Formula for Success against Poverty?

Morocco has been a leader in the area of microcredits for many years in the Arab region and in Africa. The Moroccan microcredit system is now also receiving support from Europe. Martina Sabra reports

Mahjouba Dahiban (photo: Zakoura Foundation)
The Zakoura Foundation favors credit allocation to women

​​The Moroccan nongovernmental organization AMSED allocated the first microcredits at the beginning of the 1990s. Today, altogether 13 licensed organizations in the whole country supervise more than one million credit borrowers. In 2006, according to the organization "PlanetFinance Maroc," approximately 75 percent of these borrowers were women.

Leading the pack are the nongovernmental organizations Al-Amana (40 percent of the market) and Zakoura (30 percent) as well as two large associations founded by major Moroccan banks; they divide among them around 30 percent of the market.

At the end of April 2007, Al-Amana alone counted around 450,000 credit borrowers; the mini-association INMAA, on the other hand, only 6,500.

Moroccan know-how in the area of microcredits as a means of combating poverty is increasingly in demand throughout the region. "We have just had a delegation visit from Egypt, and soon we will be presenting our work at a forum in Senegal," reports Rida Lamrini, chairman and managing director of the umbrella organization FNAM (Fédération Nationale des Associations de Microcrédits).

Morocco also plays a leading role in the Arab microfinance network SANABEL.

Uniform law

Since 1999, all Moroccan microcredit organizations have been subjected to a uniform law, which has meanwhile been adjusted several times. According to this law, consumer credits are prohibited. The law also stipulates the ceiling for credits (50,000 dirham, or 5,000 euros), and it stipulates that the microcredit organizations themselves may not be profit-oriented.

Ibtissam Alami Idrissi (photo: Zakoura foundation)
Ibtissam Alami Idrissi used her credit to design a mobile laboratory with which she carries out contracts for the state water protection agency

​​This ensures, at least theoretically, that the high credit fees benefit the borrowers themselves, among others, in the form of accompanying educational measures and service.

Credit costs at Al-Amana currently amount to approximately 20.5 percent. "In the meantime we are financially independent and no longer rely on subsidies," explains Zakia Lalaoui, marketing director for Al-Amana. "As a result, we have been able to practically halve the costs for borrowers."

Favoring credit allocation to women

The first organization to offer microcredits for the broad masses in Morocco was the private Zakoura Foundation in 1996. Its founder was advertising entrepreneur Noureddine Ayouch, a well-known patron of social work, art, and culture with good connections to the Moroccan royal house.

Like the Grameen Bank in Bangladesh, the Zakoura Foundation favors credit allocation to women and to groups whose members support one another in repayments and in building up new businesses.

In addition, borrowers at Zakoura contract to observe the equal rights of women and men as well as tolerance for other cultures and religions. "It's not only about money, but also about values. In Morocco we need a culture of trust and respect of the other," explains Noureddine Ayouch.

The repayment rate at the Zakoura Foundation was initially around 90 percent, and today is nearly 100 percent. According to the foundation, this is due not only to women's better payment practice, but also to the fact that these clients are intensively supervised and trained.

Those who want to borrow money from the Zakoura Foundation must complete courses in reading, writing, counting, business management, and civics.

Cooperation with state institutions

To give impoverished young people a longer-term perspective, the foundation also seeks cooperation with state institutions. This helped 29-year-old biologist Ibtissam Alami Idrissi, who used her credit to design a mobile laboratory with which she carries out contracts for the state water protection agency.

"I come from very modest circumstances," says the young woman. "My family could not help me, and a normal bank would never have given me credit as an unemployed academic." Today Ibtissam Alami with her small business generates about 35,000 euros a year and employs three workers.

Al-Amana staff in the Moroccan village of Irfane (photo: Al-Amana)
Al-Amana staff in the Moroccan village of Irfane

​​With around 330,000 beneficiaries a year (figures given by the foundation for 2006), supervised by approximately 1,000 "credit agents" in 450 branch offices nationwide, the Zakoura Foundation is currently second in the Moroccan microcredit business – directly behind the organization Al-Amana.

Today, Al-Amana is one of the world's most successful microfinance NGOs. The organization was founded in 1997. In contrast to other mainly privately financed microcredit associations, it received massive aid from the U.S. development agency USAID from the beginning.

Sitting on the Al-Amana's advisory board is the Moroccan Prime Minister. Al-Amana now offers credit not only for starting up new businesses, but also credit for buying homes or for renovating an apartment or home.

Alongside the U.S. government, Moroccan state institutions and banks as well as other international financial actors (European Investment Bank, Weltbank, Arab Fund for Economic and Social Development AFESD), the German Development Bank (KFW) has been participating in the microfinance sector since April 2007.

Extensive, substantiated studies, however, on the effectiveness of microcredits as an instrument of development policy are rare.

East Asian scholar Thorsten Nilges from Duisburg, who has studied the effects of microcredits on the social life of village communities in southern India, concludes that microcredits hurt more than they help. He calls microcredits the "soft" version of neoliberalism.

Falling into a debt trap

Human rights activist Khorshed Alam from Bangladesh recently called news coverage in the Austrian developmental policy journal "Südwind" of Grameen Bank and Nobel Peace Prize winner Muhammad Yumus much too uncritical.

Admittedly, microcredits have in part provided economic stimulus in rural areas. But numerous beneficiaries in Bangladesh have landed in a debt trap due to insufficient follow-ups.

In order to be able to maintain the rigorous repayment modalities, many borrowers have had to go further into debt elsewhere. The repayment rate therefore appears to be impressively high, says Alam. But the actual financial situation of the borrowers is often bad.

In Morocco, microcredit organizations have at least so far had a very positive effect. Thousands of young people have found jobs and an income as credit agents and trainers. Al-Amana alone employs over 2,500 workers nationwide.

Al-Amana beneficiaries, according to information released by the organization, have up to now generated a better income on average. This sounds good, but in view of the extremely low initial income of many beneficiaries, 20 euros more is often not really a dramatic change.

And dry income figures say nothing about the social and cultural effects of microcredits.

Martina Sabra

© Qantara.de 2007

Translated from the German by Nancy Joyce

Qantara.de

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