Diagnostic Report on the Legal and Regulatory Environment for Microfinance in Morocco

This report describes policy-related obstacles to the development of microfinance in and provides recommendations for interventions in the sector. It outlines the findings of a week-long diagnostic mission by the authors with the assistance of local legal counsel in. The report:

• Provides an overviews of the financial system and a general description of the current state of development of the microfinance sector in;
• Describes the current legal and regulatory environment in the country.

The report finds the following policy-related obstacles to the development of microfinance in:

• Decline of fiscal privileges for microcredit associations;
• Possible exercise by the Ministry of Finance of its power to set loan pricing caps for microcredit associations;
• Lack of legal capacity to mobilize equity from shareholders;
• Legal barriers to transformations of successful microcredit associations into commercial companies;
• Lack of credit information services industry;
• Constraint on foreign investment due to foreign exchange policy;
• Inability of banks and finance companies to participate directly in micro-lending due to interest rate caps.

The report concludes with the following recommendations for policy-related activities in:

• Transparency-driven regulation of microcredit associations;
• Extension of privileges for microcredit associations;
• Conditional technical assistance to Federation Nationale des Associations de Microcredit (FNAM);
• Credit reference services;
• Introduction of amendments to permit transformations of microcredit associations.