MICROFINANCE PUBLICATION ROUND-UP: Lessons Learned from Morocco’s Microcredit Crisis; Using Microinsurance to Promote Universal Coverage; Remittances and Post-Conflict Economic Growth

“Lessons Learned from the Moroccan Crisis;” by Nadine Chehade and Alice Negre; published by CGAP (Consultative Group to Assist the Poor); 2013; 4 pages; available at http://www.cgap.org/sites/default/files/Brief-Lessons-Learned-from-the-Moroccan-Crisis-July-2013_0.pdf

This report presents the results of a study conducted by US-based NGO CGAP (Consultative Group to Assist the Poor) that explored the Moroccan microcredit downturn, focusing on outlining “lessons learned from the rise, fall, and ongoing recovery of the Moroccan microcredit sector that may be useful when adapted in other countries in similar situations.” According to the authors, between 1990 and 2007 the microcredit sector in Morocco “enjoyed extraordinary growth rates;” the country’s microcredit portfolio grew roughly 1,000 percent between 2003 and 2007, becoming the largest in the Middle East and North Africa. However, this growth “soon proved unsustainable,” and in 2007 the sector began to show signs of crisis.

According to the report, between 2005 and the peak of the crisis in 2009, the Moroccan microloan portfolio-at-risk rate rose from 0.4 percent to a peak of 13.7 percent. This resulted in a sector-wide movement by MFIs to reduce default rates such as limiting the proportion of borrowers accessing loans from two or more MFIs. By 2011, the credit risk rate had fallen to 8.6 percent.

The authors conclude that the crisis “proved that market-wide risk exists, even in the case of credit-only institutions.” As competitive microcredit markets often lead to borrowers receiving multiple loans from different lenders, MFIs are “de facto connected” and can experience sector-wide success or failure as a result. The report suggests that market-wide risk can be  managed effectively by ensuring that MFI leaders focus on sustainable growth and risk management strategies, even though this may impair short-term growth. Additionally, the crisis exemplifies the need for self-regulation among MFIs, as well as increased regulatory oversight. The authors suggest that central banks “are often the most suitable candidates” for the latter task.

“Leveraging Health Microinsurance to Promote Universal Health Coverage;” by Meredith Kimball, Caroline Phily, Amanda Folsom, Gina Lagomarsin and Jeanna Holtz; published by the Microinsurance Innovation Facility; 2013; 94 pages; available at http://www.microinsurancefacility.org/sites/default/files/mpaper23%20final%20v2.pdf

This report examines how health microinsurance providers and governments can collaborate to promote universal health care. According to the report, “many countries are pursuing government-sponsored health insurance as a primary path toward [universal healthcare].” Many of these countries currently have private health microinsurance (HMI) schemes sponsored by community-based organizations, commercial insurance companies or NGOs that “share many of the same goals as government-sponsored health insurance schemes.” The report suggests that the strengths and weaknesses of these groups offer an opportunity for mutual benefit through collaboration. For example, governments historically have struggled with the task of identifying potential beneficiaries, enrolling participants and collecting premiums, tasks that HMI providers are “well positioned to manage.” On the other hand, HMI providers have historically struggled with achieving the necessary scale of operations necessary to achieve universal healthcare and gathering the necessary resources to expand their operations; governments are better positioned in both of these respects.

The authors conclude that although there is a “lack of clear-cut solutions” to achieving universal healthcare, “it is evident that HMI can contribute to government efforts to serve large numbers of informal workers and that collaboration can reduce duplicative or competing models.” Furthermore, “governments should look to HMI as a source of innovation and learning and actively seek partners with experience, fresh ideas and complementary capacities.”

“Post-Conflict Remittances and Human Security: Perspectives on Peace-Building, Institutions, and Development;” by Daivi Rodima-Taylor, Donald Terry and John Harris; published by Boston University’s Pardee Center for the Study of the Longer-Range Future; 2013; available at http://www.bu.edu/pardee/files/2013/10/Pardee-CFLP-Remittances-TF-Report.pdf

This report, organized as a collection of research papers, explores the “role of remittances in post-conflict environments” and the potential of these funds to serve as a major underpinning of economic development. According to the report, armed conflict, civil unrest, and ethnic and religious persecution causes tens of millions of people to flee from their home countries every year. Many of these refugees and immigrants send money back to family and friends who have remained in their original country. Over the past decade, improved reporting and analysis has resulted in better understanding and estimates of the economic importance of these remittances; in 2013 alone, remittances are projected to result in USD 430 billion of additional income for residents of developing countries.

The papers in the report attempt to establish the importance of remittances for sustaining developing economies and local livelihoods as well as providing funds for the rehabilitation of damaged or inadequate infrastructure. The authors argue that the process of sending remittances may be made more efficient through increased integration with existing formal banking and money transfer services, suggesting that such integration will ease transparency concerns and ensure that remittances can continue to serve as a source of funds for economic growth.

By Makai McClintock, Research Associate

Sources and Additional Resources:

“Lessons Learned from the Moroccan Crisis,”
http://www.cgap.org/sites/default/files/Brief-Lessons-Learned-from-the-Moroccan-Crisis-July-2013_0.pdf

Leveraging Health Microinsurance to Promote Universal Health Coverage,” http://www.microinsurancefacility.org/sites/default/files/mpaper23%20final%20v2.pdf

Post-Conflict Remittances and Human Security: Perspectives on Peace-Building, Institutions, and Development,” http://www.bu.edu/pardee/files/2013/10/Pardee-CFLP-Remittances-TF-Report.pdf

MicroCapital Universe Profile: CGAP (Consultative Group to Assist the Poor)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

MicroCapital Universe Profile: Microinsurance Innovation Facility (MIF)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microinsurance+Innovation+Facility+%28MIF%29

MicroCapital, August 2, 2013, “CardPlanet Solutions of Kenya Inaugurates “Pesacard” to Enable Parents to Send Mobile Money to School Children,” https://www.microcapital.org/microcapital-brief-cardplanet-solutions-of-kenya-inaugurates-pesacard-to-enable-parents-to-send-mobile-money-to-school-children/

MicroCapital, July 30, 2013, “Ecobank, Lonestar Cell MTN Launch “Mobile Money School Fees Payment Service” in Liberia,” https://www.microcapital.org/microcapital-brief-ecobank-lonestar-cell-mtn-launch-mobile-money-school-fees-payment-service-in-liberia/

MicroCapital, July 2, 2013, “Silatech, Macroinvest, Jaida, Afif, ANAPEC, IYF, Ministry of Tourism to Support Moroccan Small and Medium-Sized Enterprises (SMEs), Youth,” https://www.microcapital.org/microcapital-brief-silatech-macroinvest-jaida-afif-anapec-iyf-ministry-of-tourism-to-support-moroccan-small-and-medium-sized-enterprises-smes-youth/

MicroCapital, October 25, 2007, “Morocco and Millennium Challenge Corporation (MCC) sign $697.5m Compact, JAIDA and Other Microfinance Programs to Receive $46.2m,” https://www.microcapital.org/microcapital-story-morocco-and-millennium-challenge-corporation-mcc-sign-6975m-compact-jaida-and-other-microfinance-programs-to-receive-462m/

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/.

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