Morocco's Emerging NPL Market: A Guide for Investors

Morocco's non-performing loan market is entering a period of structural change. At the end of 2025, Moroccan banks held MAD 102.3 billion in non-performing exposures, representing an NPL ratio of 8.3% on a solo basis and 8.8% consolidated. The sector is well-provisioned at 68% coverage, but the absolute stock remains elevated by historical standards, and banks face regulatory incentives to reduce impaired balances. For international distressed-credit investors, the question is whether Morocco's legal and operational framework supports the kind of secondary-market activity that has developed in Southern Europe over the past decade. The answer is: not yet, but possibly soon. A draft law specifically enabling direct NPL transfers is currently before government for adoption. If enacted, it would remove several barriers that have historically made Morocco a difficult market for portfolio acquisitions. This article provides the factual background investors need to assess the opportunity.

The Moroccan banking system

Morocco's banking sector is concentrated and relatively sophisticated by regional standards. Six banking groups account for the majority of system assets, with the three largest — Attijariwafa Bank, Banque Centrale Populaire, and Bank of Africa — together holding more than half of total deposits and credit. The sector is regulated by Bank Al-Maghrib, the central bank, which publishes detailed supervisory data annually.

Gross disbursement credits stood at approximately MAD 1,238 billion at end-2025. Against that, the MAD 102.3 billion of non-performing loans represents an NPL ratio that is elevated but not crisis-level. For context, several European markets that attracted significant NPL investment in the 2010s had ratios above 15% at peak.

NPL classification and staging

Moroccan banks classify impaired exposures using a three-tier system aligned with international practice but with some local characteristics.

A new classification circular was adopted by the Credit Institutions Committee on 5 December 2025, which aligns Moroccan classification practice more closely with IFRS 9 staging. Investors reviewing Moroccan NPL portfolios should confirm which classification framework applies to the data they receive.

Where the NPL stock sits

The distribution of non-performing exposures across sectors and borrower types is relevant to any portfolio assessment. Moroccan banks' NPL stock is weighted toward corporates, particularly small and medium enterprises in sectors such as construction, real estate development, tourism, and textiles. Retail exposures — mortgage and consumer — represent a smaller proportion of value but a larger proportion of file count.

Secured exposures predominate by value. Moroccan lending practice relies heavily on real-estate collateral, and much of the NPL stock carries registered mortgage security. The recovery path on these exposures is therefore closely tied to the speed and efficiency of enforcement proceedings, which vary significantly by court jurisdiction.

Geographic concentration is another factor. Economic activity — and therefore credit extension — is concentrated in the Casablanca-Settat and Rabat-Salé-Kénitra regions. Exposure to other regions often involves agricultural or tourism credits with different risk profiles.

Current legal routes for NPL transfer

Morocco does not currently have a specific legal framework enabling the direct transfer of loan receivables from banks to non-bank investors in the manner common in European NPL markets. What exists instead is a workaround: securitisation.

Securitisation via FPCT

Under Law 33-06, banks may transfer receivables — including non-performing receivables — to a Fonds de Placements Collectifs en Titrisation (FPCT), a special-purpose securitisation vehicle. The FPCT issues notes backed by the receivables, and investors purchase those notes.

This structure has been used for NPL disposals in Morocco, but it is cumbersome. The securitisation framework was designed primarily for performing receivables, and adapting it to NPLs adds legal and structuring costs. It also requires the establishment of a dedicated vehicle for each transaction, which is inefficient for smaller portfolios or one-off sales.

More significantly for secured portfolios, the transfer of ancillary security through the FPCT mechanism has faced practical complications. International investors who are familiar with European "true sale" requirements will find that demonstrating clean transfer of security under Moroccan law requires more diligence than in jurisdictions with established NPL transfer regimes.

Draft Law 02-26: proposed direct transfer framework

A draft law — referred to as Draft Law 02-26 — has been prepared by Bank Al-Maghrib to enable the direct transfer of non-performing loans to specialised acquiring entities without requiring a securitisation structure. According to Bank Al-Maghrib's 2025 supervision report, this draft has been finalised and transmitted to the General Secretariat of Government (SGG) to begin the formal adoption process.

The content of the draft, to the extent it has been disclosed, would permit licensed entities to acquire NPL portfolios directly from banks, with ancillary security and guarantees transferring automatically. It would also establish a notification regime for borrowers and a licensing framework for acquirers. For further analysis of what the draft proposes and what questions remain open, see Morocco's Draft Law 02-26 and the Secondary NPL Market.

Barriers to market development

Several factors have historically limited the development of a secondary NPL market in Morocco. Some are legal; others are operational.

Legal and structural barriers

The absence of a direct transfer law is the most frequently cited constraint. Without it, every transaction must be structured through securitisation, which adds cost and complexity. The uncertainty around security transfer adds another layer of risk that investors cannot fully price at acquisition.

Licensing requirements are also undefined. European NPL markets typically distinguish between portfolio acquirers (who hold title) and servicers (who manage the assets). Morocco has no established licensing category for NPL investors, which creates uncertainty about what approvals — if any — a foreign investor would require.

Operational barriers

Servicing capacity is limited. Morocco does not have an independent special-servicing industry comparable to those in Spain, Italy, or Greece. Banks have historically serviced their own NPL books internally, and third-party servicers with demonstrated track records on Moroccan portfolios are few.

Data quality is variable. Loan tapes provided by Moroccan banks in sales processes have historically been less standardised than those in European markets with established NPL secondary markets. Investors should expect to invest significant effort in data cleaning and verification during due diligence.

Enforcement timelines are long. The Moroccan judicial system operates under significant case-load pressure, and enforcement of collateral security through court proceedings can take several years. Investors accustomed to the two-to-three-year enforcement timelines in some European jurisdictions will need to model longer periods for Morocco.

The investment process

For an investor considering a Moroccan NPL portfolio, the process follows the general pattern familiar from other markets, with some local adaptations.

Sourcing

Moroccan banks have not historically conducted the kind of public, competitive portfolio sales common in Southern European markets. Most disposals have been bilateral or semi-negotiated processes. As regulatory pressure to reduce NPL ratios increases, this may change, but investors should expect relationship-driven origination rather than broad auction processes.

Due diligence

Due diligence on a Moroccan portfolio involves the usual disciplines — tape reconciliation, legal verification of claims and security, collateral valuation, procedural review — but with additional emphasis on certain areas.

Title and registration of real estate security requires careful verification. Land registration in Morocco operates through a formal system (titres fonciers) for registered land, but a significant proportion of properties — particularly in older urban areas and rural regions — remain unregistered. Security over unregistered land presents materially different risks. For more on this issue, see Collateral Value Is Not Recovery Value.

Court status of each exposure must be identified. Moroccan enforcement proceedings progress through defined stages, and the point in the procedure at which an exposure sits determines what actions are available post-acquisition and what costs remain to be incurred.

Valuation

Valuing an NPL portfolio in Morocco requires the same cash-flow approach used in other markets: estimate gross recoveries, deduct costs, position cash flows in time, and discount at the required return. The Morocco-specific inputs involve local enforcement timelines, court costs, and realisation discounts on collateral.

Investors should not rely on percentage-of-face-value benchmarks from other markets. The ratio of recovery to face value is an output of the analysis, not an input to it, and it varies widely depending on the characteristics of the portfolio. See Pricing an NPL Portfolio: From Face Value to Cash Flows for the methodology.

Structuring

Until direct transfers are legally enabled, investors will need to use the FPCT securitisation structure or establish a local entity to act as acquirer. In either case, legal advice from Moroccan counsel experienced in financial-sector transactions is essential.

Servicing

Servicing arrangements must be agreed before acquisition. Options include engaging a local servicer, retaining the selling bank as servicer under a servicing agreement, or establishing in-house capability. Each approach has trade-offs in terms of cost, control, and alignment of incentives.

Key risks for international investors

Morocco presents the standard risks associated with NPL investment in an emerging market, plus some specific factors.

Legal uncertainty

Until Draft Law 02-26 is enacted and tested, legal uncertainty around the transferability of claims and security will persist. Investors should price this uncertainty explicitly or structure transactions to mitigate it.

Enforcement risk

Enforcement timelines are long and variable. Court capacity constraints mean that even well-prepared cases may take years to reach resolution. Judicial unpredictability — variation in outcomes across courts or judges — adds another dimension of risk.

Currency risk

Morocco operates a managed float against a basket weighted to the euro and dollar. For investors funding in hard currency, dirham depreciation is a risk to returns. Hedging is available but adds cost.

Concentration risk

The limited number of large portfolios available means that any significant allocation to Morocco is likely to involve concentration in a small number of positions. Portfolio diversification may be difficult to achieve.

Political and macroeconomic risk

Morocco has a track record of relative political stability and orthodox macroeconomic management, but country risk remains a factor for long-duration investments with recovery timelines measured in years.

The opportunity

For investors with the capacity to operate in an emerging market and the patience to work within developing legal and operational frameworks, Morocco presents an opportunity with several attractive characteristics.

The NPL stock is substantial. At MAD 102.3 billion — equivalent to approximately USD 10 billion at recent exchange rates — the market has sufficient scale to support institutional-sized investments.

Provision coverage is high. Banks have already reserved against a significant portion of their NPL exposures, which may make them willing sellers at prices that work for acquirers.

Regulatory pressure is building. Bank Al-Maghrib has signalled a clear policy objective of reducing NPL ratios, and the draft transfer law reflects that priority. Banks will face continuing pressure to dispose of non-performing balances.

Competition is limited. Unlike Southern European markets, where NPL investment has become crowded, Morocco has attracted limited institutional capital to date. Early movers may secure better pricing.

The framework is improving. If Draft Law 02-26 is enacted in a form that facilitates clean transfers with automatic security assignment, the legal barrier that has historically constrained the market will be removed.

Serenor Capital's role

Serenor Capital accompagne les institutions financières et investisseurs dans l’analyse et la valorisation de portefeuilles de créances en souffrance au Maroc — voir analyse et valorisation de portefeuilles et suivi de portefeuille.

We do not manage funds, purchase NPLs for our own account, or provide collection or legal services. Our function is analytical: recovery scenario modelling, collateral analysis, cash-flow structuring, and the preparation of materials that support investment decisions.

For further reading on the practical questions involved in underwriting a Moroccan portfolio, see Investing in Moroccan NPLs: What Investors Need to Underwrite.

Sources and references

• Bank Al-Maghrib, Rapport Annuel sur la Supervision Bancaire — Exercice 2025 (June 2026): https://www.bkam.ma/content/download/847887/9165409/Rapport%20DSB%202025.pdf
• Bank Al-Maghrib, press release on the 22nd edition of the Annual Banking Supervision Report (June 2026): https://www.bkam.ma/Communiques/Communique/2026/Presentation-de-la-22eme-edition-du-rapport-annuel-sur-la-supervision-bancaire-exercice-2025
• Law 33-06 on securitisation (Titrisation), as amended
• Draft Law 02-26 on the transfer of non-performing loans (not yet enacted; transmitted to General Secretariat of Government for adoption process)