The evolution of late payments is a good indicator of the health of an economy.
While the payment terms used depend on cultural and legislative, an increase of payment delays the consequences of the financial difficulties of companies.
The analysis of the situation in Morocco is revealing a contrasting reality that is influenced by contradictory factors.
What are the businesses payment practices in Morocco?First regarding the payment methods, companies have a preference for the check, that is used for a third of the payments made, followed by bank transfers and bills of exchange.
The massive use of the check payment method does not favor payment in due time. It is certainly one of the reasons of the high level of late payments denounced by Moroccan companies.
The granting of an open credit to customers is deeply rooted in Moroccan commercial culture. 91% of companies claim to grant a payment term, certainly in a way too automatic because only 13% of them have a specialized service able to perform credit analysis.
This certainly explains the level of payment default which is extremely high. 28% of companies claim supporting an unpaid rate of over 10%! A better assessment of the creditworthiness of customers ahead of the validation of payment terms would certainly improve this situation which must lead many companies to bankruptcy.The contractual payment terms are reasonable. It is curious to note that they roughly correspond to the European average, characterized by a large gap between the northern countries (30 days and less) and the southern countries (90 days and more). France being in the middle with 55 days average.
39% of businesses say to give a payment term between 30 and 60 days, 25% between 60 and 90 days. Only 10% give an average of 120 days. This control of the contractual period was influenced by the 2011 31-10 Act that defines a target of 60 days as a legal delay starting on receipt of goods, or 90 days when the seller and buyer agree to apply that payment term.
The Act also establishes the principle of late payment penalties, calculated on the basis of the main policy rate of the central bank plus a rate set by decree.
However late penalties are globally not applied like what happens in some European countries and the calculation period based on the date of receipt of the goods and not on the invoice date makes difficult to control this provision.
The real problem of the Moroccan trade credit is the level of late payments that is in average above 30 days, which is more than double than the European practices. 49% of businesses say incur an average delays higher than 60 days, including 19% higher than 120 days!
It is clear that this reality is a considerable obstacle to the development of Moroccan companies and especially SMEs. The fight against late payments should be a priority to promote the growth of local businesses and the economy.
ConclusionThe level of outstanding payments and unpaids do not allow Moroccan companies to take advantage of reasonable contractual payment terms. They would gain to strengthen their credit management service to better assess customer risk upstream and to implement an efficient recovery and disputes management processes.
See the full analysis done by Coface (in french) here