Assessing Credit Access in MoroccoMorocco is a North African country bordering the Atlantic Ocean to the west and the Mediterranean Sea to the north. Its economy relies largely on vibrant services and agricultural sectors for growth, and after experiencing a severe drought in 2016, the latter sector has bounced back in 2017. The industrial sector, however, has yet to see significant investment or growth.

According to the Moroccan government’s own estimates, extreme poverty has been eradicated in recent years. The percentage of the population living below the national poverty line was around 4.8 percent in 2014.

One signal of a healthy economy is access to credit. Below are some of the current strategies for improving credit access in Morocco.

Agricultural Credit Access in Morocco: The “Meso-Credit”

As is the case in many countries, rural areas in Morocco have a tougher time gaining access to credit — oftentimes, their residents don’t even bother trying. Innovations for Poverty Action reports that 50 percent of the rural households surveyed indicated that they needed credit in the previous year but never actually requested it.

To meet the needs of the 40 percent of Moroccan farms that are midsized, the Group Crédit Agricole du Maroc offers an innovative “meso-credit” portfolio. Midsized farms are considered too small to take a traditional banking approach but too large for a microfinance approach. Meso-credits are generally loans given to agricultural small and medium enterprises (SMEs) consisting of less than €9,300, with good success and repayment rates.

When the midsized farms can access credit, they can survive, thrive, expand and hire, which ultimately will reduce rural poverty in the area.

The World Bank’s Contribution

In May 2017, the World Bank announced a $350 million program to fund financial intermediation reforms in Morocco.

The program has four main goals:

  1. Support new sources of financing for SMEs
  2. Tighten oversight of the banking sector,
  3. Encourage capital market development by increasing the range of investment tools and protecting Moroccan investors
  4. Invest in the civil service pension fund to keep it solvent

Low-income households are expected to benefit from these reforms, as are female entrepreneurs. The reforms allow women to gain access to more sources of financing and electronic payment systems, which remove social and economic barriers that previously stood in the way of women.

The Takeaway

Many projects are underway to help improve Moroccan investors’ access to credit in a responsible and growth-oriented way.

Hopefully, these efforts—and others like them—will improve credit access in Morocco, get development projects off the ground and lift even more Moroccans out of poverty.

– Chuck Hasenauer

Photo: Flickr

Credit Access in IndiaThe evolution of credit has sanctioned simply the idea of money as an invisible but powerful force. In a place where poverty still affects 22 percent of the population, credit access in India is difficult for many of its people. Often, formal credit is as elusive for the people of India as its tangibility.

PMJDY and Financial Inclusion
Though financial inclusion has become a recent focus for policymakers, 40 percent of people still lack access to basic financial services. Financial inclusion is the basis of perpetual economic growth. “Without financial inclusion, we cannot think of economic development because a large chunk of the total population remains outside the growth process,” said Dr. Harpreet Kaur and Kawal Nain Singh of Punjabi University and The Rayat Institute of Management.

Many low-income individuals have relied on informal, and sometimes devastating, options to borrow money or gain credit access in India. In response to this, formal options such as Pradhan Mantri Jan Dhan Yojana (PMJDY), a mega financial inclusion plan, was designed. PMJDY aims to ameliorate poverty and fast track financial growth. The program targets those from remote areas and promotes financial literacy, universal access to banking services and insurance. This is all to “commence the next revolution of growth and prosperity,” the plan explains.

Unfortunate Faults
More than a few studies have reported the same findings as Dr. Joy Deshmukh-Ranadive of the Human Development Resource Centre in New Delhi. In the doctor’s report on rural micro-finance in India, she explains that “the track record of these formal sources has not been positive. Micro-finance…circumvents the drawbacks of both formal and informal systems of credit delivery.” These downsides include exploitative interest rates and fortifying systems of oppression.

Entrepreneurship in Rural India
The micro, small and medium enterprise sector (MSME) account for 37 percent of India’s GDP, and more than 40 percent of the country’s total exports, according to the World Bank. Despite this, MSMEs have been limited by inadequate access to financial services.

Fortunately, the International Finance Corporation devised a program called India Collateral. The program is modeled after a similar program that has had success in China. The project hopes to revise the discrepancy by opening access to banking services for more MSMEs by increasing lenders’ confidence.

While there are programs formulated to improve access to credit in India, there remains a gender bias. Though loan rejection and approval are issued at an equal rate to both men and women, women tend to seek financial services less often. Higher gender bias countries like India see more women deferring from the loan process, according to a report by the European Central Bank.

It is an interesting paradox: those who have money are those who typically qualify to borrow it. The necessary condition for credit access is already established finances. Those who stand to benefit the most from borrowed money are those who do not have it. Steps toward financial inclusion in India are governed by this idea. Many programs continue to amend credit access in India, develop the informal credit market and lower interest rates in the hopes of developing the country’s economy from the bottom up.

– Sloan Bousselaire

Photo: Flickr

TurkeyIt can be difficult to get investment projects off the ground when potential investors themselves cannot access credit. Without investment projects, it becomes difficult to lift people out of poverty, so the issue itself is critically important to The Borgen Project.

So, how does the current picture look regarding credit access in Turkey?

Turkey boasts the second-largest banking system in Emerging Europe, after Russia. The term “Emerging Europe” refers to poorer economies in central, eastern and southeastern Europe. Think Serbia and Albania, not Germany or France.

The Turkish system is highly liquid and well-capitalized, granting it great flexibility to lend financing to investors looking to develop the region. There are many viable options for those looking to get a loan in Turkey.

Turkey’s system supports three types of banks: standard deposit banks, development and investment banks and participation banks. Any of these may grant loans in the form of cash, non-cash or interest-free (i.e., participation) loans in local or foreign currency. Leasing and factoring companies are also an option and several international development banks also provide funding. The European Investment Bank (EIB) and the International Finance Corporation (IFC) are two such entities.

In 2016, the World Bank reported that Turkish bank account, debit card and credit card ownership were at an impressively high level, which tends to indicate access to finance. As of then, the country had also recently increased its rate of savings, which bodes well for future credit access. However, the data show that women continue to have less access to credit than men, despite progress being made.

Just this past September, Reuters reported that Turkish President Tayyip Erdogan called for banks to open credit access in Turkey for investors and to lower their interest rates. Erdogan strongly opposes high-interest rates and wants to pressure the banks—especially state banks—to makes this change.

According to Hürriyet Daily News, this comes after Deputy Prime Minister Mehmet Șimșek announced earlier this year the creation of a new Credit Guarantee Fund that allows crafts and tradespeople easier access to financing. Bloomberg reports that policymakers don’t intend to expand that fund despite the growth it has already sparked. Time will tell whether that is a good move.

Hopefully, the overall increase in lending power will spur even more investment and growth in Turkey and serve as an example to other nations struggling with high levels of poverty.

– Chuck Hasenauer

Photo: Flickr