IFC plans €60 million initiative to tackle distressed debt in Morocco

Yesterday 16:45

By: Azzat Manal

IFC plans €60 million initiative to tackle distressed debt in Morocco

The International Finance Corporation (IFC) is preparing a new investment mechanism aimed at addressing distressed debt in Morocco and helping financial institutions improve the management of non-performing assets. The initiative is being developed in partnership with German company EOS and could involve total financing of up to €60 million.

The proposed mechanism would establish a specialised platform to acquire portfolios of non-performing loans held by Moroccan financial institutions. These portfolios would then be managed and restructured, allowing banks to reduce the volume of troubled assets on their balance sheets and potentially increase their capacity to finance households and businesses.

The planned platform could target a broad range of distressed assets, including non-performing loans issued to individuals, small and medium-sized enterprises and larger companies. Certain real-estate assets associated with these debts could also be included.

Under the proposed structure, the IFC and EOS could each contribute up to €30 million, bringing the potential total investment to approximately €60 million. The project remains subject to approval, with consideration by the IFC’s Board of Directors expected on October 15, 2026.

EOS is expected to play an important role because of its experience in acquiring and managing distressed debt portfolios. The German group, part of the Otto Group, has operated in the sector for more than five decades and has a presence in more than 20 countries, employing more than 6,000 people.

The initiative comes as Morocco’s banking sector continues to face pressure from a significant stock of non-performing loans. The value of these loans reached approximately 102.3 billion Moroccan dirhams at the end of 2025, representing an annual increase of around 5%.

Despite the rise in the absolute value of troubled loans, their share of total lending declined slightly, from 8.4% in 2024 to about 8.2% at the end of 2025. The figures nevertheless underline the importance of developing specialised tools capable of dealing with distressed assets more efficiently.

For banks, the prolonged accumulation of non-performing loans can tie up capital and resources that could otherwise be directed toward new lending. Creating mechanisms to transfer these assets to specialised investors could therefore help financial institutions clean up their balance sheets and improve their ability to support economic activity.

Morocco is also working toward establishing a legal framework for a secondary market for distressed debt. Proposed legislation would allow financial institutions to transfer certain troubled assets directly to investors or specialised companies.

Such a market could encourage the emergence of professional investors specialising in the purchase, restructuring and recovery of distressed debt. This would provide banks with additional options for managing credit risk while creating a more structured environment for the treatment of non-performing assets.

The IFC’s proposed investment reflects a broader effort to strengthen the efficiency and resilience of Morocco’s financial system. By helping banks release resources currently tied up in troubled loans, the initiative could support additional financing for households, businesses and investment projects.

The development of a secondary market could also improve transparency and create greater opportunities for specialised financial operators. Over time, this could contribute to a more flexible banking system capable of responding more effectively to changing economic conditions.

For Morocco, the proposed €60 million mechanism represents more than an investment in distressed assets. It forms part of a wider strategy to modernise financial risk management, improve the circulation of capital and strengthen the banking sector’s ability to finance the national economy.