47 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE 1Certain qualities of finance, such as interest and excessive uncertainty, are impermissible under Islamic law (sharia) (IMF, 2017). In 2021, 19% of Moroccans who did not have a bank account cited religious reasons, higher than the 10% global average (World Bank, 2021). remarkable success with adult account ownership at formal financial institutions, increasing to 44%, 15 percentage points higher than in 2017 and just below the 48% MENA region average. The World Bank emphasized that Morocco was among only four economies (along with Brazil, Ghana, and Myanmar) that experienced double-digit growth in this area (Demirgüç-Kunt et al., 2022). Reported savings and borrowing rates also increased significantly. As of 2021, 35% of Findex survey respondents had saved money, and more than half of them had borrowed money within the previous year (World Bank, 2021). The expanded access may seem abrupt, but Moroccan national authorities have been prioritizing the development of an inclusive financial sector for a long period through initiatives of the MEF, Morocco’s government arm responsible for addressing financial and monetary issues, and BAM, the country’s central bank. Since 2019, BAM and the MEF have jointly adopted the National Financial Inclusion Strategy, a form of governance that has become common in developing countries striving to bolster financial access for low-income populations and enterprises. This strategy prioritizes underserved populations, such as women, rural populations, and young people, focusing on access to mobile payments, accessibility to microfinance, bank penetration into rural areas, enterprise financing, and financial literacy (Ocampos, 2023). The World Bank Financial Sector Assessment Program in 2016 highlighted several actions taken by the government to bolster financial accessibility for unbanked Moroccans, including BAM’s 2010 formation of Al Barid Bank, a subsidiary of the national postal system, Poste Maroc. The new postal bank succeeded by leveraging the well-developed and extensive infrastructure of the national post in rural areas, opening six million accounts from 2009 to 2014 for not only underserved populations who lacked proximity to financial institutions but also adults in urban and peri-urban areas (Financial Sector Assessment..., 2016). Financial inclusion at the individual and household level has been furthered by the 2014 banking law, which involved the MEF declaring 20 different banking services free of charge as of 2017 (United Nations Conference..., 2018). The new banking law also expanded services for the notable segment of the population requiring sharia-compliant1 banking through the introduction of participative banks, five being active as of 2020 (BAM, 2021a; Financial Sector Assessment..., 2016). The 2014 banking law additionally established payment institutions, allowing nonbank entities to offer payment and account transaction services (Financial Sector Assessment..., 2016). The regulation implements three tiers of payment accounts with deposit ceilings, rather than minimums, to broaden access to the service. To be opened, tier 1 payment accounts require only a phone number, whereas tier 2 requires ID, and tier 3 proof of address and an interview with the institution (Priollaud & Saudi, 2023). Lack of required documentation was the reason for not opening bank accounts in 20% of the 2021 Findex respondents. Despite the substantive improvement shown in metrics like account ownership and accessibility of services for underserved communities, issues remain for the advancement of Moroccan financial inclusion. Not only does half of the population remain unbanked and prominent gaps in access still exist for minority and underserved groups but also the high fraction of “underbanked” individuals raises concern (UNSGSA, 2023b). The numbers of adults with bank accounts are increasing, yet regular use of them is slim aside from ATM cash withdrawals. Of the adults with accounts at formal financial institutions, only 31% stored money in them and almost 50% went without making a deposit in 2021 (World Bank, 2021). Usage rates of mobile money services and broader digital financial tools in Morocco also are low. The Global System for Mobile Communications Association Mobile Money Prevalence Index of 2021 rated Morocco as “very low,” the lowest possible grade based on the adoption, activity, and accessibility of services (Andersson-Manjang, 2021). The 2020 Annual Report on Banking Supervision states that of all transactions associated with payment accounts, 91% were cash payments or withdrawals, with only 5% made on mobile phones (BAM, 2021a). The 2021 Findex results showed that only 6% of respondents had mobile money accounts, of which fewer than 20% used their accounts at least two times a month, and just 30% used their accounts without assistance. The low rate is hindering the effectiveness and progress of Morocco’s large financial infrastructure investments and means that account ownership statistics alone produce a misleading image of financial inclusion in Morocco. Growing importance of digital finance Morocco’s journey to constructing financial infrastructure compatible with the needs of its unbanked
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