Whether by choice or out of necessity, Moroccan consumers are cutting back on borrowing. Salafin, which offers personal loans and car financing, has experienced deteriorating fundamentals amid a challenging economic environment.
"People are not encouraged to go out and take loans," said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi. "At the same time, finance companies are more cautious due to rising unemployment and slower growth."
Morocco, with a population of 33 million, has lowered its forecast for growth this year to 3 per cent, down from 4.8 per cent for last year.
The kingdom, whose biggest trading partners are France and Spain, has been hit hard by Europe's debt crisis.
Salafin pursued a strategy at the peak of the economic boom to "capitalise" on its parent company BMCE Bank and develop consumer loan activity across the lender's network of more than 500 branches. Salafin has fewer than 10 branches across the country.
"But this activity was risky for Salafin," Mr Henin said, as non-performing loans started to rise and have a direct impact on the bottom line.
"Hence they had to put a hold on the lending to focus on quality."
Hanane Rahali, an analyst at CFG Group, told clients in a note: "Taking into account the lack of visibility regarding the sector's recovery, Salafin will remain binding to a prudent loan granting policy."
The analyst has a hold rating on Salafin's shares with a target price of 590 Moroccan dirhams. Salafin's stock has fallen 4.8 per cent so far this year.
To diversify Salafin's revenue base, the company sought to develop fee-generating activities such as collections and back-office operations, with BMCE and other financial companies.
"The invoicing to BMCE already started in July and should give its full effect in the net banking income this year," Mr Rahali said.