Forward by Xavier Reille
Manager of Financial Institution Group Advisory Services in Europe, Middle East, and North Africa
Since its remarkable rise and hard fall in 2008-09, much has been written about the microfinance sector in Morocco. As memories of what is often regarded as the Moroccan microfinance crisis recede, this report takes a look at how the sector has evolved since then. Using case studies from the three leading MFIs in Morocco – Al Amana, Fondation Banque Populaire (Attawfiq), and FONDEP – as well as a wealth of data from other sources, we seek to capture the lessons that can be learned from this experience. It is also an opportunity to deepen the understanding of how the crisis evolved and look ahead to future challenges and opportunities faced by the sector.
Morocco is regularly included in the pantheon of microfinance crisis markets – Bosnia, Nicaragua, and Andhra Pradesh – which together had a major negative impact on the sector’s reputation. However, the crisis in Morocco was both less severe and shorter than the markets to which it is often compared. Indeed, the most severe period of the crisis lasted just one year and the sector had stabilized by 2011.
This is not to minimize the impact the crisis, let alone to argue over its existence. The years leading up to 2008 featured most of the hallmarks of pre-crisis markets: rapid growth, aggressive competition, poor lending discipline, accompanied by poor governance, and lax controls. On the other hand, the level of multiple borrowing was well below that of the most heated markets, and overall microfinance penetration remained moderate. Moreover, the Moroccan crisis was defined by the crisis of one institution – Zakoura – without which the microfinance crisis in Morocco looks far less serious.
This paper seeks to identify the causal effects of expanded access to microcredit on borrowers and communities using six randomized evaluations. The evaluations are based on a variety of sampling, data collection, experimental design, and econometric strategies. The methods are deployed across urban and rural areas of six countries in four continents representing vast disparities in terms of borrower characteristics, loan characteristics, and lender characteristics. The paper finds a consistent pattern of modestly positive, but non-transformative effects of microcredit. Other highlights include:
- Studies do not find clear evidence, or even suggestive evidence, of reductions in poverty or substantial improvements in living standards;
- There is strong evidence suggesting that businesses expand, though the extent of expansion may be limited, and there are hints that profits increase with access to microcredit;
- Analysis shows that it is likely for access to microcredit to have an effect on occupational choice, business scale, consumption choice, female decision power, and improved risk management;
- There is little evidence of harmful effects of microcredit, even with individual lending at high real interest rates;
- Analysis of heterogeneous treatment effects of the studies suggest the possibility of transformative effects on some segments of microlenders’ target populations.