MOROCCO: An Introduction to Banking & Finance

Legal Challenges and Opportunities for Cross-Border Investment and Finance in Morocco

Morocco is today recognised as one of the most dynamic financial and investment markets in Africa. The country’s banking system is solid yet dynamic, and increasingly regional, while its legal framework is evolving in line with international best practices. Yet this progress comes with complexity: the Moroccan legal and regulatory environment offers great opportunities to foreign investors, but also presents specific hurdles that require careful structuring, particularly in cross-border investments and financings.

The coming period will be marked by the modernisation of banking law, the progressive liberalisation of the foreign exchange regime, and increased regulatory attention to financial stability, green finance, and the integrity of financial flows. For international investors, lenders and M&A actors, this means that legal structuring is more critical than ever.

Economic and investment context

The Moroccan economy together with its currency (the Moroccan dirham – MAD) have demonstrated strong resilience amid global uncertainty since the 1990s. With a diversified industrial base, strategic geographical position, ambitious government reforms, and the determination and vision of its King, Morocco continues to attract sustained foreign direct investment (FDI), particularly in sectors such as automotive, aerospace, renewable energy, agribusiness, sports and logistics.

The New Investment Charter, enacted in late 2022, and the development of Casablanca Finance City (CFC) as a regional hub are strong signals of Morocco’s deepening integration into global financial and investment flows.

At the same time, Moroccan banks — well capitalised and sophisticated — are pursuing an increasingly cross-border strategy, particularly in Sub-Saharan Africa, while also supporting large infrastructure and energy projects domestically.

Legal and regulatory trends

Morocco’s legal environment for banking and finance is in a regular and active phase of reform. Several key trends and developments are shaping the way foreign investors and lenders approach transactions in the country.

Foreign exchange regulation: the persistent central constraint

Morocco maintains a controlled foreign exchange regime, governed by the Foreign Exchange Office (Office des Changes). All cross-border capital flows, debt service payments, and intercompany movements must comply with a sophisticated set of rules and restrictions.

For FDI, the regime provides mechanisms to secure convertibility guarantees, allowing for the repatriation of capital and dividends. However, issues arise frequently in relation to:

• the structuring of cross-border shareholder loans, which are subject to prior declaration or authorisation;
• the limitations on upstream guarantees and financial assistance, which require particular legal analysis and often innovative structuring;
• the difficulty of hybrid financing structures, where part of the funding is provided offshore and part onshore; and
• the regime applicable to funded and unfunded intra-group cash movements, which remains highly restrictive.

While there is a political will to progressively liberalise the foreign exchange regime — as evidenced by the managed float of the Moroccan dirham and successive revisions of the General Instruction of the Office des Changes (Instruction Générale de l’Office des Changes, or IGOC) - the current framework remains a key practical constraint that must be factored into any cross-border structuring.

Financing M&A transactions: legal and practical challenges

Cross-border M&A in Morocco, whether through share deals or asset deals, is highly active. Yet financing such transactions requires navigating several sensitive legal issues.

• Moroccan company law prohibits financial assistance by Moroccan target companies for the acquisition of their own shares, which limits the ability to use Moroccan target assets as direct security or sources of repayment in acquisition financings.
• Upstream guarantees granted by Moroccan subsidiaries in favour of foreign parent company debt are permitted only under certain conditions and require robust legal justification to avoid regulatory and corporate risk.
• Structuring leveraged acquisition finance in Morocco therefore requires careful selection of the investment vehicle (onshore SPV, CFC status, or offshore), and tailored intercreditor and security arrangements.
• The enforcement of security interests remains a challenging area. Although Moroccan law provides for a wide range of pledges, mortgages, and financial collateral arrangements, practical enforcement can be time-consuming and uncertain, particularly in the absence of harmonised and digitised registries.

Structuring project and infrastructure finance

Morocco continues to be a leading destination for project finance in the MENA region, particularly in renewable energy, water, ports and transport infrastructure.

Key legal considerations for lenders and sponsors include the following.

• The robustness of security packages, particularly in projects involving concessions or public-private partnerships (PPP), where administrative law considerations may affect enforcement.
• The necessity to ring-fence project revenues and structure appropriate offshore and onshore cash waterfall mechanisms, always in compliance with the foreign exchange regime.
• The increasing importance of green finance standards: Moroccan law and regulatory guidelines are pushing sponsors and banks to structure projects that meet international ESG expectations.

The legal framework for PPP is gradually improving, with a dedicated PPP Law and more bankable risk allocation, but careful drafting remains essential to mitigate legal uncertainty.

Reform of the Banking Law and the new regulatory landscape

The anticipated new Banking Law is a key milestone on the horizon. Expected to be enacted in the coming year, this reform aims to:

• introduce an updated regime for bank resolution and reinforce financial stability;
• align prudential supervision more closely with Basel III principles;
• provide a clearer framework for financial conglomerates and cross-border banking activities; and
• support the development of green and sustainable finance.

The new framework will likely increase regulatory expectations for banks and clients alike, particularly in areas such as AML/CFT compliance, climate risk reporting, and corporate governance.

Opportunities and challenges for clients

The Moroccan market offers significant opportunities for investors and financial actors:

• the country’s banking system is deep and sophisticated, with major Moroccan banks able to support complex domestic and regional transactions;
• Morocco offers a stable legal and macroeconomic environment compared to many emerging markets; and
• the government is actively promoting green finance and sustainable investment, which will create new areas for legal innovation.

Yet clients must carefully manage several persistent challenges:

• the foreign exchange regime remains the single most sensitive constraint on structuring cross-border finance and investment;
• legal uncertainties remain in certain areas of security enforcement and corporate structuring, particularly in complex, multi-layered financings;
• structuring M&A finance or group-level guarantees must be done with great caution, balancing legal permissibility with commercial objectives;  and
• the interaction of Moroccan administrative law with project finance remains an area requiring expert navigation.

Conclusion

Morocco’s banking and finance legal landscape is in full evolution. While offering considerable opportunities for cross-border investment, M&A and project finance, it remains a market where legal and regulatory mastery is necessary.

Foreign investors, sponsors and lenders must approach Morocco with both ambition and caution, supported by legal structuring that is sophisticated, pragmatic, and adapted to the nuances of Moroccan law and regulation.

As Morocco further integrates into the global financial system, with deeper African linkages and greater regulatory alignment with international standards, its banking and finance law will continue to evolve – offering fertile ground for those able to anticipate and manage its complexities.