Report: Morocco’s Small, Medium Businesses Are Highly Vulnerable

Rabat – Moroccan Small and Medium-Size Businesses (SMEs) have a relatively higher Corporate Vulnerability Index (CVI), an index tracking the exposure of businesses, according to the latest publication of Bank Al-Maghrib (BAM), Morocco’s central bank.

The report, titled “Analysis of Morocco’s Productive Vulnerability,” analyzes data sourced from 306,346 Moroccan businesses across all sectors.

Covering 1,218,011 corporate balance sheets, the study concludes that despite a notable increase in 2014 offset by stagnating domestic economic growth, the CVI for all companies remained stable over the study period.

The index is primarily based on the Debt at Risk (DaR) concept, which is the likelihood of businesses defaulting on paying loans.

Regarding DaR, chances of defaulting on payments pose a higher risk for Very Small Businesses (VSB) at 37%, followed by Medium Businesses (SME) at 23%, and Large Businesses having the lowest risk of defaulting at 15%.

In addition to accounting for corporate default rates, the CVI subsumes information on the Return on Assets (ROA), a measure of a company’s productivity.

The Return on Assets for Moroccan businesses rose sharply between 2006 and 2009, reaching 6% before stagnating at 2%, affected by the global financial crisis in 2007-2008.

Emphasizing the importance of access to financing as the cornerstone of creating a business-friendly climate, the report notes that 20% of Moroccan businesses benefited from external financing. 93% of said businesses benefited from bank-offered loans, according to a survey by Morocco’s High Commission for Planning (HCP).

Access to bank financing negatively correlates with CVI: The higher the CVI, the lower the chances for businesses to access bank loans.

For VSBs, access to bank loans is set at 28%, compared to 68% for MSEs, and 87% for Large Businesses, according to BAM’s report.

Assessing the business climate in Morocco, a World Bank survey conducted in the same period indicates that 4% of surveyed businesses expressed their concern at lack of access to financing, less than the MENA region’s average of 8%.

Despite pointing to the lingering issues facing Moroccan companies, the data actually shows signs of improvement in the business climate in Morocco. A similar 2013 report indicated that 15% of Moroccan businesses were concerned that lack of access to bank loans hindered their development.