Lhe centrality of microfinance is linked to its strong propensity to economically and socially include people with very modest incomes, who are therefore unattractive to traditional banking establishments and insurance companies. To get an order of magnitude, the number of active customers fell during the 1st quarter of 2021 to 886,109, i.e. a drop of 1.66% compared to the same quarter of 2020.
Aware of the strong economic impact of microfinance on populations lacking substantial income, the public authorities have taken significant measures in recent years to strengthen the financing capacity and transform microcredit institutions.
As such, it is worth recalling the drafting of the decree of August 7, 2019, which raised the maximum ceiling for loans to 150,000 DH against (50,000 DH previously). The establishment of Law No. 50-20 relating to microcredit is also a major event. This legal mechanism is supposed, among other things, to transform the microcredit sector, integrate it into the financial system, while improving governance.
Knowing that the field of activity of microfinance establishments is widened by law n°50-20 which allows, in addition to the granting of microcredits by microfinance establishments, the collection of deposits and microinsurance operations. Concretely, by virtue of the aforementioned legal instrument, microfinance entities can provide, for the benefit of their clients, advisory services, training and technical support in the field of microcredit.
The current priority
Asked about the operationalization of Law No. 50-20, Youssef Bencheqroun, Managing Director of Al Amana Microfinance, provides a sizeable clarification. “Full operationalization of the law is not yet possible due to the lack of implementing decrees. The crucial question of taxation has not yet been decided., reveals the owner of the establishment. The crisis linked to the pandemic has acted as a speed bump for the arrival of the various implementing decrees.
For the time being, taxation is a thorn in the side of microfinance entities, aware of the need to invest more in the financing segment of VSEs. Which means taking more risks. However, such an orientation presupposes the strengthening of equity capital which should not be burdened by heavy penalizing taxation. Taxation is a sticking point, since in the pandemic context, the State needs more tax revenue in order to finance the community’s growing expenses.
The covid-19 crisis has also led some microfinance players to reconsider the order of their priorities. “We are coming out of a year of crisis which is not yet behind us. The whole challenge is to return to the nominal pre-crisis level, that is to say that of 2019. However, we are not there yet”, explains our interlocutor. It should be recalled that, like several sectors of the national economy, the parameters for emerging from the crisis are beyond the control of the microcredit sector. The current border closures, which have brought tourism and other sectors and professions to their knees (crafts, tourist guides, tourist catering, car rental, etc.), are not without impact on the microcredit industry .
“The looming risk of drought is a source of concern for our business”, analyzes the boss of Al Amana Microfinance. It should be recalled that according to the figures available on the website of the National Federation of Microcredit Associations (FNAM), the outstanding amount of microcredit increased by 9.77% between the first quarter of 2020 and that of 2021. It thus rose from 7 44 billion dirhams in March 2020 to 8.16 billion dirhams in the same period of 2021. And this, with the added bonus of an improvement in the amounts released between the 1st quarter of 2020 and the 1st quarter of the year 2021. Concretely, the amount of loans released increased by 22.6% in 2021 to reach 728 MDH. Youssef Bencheqroun is formal.
Given the scale of the crisis, prolonged by the Omicron variant, it will take time for Law No. 50-20 to move the lines of the market. For the time being, taxation, deemed prohibitive, is raising a posa wait-and-see attitude on the part of the major players in the sector, who see mesofinance as a real relay for growth and transformation. As a reminder, mesofinance is particularly suitable for VSEs, SMEs and auto-entrepreneurs, who struggle to find financing offers adapted to their needs and the realities of their activities.
Increases in bad debts
According to professionals, the increase in non-performing loans in 2021 would be a manifestation of the consequences of the crisis. “The risk is still obvious. Nearly ¼ of our receivables are compromised as a result of the pandemic”, reveals our source. Despite this delicate context, Al Amana Microfinance, whose core business has so far been, among other things, the financing of income-generating activities (IGA), relies on VSEs. As proof, the microcredit establishment has developed an experimental Corporate portfolio which weighs between 10 and 15% of its overall portfolio.
The long-term objective is to be more active in the very small business financing segment, a new business for the microfinance institution. In the end, according to professionals, the return to the pre-crisis nominal level will take longer than expected. On the other hand, it is a good omen to note that the law n°50-20, which authorizes the collection of deposits, widens the window of opportunities for a different growth for the microfinance industry. “In terms of business, the course of transformation has a leverage effect”concludes Youssef Bencheqroun.
A transformative law
The major transformations brought about by Law No. 50-20 relating to microcredit, published in the Official Bulletin in July 2021, constitute a response to the grievances of several major players in a sector, today, resolutely determined to increase its shares of market for financing VSEs. Composed of twenty articles, the text provides, among other things, the forms that microcredit establishments can adopt. Clearly, the latter can opt either for the status of association or for that of public limited company (SA). Knowing that the associations cannot directly manage the microcredit service and must create, for this purpose, public limited companies. It is important to remember that the same legal system specifies the conditions required for the exercise of the activity. The public limited companies created must be credit institutions established in accordance with Law No. 103-12 relating to credit institutions and similar bodies, since microcredit associations are prohibited from collecting funds from the public.