Morocco approves new decree to expand microfinance sector amid rising economic challenges

The Moroccan government has approved Decree No. 2.25.450, setting a new legal framework for microfinance institutions, particularly by defining the maximum amount of microloans and the caps on funds they may receive.

The move, enacted during a cabinet meeting in early July 2025, activates key provisions of Law No. 50.20governing microfinance, which was adopted in July 2021.

According to the government, this decree aims to better respond to the financing needs of low-income individuals and very small enterprises (VSEs), especially those seeking to create or expand productive, service-oriented, or income-generating activities that support employment.

As of the end of 2024, Morocco’s microfinance sector reached a total value of 9.3 billion dirhams, with approximately 778,404 active beneficiaries, including 47% women, reflecting both the sector’s broad reach and the growing demand for inclusive financing.

Concerns Over Efficiency and Economic Impact

Despite these promising figures, economic experts remain cautious. Mohamed Adel Icho, a professor of economics and management at the University of Beni Mellal, raised concerns over the sector’s structure and impact.

“Over 6 billion dirhams of the total loans went to individuals, while just 2 billion were directed to VSEs,” Icho noted, highlighting a drift from the original goal of supporting productive and formalized economic activities. Instead, many loans appear to support individual consumption, which risks leading to non-productive indebtedness.

Icho also pointed to the limited job creation linked to the sector. With just 7,568 employees across all microfinance institutions nationwide, the sector’s direct impact on unemployment remains marginal, despite its long-standing presence and focus on rural areas.

Moreover, Icho criticized the unchanged loan cap of 50,000 dirhams, in place since 2019, as outdated. He argued that, given inflationary pressures and rising costs post-COVID-19, the actual cost of launching even the simplest income-generating activity now exceeds this limit, potentially undermining the efficacy of microloans.

Market Concentration and the Risk of Financialization

Another red flag is market concentration: four major institutions control 98% of all issued loans. According to Icho, this raises concerns over limited competition, potentially impacting loan conditions, interest rates, and service quality.

The sector’s gradual transition from non-profits to joint-stock companies also raises questions. While this change could improve governance and attract investment, it risks shifting the sector’s focus from social empowerment to profit-maximization, possibly weakening its original developmental mission, Icho warned.

Legal Experts Highlight Structural Reforms

Badr Zaher Al-Azraq, a business law researcher, viewed the newly approved decree as a positive step toward adapting microfinance to Morocco’s evolving economic landscape.

“The previous framework no longer aligned with market dynamics and price fluctuations,” he told Hespress AR. The decree, he added, sends a clear signal that the government intends to broaden access to credit, boost financial inclusion, and open new opportunities for underserved populations.

However, Al-Azraq also cautioned that small entrepreneurs often struggle with debt repayment, especially when loans are not coupled with adequate support and follow-up. Without financial literacy, coaching, or oversight, these loans could become a burden instead of a development tool.

He emphasized that better loan structuring and repayment scheduling could help transform small projects into medium or large businesses over time, especially if coupled with capacity-building programs.

Calls for Policy Adjustments and Monitoring

Experts consulted by Hespress AR urged the government to gradually raise the loan cap to match the real costs of investment, while calling for a better balance between loans for individuals and support for VSEs.

They also highlighted the need to diversify market actors, preventing excessive loan concentration and encouraging competition. At the same time, they called for rigorous monitoring systems to mitigate the risk of non-productive debt accumulation, particularly among vulnerable populations.

Icho concluded that while microfinance remains a vital tool for financial inclusion, the Moroccan experience, despite expanding numerically, requires a more nuanced evaluation. “Raw numbers are not enough,” he said. “We need clear indicators showing improved income, business sustainability, and genuine socioeconomic impact to assess success.”