Moroccan microcredit sector hits problems

2008-12-03

Facing an increase in non-payment, Morocco's microfinance sector is working with the government to inform borrowers and to stabilise lending and repayment practices.

By Sarah Touahri for Magharebia in Rabat – 03/12/08

[Sarah Touahri] National Federation of Microcredit Associations President Tarik Sijilmassi (left) says the Moroccan microcredit industry has been hit by an increase in non-payment.

In 2008, the number of Moroccan microcredit customers fell by 4%. The National Federation of Microcredit Associations (FNAM) and the finance ministry want to take steps together to boost the industry, which saw strong growth between 2005 and 2007 with a 114% rise in the number of customers, an increase of 260% in the total volume of loans, and a rise of 162% in the overall number of employees in the sector.

These figures were announced at a meeting of a microcredit advisory board convened for the first time on November 25th at the invitation of the Ministry of Finance to deal with the problems currently affecting Moroccan microfinance.

Finance Minister Salaheddine Mezouar called on industry figures to enhance co-operation since the microcredit sector is such an important tool in helping people generate income. "We need to stay in touch with the realities faced by the population so that we can provide assistance; this is why it's important to develop the microcredit sector."

Unfortunately, the industry has been hit by an increase in non-payment, with the volume of arrears up to 5%, according to FNAM President Tarik Sijilmassi.

"We're not in the business of making money in a system where arrears are offset by profits; microcredit associations don't make a profit," he said.

Industry figures believe the situation is due to both external and internal factors.

Sijilmassi said one internal problem is a lack of strict regulations. "We need to organise the profession so that we can improve the quality of new loans. Although microlending is a non-profit activity, associations must develop within a professional framework governed by internal regulations," he said.

An external factor of concern is people's confusion between microcredit and subsidies. "This confusion must be addressed and this means we need to communicate with [borrowers]," Sijilmassi concluded.

Sociologist Jamal Boughaba told Magharebia that some associations help the destitute without any obligation on the part of beneficiaries. Some people take out microloans in the belief that they are grants issued by the association.

Fatima Balimi, a dressmaker, said her husband wanted to borrow 2,000 dirhams from a microcredit institution to start up a business. "When he got in touch with them, he found out he would have to pay the money back. That was a real disappointment, because the small amount would have been just enough to make a small profit. He abandoned the idea, but his brother took out the loan with the intention of not paying it back immediately," she said.

There is also stiff competition in some regions between lenders, said Noureddine Ayouche, President of the Zakoura Microcredit Foundation.

"In some regions there are 10 or 11 associations in competition with each other, against a backdrop of huge need throughout Morocco."

Competition has driven some associations to branch out from their main purpose of giving microloans. In order to turn profit, some institutions have begun issuing consumer loans.

FNAM has called on its members to avoid entering into competition, on the grounds that the primary purpose of microcredit is to help members of the public and fuel development.

Finance Minister Salaheddine Mezouar told Magharebia there is a need to draw up a code of ethics so that the sector will develop at the desired pace and the interests of beneficiaries will be protected.

FNAM is made up of 13 associations with more than 7,000 employees and 1.2 million customers. Fifty-five percent of customers within the sector are women, while beneficiaries in rural areas account for 40 percent.