Microfinance institutions: how BAM will bail out the coffers

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Following the almost general decline in the indicators of microfinance institutions, due to the health crisis: cessation of loan release activity, very low recovery rate, cash flow problems, etc., Bank Al-Maghrib is launching a program to support the financing of micro-credit associations. In a recent circular letter from the Monetary and Foreign Exchange Operations Department of Bank Al-Maghrib, the institution sets the terms under which financing support will be provided. Details !

Bank Al-Maghrib (BAM) is setting up a refinancing line for new loans and rescheduled existing loans granted to micro-credit associations, during the period from “1st quarter of 2022 to the last quarter of 2023”. Clarification of size: “The refinancing of Bank Al-Maghrib is granted for a period of one year, in the form of guaranteed loans”, specifies the circular.

For their part, the banks will have to mobilize, in favor of Bank Al-Maghrib, as a guarantee for the refinancing granted, the eligible assets fixed by the decision of the Wali n ° 80/W/20 relating to the instruments of monetary policy, its modifications and the texts taken for its application.

In terms of their accounting, it will be necessary to take into account the fact that the refinancing rate is equal to the weighted average of the key rate over the refinancing period. Banks participating in this program can benefit from quarterly refinancing from Bank Al-Maghrib for a maximum amount equal to the volume of eligible loans.

By eligible loans, BAM means new loans and rescheduled existing loans granted to micro-credit associations, disbursed during the quarter preceding each call for tenders and having a duration greater than or equal to one year.

How will things go technically?
In the circular note LC/BKAM/2022/4 signed by Mounir Razki, head of the Monetary and Foreign Exchange Operations Department at Bank Al-Maghrib, and dated April 15, 2022 and relating to the support program, BAM indicates how things are going. technically happen?

On the settlement date, BAM will credit the central settlement accounts of the beneficiary counterparties with the amounts of the refinancing granted to them. At maturity, BAM will debit the central settlement accounts for the amounts granted, plus the related interest.

But in the case of an early repayment, partial or total, of a credit refinanced within the framework of this program, the bank will have to inform Bank Al-Maghrib without delay and proceed, within the next two working days, to the repayment of the refinancing. for an equivalent amount.

But in the event of non-compliance by a bank with one of the provisions of the circular letter, BAM warns that it will debit the central settlement account of the establishment for the total amount of the refinancing granted, plus interest and penalties related.

Why such a program?
It must be said that the microfinance sector has been damaged by the Covid. The crisis having had a deleterious effect on the ability of clients of Microfinance Institutions (MFIs) to preserve their livelihoods, because they generally come from the most vulnerable sections of society.

Thus, microfinance actors have seen their challenges multiply: stoppage of loan release activity, very low recovery rate, cash flow problems; in short, we have witnessed an almost general decline in MFI indicators. So many issues that weaken all MFIs.

In order not to add to the worries of the target population, to help customers in difficulty so that incomes and jobs are not disproportionately affected and to avoid business shutdowns, customers in the sector have benefited from a massive postponement repayments of their microloans, following requests made for an average duration of three months without interest and without charge.

In April 2021, Ahmed Ghazali, president of the National Federation of Microcredit Associations (FNAM), pointed out that on this date, more than 665,000 microcredit files, representing an outstanding amount of 6.2 billion dirhams, were concerned. That is 86% of the sector’s overall outstanding amount, inducing a negative impact on the net microcredit product for approximately 350 MDH of loss of earnings.

The key role of the sector
It is important to underline the key role of the microcredit sector which allows nearly a million micro-enterprises, excluded from the traditional financial system, to access quality financial services. Not to mention the capillarity of the network of MFIs made up of more than 1,700 fixed branches, 40% of which are in rural areas and 150 mobile branches dedicated exclusively to rural areas and landlocked regions. These million income-generating activities (IGA) support some 4 million Moroccans and employ hundreds of thousands of employees. The sector is considered one of Morocco’s leading employers with more than 8,500 employees, 50% of whom are women.

How to participate in a refinancing operation?

To participate in a refinancing operation, banks must communicate to Bank Al-Maghrib, no later than the 15th of the month following the end of each quarter, the statement of credits eligible for this program, drawn up in accordance with a model. The legal representative of the bank must send Bank Al-Maghrib, prior to the settlement of each guaranteed loan transaction, a letter of confirmation and guarantee, a promissory note, a moral commitment as well as the list of assets presented as collateral.

Modeste Kouamé / ECO Inspirations

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