised to organize a meeting as soon as possible.

Moratorium “bis” at the end of December for the tourism sector

The estimated impact of the crisis for the year 2020 is -69% on tourist arrivals, -60% on foreign exchange earnings and about 50% loss of jobs compared to 2019. According to Bank Al-Maghrib (BAM), travel revenues would show a sharp decline from $8.8 million (78.8 MMDH) in 2019 to $2.67 million (23.9 MMDH) in 2020 and would rebound to $5.5 million (49.1 MMDH) in 2021. In the absence of specific support to the sector, the impacts of this crisis will continue to be felt at least until the end of 2023. To limit these impacts, a program contract 2020-2022 relating to the “revival of the tourism sector in the post-Covid-19 phase” has been adopted. 

According to it, the planned measures will allow to resume the performances of 2019 from 2022, and thus recover more than 5 million tourists, $3.13 million (28 MMDH) of travel revenues in foreign currency and ensure the maintenance of at least 80% of stable jobs over the period 2020-2022. Among the financial measures to support the sector is the “establishment of a moratorium for the repayment of bank loans and for the repayment of leases until December 31st, 2020 without payment of fees or penalties for tourism businesses and their employees” (measure 7). The section discussed the application of measure 7 of the program contract and wondered whether Bank Al-Maghrib would renew the authorization concerning the first moratorium. After discussions with BAM’s Banking Supervision Department, the latter gave its agreement to the Professional Association of Finance Companies.  In terms of activity, at the end of September, the finance companies felt the effects of the Covid-19 crisis, which were variously appreciated.

The leasing market

The leasing market recorded a sharp decline in activity during the first nine months of 2020, with a decline of $400,000 (3.6 MMDH) or 32.7% in financing compared to the same period in 2019. Production during the first nine months of 2020 stood at $1.24 million (11.1 MMDH) compared to $1.87 million (16.7 MMDH) one year earlier. The outstanding amount at the end of September 2020 decreased, compared to the end of December 2019, by $210,000 (1.9 MMDH or 3.9% for the book outstanding amount, and by $180,000 (1.6 MMDH) or 3.2% for the financial outstanding amount.

The consumer credit market

The consumer credit market recorded a sharp decline in activity during the first nine months of 2020, with a decline of $380,000 (3.4 MMDH) or 24.7% in financing compared to the same period in 2019. Production for the period stood at $1.15 million (10.3 MMDH) compared to $1.53 million (13.7 MMDH) one year earlier. At the end of September 2020, gross outstanding amounted to $6.22 million (55.6 MMDH), up by $35.3 million (315 MMDH) or 1.2%. The share of outstanding receivables in the gross outstanding amount stood at 13.1% at the end of June 2020 instead of 10.4% one year earlier.

Factoring activity of the three APSF member companies

With a total of $1.3 million (11.6 MMDH) in debt write-offs for the fiscal year, the factoring activity of the three APSF member companies declined by $145,000 (1.3 MMDH) or 10.6% compared to the first nine months of 2019. Outstanding debt write-offs at the end of September 2020 reached $390,000 ( 3.5 MMDH), up by  $48 million (428 MMDH)or 13.9% compared to the end of December 2019.

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(Featured image by RF._.studio via Pexels)

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First published in LesEco.ma, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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