The assessment indicates continued efforts of the Moroccan government to support the banking sector.

“Islamic banking has made relatively little headway in Morocco so far, despite the country’s large Muslim population,” Moody’s observed in its report.

Even though Muslims make up over 90 percent of the country’s total population, the Islamic banking sector accounted for only 1.4 percent of the aggregate banking assets by the end of 2021.

Nevertheless, “Moroccan banks’ capital will remain stable but modest compared with their emerging market and African peers,” according to the report.

The agency maintained a stable outlook in the banking sectors of Nigeria, Egypt, Kenya, and the West African Economic and Monetary Union. South Africa’s banking outlook was also upgraded from negative.

Global instability caused by climate threats, pandemics, and more recently the Ukraine war have left Africa’s banking environment fragile.

Even with the difficult operating environments in many of these nations, the banks’ deposit-based funding structure, capital, and profitability are set to hold steady, Moody’s added.

“Profitability will be supported by improving net interest margins from rising interest rates that will compensate for higher costs and loan loss provisions,” said Constantinos Kypreos, senior vice president at Moody’s.

“Reported capital ratios will also be stable, with banks potentially reducing dividend payouts if required.”

Moody’s noted that the asset quality for nearly all banks is expected to decline, indicating households reduced disposable incomes and businesses’ declining earnings.

African banking systems will remain deposit-funded and liquid, enabling financial stability. As for the Nigerian and Egyptian banks, foreign currency liquidity will still pose a threat.

The agency predicted continued low growth for South Africa, and robust growth for Egypt, Kenya, and WAEMU.