Abdellatif Jouahri, Governor, Bank Al Maghrib (BAM): Interview

Interview: Abdellatif Jouahri

What are the main monetary policies adopted by BAM in response to current conditions?

ABDELLATIF JOUAHRI: As we predict inflation to remain moderate in the medium term and non-agricultural activities to see a gradual recovery, BAM has maintained an accommodative monetary policy in recent years, keeping its key rate unchanged at the historical low level of 2.25%. At the same time, it has continued to support and facilitate financing for micro-, small and medium-sized enterprises, in particular through a programme established in 2013 that gives banks access to funds worth up to the equivalent value of credit they grant to this category of businesses. We will also adopt a number of additional measures in 2020, developed as part of an entrepreneurship support programme. In response to the widening liquidity deficit, BAM has adapted its average weekly injections to the changing needs of banks, raising them from Dh42.3bn ($4.4bn) in 2017 to Dh77.6bn ($8.1bn) in 2019. In addition, in September 2019 the bank’s board decided to reduce the rate of monetary reserves from 4% to 2% in order to structurally reduce the need for continued interventions. This adjustment allowed a permanent injection of a little more than Dh11bn ($1.1bn).

The reform of the exchange rate regime – first implemented in January 2018 – has been successful, with a gradual deepening of the inter-bank market. The flexible exchange rate moved within the target range without intervention from the central bank.

How would you characterise the potential of green finance in the Moroccan banking sector?

JOUAHRI: Green finance is crucial to enable countries – especially emerging and developing ones – to fulfil commitments made under the Paris Agreement. Indeed, Morocco will need $50bn for mitigation programmes and at least another $35bn for adaptation projects through to 2030. Mitigation programme requirements alone will depend on an international support of about $24bn.

Beyond the Paris Agreement, financial institutions are working to facilitate economic diversification, sustainability and energy transition. They also help finance projects in the renewable energy sector, and some banks are developing financing products specific to sustainable development. Banks have also issued green bonds. These initiatives will need to be further developed and well integrated into banks’ business development and operational strategies.

On the demand side, it is imperative that the authorities implement incentives that encourage sustainability, such as subsidies, eco-taxes and environmentally focused regulations. This would make it possible to offset the high costs of green projects.

In what ways can financial products targeting small and medium-sized enterprise (SME) development be improved?

JOUAHRI: Because of the central role SMEs play in the economy, Morocco’s financial authorities have strived to increase financial inclusion for over a decade, in particular for smaller firms. Indeed, backed by encouragement from BAM, many measures have been implemented by both public- and private-sector stakeholders to develop an inclusive environment that provides financing products and dedicated support networks to SMEs.

Despite efforts to boost financial inclusion, however, access to funding remains one of the major impediments to growth faced by SMEs. BAM has developed a national financial inclusion strategy in partnership with the Ministry of Economy and Finance, and with stakeholders in the finance world, to respond to these challenges and implement policies that enhance access to finance. A detailed roadmap was established and adopted by the Strategic Council at its second meeting in November 2019.