Since the early 1990s, Morocco has been undertaking a gradual liberalization of its financial system. The reforms have mainly focused on modernization of the monetary policy instruments and overhauling the financial system’s legal and regulatory framework (Kacemi and Zouhar, 2008). Key elements of the reform process were eliminating quantitative ceilings on credit, liberalizing interest rates, introducing market-based instruments of monetary policy and developing capital markets. As a consequence, the financial sector grew significantly in depth and breadth. The stock market started to develop with market capitalization rising from less than 3% of GDP in 1989 to 55% in 2005. In 1993, Morocco achieved current account convertibility and in 1996, a foreign exchange market was established ending the Central Bank’s monopoly on holding and managing foreign currencies. More recently in 2001, commercial banks were allowed to make investments abroad. The removal of foreign exchange controls on non-residents and the deregulation of financial markets have substantially changed the environment in which the monetary policy operates.
Tunisia has liberalized interest rates and credit allocation decision by commercial banks. Interest rates were liberalized in 1987 and were allowed to be set freely within a spread of three percentage points of the money. By 1996, deposit and lending rates have been liberalized. Limited controls on some deposit rates remained. A new indirect monetary policy was introduced. Treasury bills were redesigned in order to make them more liquid and attractive to investors. In parallel, the legal framework for new private investments such as certificates of deposit, commercial papers, mutual funds and corporate bonds was reinforced. Although many of these instruments are scarcely used since 1992, the average lending rate for each bank has been limited to the money market rate (TMM) plus 3 percentage points. Term deposits are remunerated at about 0.5 percent below TMM, and sight deposits at 2 percents. Comfortable interest margins have allowed banks to achieve adequate levels of profitability.
In Tunisia, bank governance is well advanced (Law Act in May 2006 and December 2007 on strengthening the policy of transparency and improving the quality of information).
Sources: from the author and adapted from Achy, 2003, Arestis, 2000, Kacemi and Zouhar, 2008, Maghyereh, 2004 and Nashashibi and al., 2001.
