Impact of Covid-19 on SME portfolios in Morocco: Evaluation of banking risk costs and the effectiveness of state support measures

• Main Authors: Mohamed Habachi, Salim El Haddad
• Format: Article
• Language: English
• Published: LLC "CPC "Business Perspectives" 2021-09-01
• Series: Investment Management & Financial Innovations
• Subjects: expected loss; expert opinion; internal rating; probability of default
• Online Access: https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/15499/IMFI_2020_03_Habachi.pdf

This study proposed a method for constructing rating tools using logistic regression and linear discriminant analysis to determine the risk profile of SME portfolios. The objective, firstly, is to evaluate the impact of the crisis due to the Covid-19 by readjusting the profile of each company by using the expert opinion and, secondly, to evaluate the efficiency of the measures taken by the Moroccan state to support the companies during the period of the pandemic. The analysis in this paper showed that the performance of the logistic regression and linear discriminant analysis models is almost equivalent based on the ROC curve. However, it was revealed that the logistic regression model minimizes the risk cost represented in this study by the expected loss. For the support measures adopted by the Moroccan government, the study showed that the failure rate (critical situation) of the firms benefiting from the support is largely lower than that of the non-beneficiaries.