VZCZCXYZ0007
RR RUEHWEB

DE RUEHCL #0235/01 3501713
ZNR UUUUU ZZH
R 151713Z DEC 08
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 8223
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHMD/AMEMBASSY MADRID 3835
RUEHFR/AMEMBASSY PARIS 0674

UNCLAS CASABLANCA 000235 
 
SIPDIS 
 
STATE FOR NEA/MAG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINT MO PGOV
SUBJECT: DIFFICULTIES IN MOROCCO'S MICROCREDIT SECTOR 
PRESENT SILVER LINING 
 
¶1.  (SBU) Summary: The Central Bank of Morocco and the 
National Federation of Microcredit Associations (FNAM) moved 
decisively the week of 8 December to address difficulties in 
Morocco's microcredit industry, recommending that a national 
credit bureau be established.  The Central Bank reported that 
in 2008 the number of loan beneficiaries decreased by four 
percent and that the default rate on microcredit loans 
increased by three percent.  Financial experts in the field 
told Econoff that these difficulties stem from a lack of 
structural coordination and harmonization amongst the 13 
local microcredit institutions (MCIs).  Once established in 
early 2009, the Central Bank's credit bureau will be able to 
track the credit history of each applicant seeking a loan 
within the group of 13 and consequently eliminate the 
multiple simultaneous loans given to individuals. This will 
likely reduce the number of microcredit beneficiaries by half 
a million.  In the long run, this change is a positive 
development, forcing MCIs to rethink and restructure their 
lending operations and thereby developing a fundamentally 
sound basis essential for a constructive relationship with 
the Millennium Challenge Corporation (MCC).  (Note: The MCC 
plans to launch its USD 46 million project to increase 
financial services for Moroccan micro-enterprises in the 
upcoming months. End Note.) End Summary. 
 
----------------------- 
A Flourishing Industry 
----------------------- 
 
¶2.  (SBU) The microcredit sector, a central part of Morocco's 
poverty reduction strategy, has grown exponentially in the 
last decade. In 2008, there were an estimated 1.3 million 
clients, with a loan portfolio of USD 695 million. (Note: 
Currently 64 percent of the loan recipients are women. End 
Note.) According to Executive Director of Planet Finance 
Maghreb, Mohamed Maarouf, in the last two years the number of 
microcredit beneficiaries grew by 144 percent, the total 
value of loans distributed increased by 260 percent, and the 
number of employees in the sector increased by 160 percent. 
At a micro-enterprise award ceremony attended by the Consul 
General in Casablanca, FNAM announced its plan to increase 
the number of microcredit loan recipients to three million in 
¶2009. 
 
------------ 
Perhaps Not 
------------ 
 
¶3.  (SBU) Despite efforts to expand the sector, the Central 
Bank of Morocco and financial experts in the field note a 
current decline in microcredit lending and predict that this 
trend will continue. According to the Central Bank, in 2008 
the number of loan beneficiaries decreased by four percent 
and the default rate on microcredit loans increased by three 
percent. Both Mustapha Bidouj, President of Banque Populaire 
Foundation for Microcredit (BPFMC), and Maarouf of Planet 
Finance Maghreb, told Econoff that these difficulties stem 
from a lack of structural coordination and harmonization 
amongst the 13 local MCIs.  Currently, the lending system 
permits an individual to simultaneously borrow money from six 
different MCIs, without the microcredit lenders' knowledge of 
the other loans, said Maarouf.  "Before the clients realize 
it they are way in over their heads, leading to an increased 
default rate," Bidouj told Econoff. 
 
¶4.  (SBU) The lack of structural organization also leads to 
intense competition amongst the different microcredit lenders 
for potential clients.  The President of BPFMC told Econoff 
that it is not unheard of to have five microcredit lenders in 
the same one-mile radius offering identical products and 
vying for the same clients.  Recognizing that micro-lending 
is a non-profit activity, FNAM President Sijilmassi asserted 
that "associations must develop within a professional 
framework governed by internal regulations." 
 
¶5.  (SBU) Another challenge is the confusion amongst loan 
recipients about whether these microcredit loans are social 
subsidies.  Maarouf of Planet Finance told Econoff of a 
misguided local political figure who urged his constituents 
not to pay back their loans, alleging that they were in fact 
gifts from the King. &This confusion must be addressed and 
this means we need to communicate with borrowers,8 
Sijilmassi said. 
 
----------------- 
The Silver Lining 
----------------- 
 
¶6.  (SBU) Although the microcredit sector in Morocco 
currently faces challenges, efforts to strengthen and improve 
the sector offer a sliver lining. In early December at the 
invitation of the Central Bank of Morocco, the executive 
board of FNAM and the Central Bank moved decisively to create 
a national credit bureau. Once established in early 2009, 
this new entity will be able to electronically track the 
credit history of each applicant seeking a loan within the 
group of 13 microcredit lenders. Maarouf predicts that the 
credit bureau will likely reduce the number of microcredit 
recipients from 1.3 million to 800,000 because the number of 
repeat beneficiaries will be eliminated. As a result, MCI,s 
will be forced to rethink and restructure their lending 
operations and thereby develop a solid industry that can work 
effectively with the MCC. (Note: The MCC plans to launch its 
USD 46 million project to increase financial services for 
Moroccan micro-enterprises in the upcoming months. End Note.) 
 Another positive development is that rural Morocco will 
likely become a new target for MCI,s in attempt to augment 
their client base.  Currently, 85% of microcredit loans are 
issued in urban areas. 
 
¶7.  (SBU) Comment: For now, the reforms in the sector reflect 
the support the Central Bank has extended to the microcredit 
industry.  In the long run this is positive development for 
the sector,s credibility, which suffered a minor setback in 
¶2008.  The new developments in the sector have already forced 
MCI,s to rethink and restructure their operations and 
thereby develop a fundamentally sound basis essential for a 
constructive and effective cooperation with MCC. End Comment. 
MILLARD