48 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 42 | 2024 population cannot be separated from its investments in digital infrastructure. Digital financial services are at the forefront of global efforts to promote financial inclusion (Lauer & Lyman, 2015); among the myriad reasons, the most obvious is removing the need to physically travel to bank branches, a main barrier to access in remote areas or for women with caregiving expectations (Soudi, 2022). Digital services additionally are often less costly than traditional banking services and may better fit the need for affordable small, irregular transactions within the context of volatile incomes of informal work (Lauer & Lyman, 2015). Mobile money platforms have garnered importance in emerging markets in sub-Saharan Africa, Latin America, and South Asia, and they are now a widely accepted tool for providing services to the financially excluded in locations where financial infrastructure is poor (Murray, 2023). Platforms providing payment services through mobile phones often are started by telecommunications companies that form deals with financial institutions or create their own payment applications. Safaricom’s M-Pesa, the flagship Kenyan mobile money application, has been the subject of attention for almost two decades. By 2024, it was serving 51 million users throughout seven African countries (Vodafone Group, n.d.). Morocco is an ideal environment for the uptake of mobile money services, with the country’s cell phone penetration rate greater than 100%, meaning that mobile phone subscriptions exceed the population (Soudi, 2022). The UN Development Programme assessment on Morocco’s financial ecosystem reveals that connectivity is also wide ranging, with greater than 99% of the population covered by 3G and 4G networks (Priollaud & Saudi, 2023). Morocco has introduced supportive legislation to foster mobile payments, allowing telecommunications companies to enter the financial space independently with payment institution status, through the 2014 banking law and the creation of the nationally regulated M-Wallets platform by BAM and the National Telecommunications Regulatory Agency in 2018 (Business Monitor International, 2022). Mobile wallets provide person-to-person money transfers, merchant payments, and deposit and withdrawal services (Moroccan central bank…, 2018). The mobile wallet ecosystem has evolved to encompass competition between purely mobile financial services by telecommunication companies, such as MT Cash and inwi money, new mobile services from existing financial institutions like Banque Populaire and Al Barid Bank, and mobile services connected to traditional transfer companies, such as Cash Plus and Wafacash (Priollaud & Saudi, 2023). The availability of such financial mechanisms leaves open the question of why Moroccans have not adopted them more widely. Why are financial services underused? The disconnect between the accessibility and usage of formal financial services in Morocco can be attributed to three phenomena. First, informal economic activity is prominent in the country, perpetuating traditional money-managing habits and norms outside of formal finance. Second, low rates of financial literacy hinder unbanked and underbanked individuals from taking advantage of services that cater to their needs or alternatives that are cheaper than conventionally used ones. Third, public perceptions of formal financial institutions, especially banks, are generally negative in Morocco, fueling an aversion to utilizing the services of or even entering formal institutions. Endurance of cash reliance and informal finance One of the main barriers to the use of formal services is Morocco’s high informal share of economic activity. Substantial informal economies are common in emerging markets, including North African countries that have economic indicators, such as GDP per capita, similar to Morocco’s. In fact, Morocco exceeds its peers in certain aspects of informality. For instance, the informal employment rate in 2023 was 77.3%, compared with Egypt’s 62.5% and Tunisia’s 42.9% (Mohammad et al., 2023). Involvement in the formal sector is avoided to evade taxes on income, legal requirements related to labor activities, or contributions to social security (Lahlou et al., 2020). The drawbacks of such prevalent informal activity are clear for the welfare of individuals and families: income volatility, lack of social protections, and difficulty in managing risks. Informal workers, on average, are paid five times less than formal laborers and work under harsh conditions not always in line with public regulations (Eljechtimi, 2023). Clear too are macroeconomic hindrances, such as in tax revenue generation for the government (Mohammad et al., 2023). According to Finance Minister Mohamed Benchaaboun in 2020, the informal economy costs the country $3.4B annually in tax revenue (Eljechtimi, 2020). The widespread informality of Morocco’s economy steers large population segments to manage their money outside of formal services, depending instead on cash and familial relationships.
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