Jawad Moustakbal (ATTAC CADTM Morocco) was one of the CADTM delegates present at the 9e CADTM South Asia meeting, Colombo, Sri Lanka (December 2-4, 2022). He presented the damage caused by microcredit and public debt in Morocco for decades.
People in debt found themselves confronted – in particular by the accumulation of microcredits to repay the previous ones – with interest rates exceeding 40%
Jawad Moustakbal began his intervention on the debt
Multilateral debt : Debt that is owed to the World Bank, IMF, regional development banks like the African Development Bank, and other multilateral institutions like the European Development Fund.
Private debt : Loans contracted by private borrowers regardless of the lender.
Public debt : All loans contracted by public borrowers.
private by detailing the case of Morocco. He first recalled that the debt was used as a tool to colonize Morocco. After the country’s independence in 1956, the debt was used as a pretext to implement neoliberal policies. Today, Morocco’s debt has doubled compared to its 2012 amount and the debt service
Repayments of interest and borrowed capital.
represents 10 times the health budget, 3 times the education budget and 7 times the amounts dedicated to public investment.
Jawad Moustakbal explained that the solution found by capitalism to respond to the damage caused by its austerity policies was microcredit. Faced with the withdrawal of the State, which no longer takes care of the essential needs of the population, the working classes have been invited to take out loans.
In Morocco, the microcredit system developed in the mid-1990s. This sector exploded between 2003 and 2007, a period during which loans multiplied. All loans granted by microfinance institutions multiplied by 11 between 2003 and 2007. Between these same two dates, the number of debtors multiplied by 4.
The microcredit sector then entered into crisis in 2008, with repeated payment defaults. The indebted people found themselves confronted – in particular by the accumulation of microcredits to repay the previous ones – with interest rate
When HAS lend money to B, B repays the amount lent by HAS (the capital), but also an additional sum called interest, so that HAS has an interest in carrying out this financial transaction. The higher or lower interest rate is used to determine the amount of interest.
Let’s take a very simple example. Whether HAS borrows 100 million dollars over 10 years at a fixed interest rate of 5%, he will repay in the first year one tenth of the capital initially borrowed (10 million dollars) and 5% of the capital due, i.e. 5 million dollars, so a total of $15 million. The second year, he still reimburses a tenth of the initial capital, but the 5% only relates to the 90 million dollars remaining due, that is to say 4.5 million dollars, therefore a total of 14.5 million dollars. And so on until the tenth year when he reimburses the last 10 million dollars, and 5% of the remaining 10 million dollars, that is 0.5 million dollars, therefore a total of 10.5 million dollars. Over 10 years, the total repayment will amount to $127.5 million. In general, the repayment of the capital is not made in equal installments. In the first years, the repayment mainly concerns interest, and the share of the capital repaid increases over the years. Thus, in the event of cessation of repayments, the capital remaining due is higher…
The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate less the rate of inflation.
exceeding 40% (for half of the loans granted by microfinance in Morocco). However, microcredit organizations hide and drown this information in the contracts they sign.
Three years later, in 2011, a massive social movement rose up against the abuses of microfinance in Ouarzazate (Morocco).
Regarding the use of funds lent by microfinance institutions in Morocco, a study showed that 43% of the funds are used for daily consumption, not to finance long-term projects.
Jawad Moustakbal is the national coordinator in Morocco for the International Honors Programme: “Climate Change: The Politics of Food, Water, and Energy” at the School of International Training (SIT) in Vermont, USA. He has worked as a project manager for several companies, including OCP, the Moroccan public phosphate company. Jawad is also a social and climate justice activist, he is a member of the national secretariat of ATTAC/CADTM Morocco, and a member of the shared secretariat of the International Committee for the Abolition of Illegitimate Debts. He holds a civil engineering degree from the EHTP in Casablanca.