Microcredit in Morocco: A Story of Highs and Lows

Nov 2014
Morocco, November, 23 2014 - According to the latest data from the World Bank on Morocco poverty, inequality and insecurity remain significant challenges. 6.3 million people, or one fifth of the total population, live just above the poverty line.

The overall unemployment rate remains high at around 9%, the youth unemployment rate in urban areas stands at around 35%. Despite all the efforts, Morocco remains among the least active emerging economies.

To sustain economic growth and fight poverty, one of the main strategies that were implemented in Morocco was the creation of microcredit sector, a strategy that has seen a lot of success in many countries. The microcredit is a credit whose purpose is to allow low-income people to create or develop their own product or service to ensure their economic integration. The amount of micro-credit may not exceed fifty thousand dirhams (50 000 Dhs).

Morocco has implemented the microcredit sector since the nineties. Two associations stand out: Foundation Zakoura of microcredit in 1995, and association Al Amana in 1997, which starred at the national and international level. Many associations were established after. This development has made Morocco one of the most successful countries in this sector at the global level. The table below shows the ranking of top Morocco’s microcredit association at the international level.

Table1: Ranking of Morocco’s microcredit associations worldwide (2007)

Ranking of Morocco’s microcredit associations worldwide (2007) Morocco

The microcredit sector in Morocco has been advancing since its creation. It reached its highest point at the year 2007.

Based on the activity report of 1998, Zakoura was one of the most active Moroccan associations; the number of their loans rose by 507% compared to 1997, the value of these loans also increased by 412%, and the repayment rate exceeded 99%.

The other stand out association is Al Amana, which is considered a leader at the national and the international level. Its operational and capital grants reached MAD 110 million, mainly provided by USAID (48%) and Fonds HASSAH II (42%). It received several international awards like Price of Financial Transparency Mix Market (2007), price CGAP Financial Transparency (2007), Certificate of Merit CGAP (2006), and price Sanabel Financial Transparency (2005).

However, in 2008 the symptoms of the crisis began to emerge. In 2009, Portfolio at risk (PAR) was up to 10%, while universally it did not exceed 5%[4]. The number of active clients and the value of loans were steadily decreasing. The two graphics below illustrate the highs and lows of the sector from 2003 until 2010.

Evolution of active clientsEvolution of Loans amount

The crisis was caused by intense competition between microcredit associations, which carelessly gave loans to insolvent clients. These clients had the opportunity to benefit from several microcredit offered by different associations at the same time ultimately leading to a debt crisis.

The graphic below illustrates how the sector reached a crisis point.

Graphic 3: Crisis Mechanism

Crisis mechanism

A study by Solène Morvant Roux and Marc Roesch (2013) pointed out that one of the causes of the microcredit crisis is the heterogeneous groups mostly formed by the associations. Credit activity was their only commonality.When one member refused to pay his part of the loan, the other members followed his lead by not paying their parts also[5].

Loan officers were also affected by the crisis because an important part of their salary depended on the number of new clients and loans they granted. The crisis forced them to work and focus on the recovery of loans rather than on getting new clients. Their efforts did not lead to the recovery of most of the loans since clients simply refused to pay their loans.

Foundation Zakoura experienced several problems especially insolvency, and lack of experience in risk management, which required urgent intervention by the Ministry of Finance to save the foundation Zakoura and the sector as a whole. This rescue came in the form of a fusion between Foundation Zakoura and “Fondation banque populaire pour le microcredit” in 2009, the result was the “Fondation Zakoura Chaabi pour le microcredit.”

Since the end of 2009 the microcredit sector has begun recovering after the crisis, relying on a set of strategies such as using central risk. It is a system that allows the identification of clients who already benefit from microcredit from different associations at the same time, which has worked to avoid the cross debt.

Also, mapping the microcredit sector that has allowed regulating the geographical distribution of the new agencies, the associations have started to inform the National Federation of Microcredit Associations about each new agency at least two months before granting their first loan. Furthermore, the personnel of the associations were enrolled in learning programs in order to know more about the development of the new strategies implemented in the microcredit sector.

The Moroccan microcredit sector has been through some ups and downs. There were some growing pains during 2008 crisis. However, by implementing new strategies, the sector has now fully recovered and is on a steady increase since 2009.


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