Empowering the most vulnerable groups through innovative applications of blockchain technology and digital finance will promote financial inclusion, gender equity, and income equality.
Under the leadership of King Mohammed VI, Morocco has made great steps toward gender equity, establishing tremendous levels of economic growth while eliminating poverty. This trend must continue in order to ensure Morocco’s future prosperity.
The redesign of the current national National Electronic Identity Card (CNIE) system will result in greater social targeting and higher levels of social protection. It will also give governmental agencies the ability to collect data on the Moroccan population as a whole, which can be used for greater economic and societal pursuits.
This new e-CNIE system should combine the current national databases of the Moroccan population, and through using data cleaning, it should establish the necessary societal infrastructure for Morocco’s bright future.
While this may be a costly investment, it will give the country greater access to data collection of all Moroccans. As an example, Estonia’s e-Estonia use of a nationwide blockchain system and its move towards a digital society has resulted in benefits such as saving the country 2% of its GDP in salaries and expenses.
Challenges preventing financial inclusion
The Moroccan population as a whole has suffered greatly at the expense of corrupt public officials, a lack of financial inclusion, and a lack of data, among other issues. Morocco currently has issues with high levels of youth unemployment, gender inequality, and poverty. Many Moroccans cannot afford a bank account, do not have the proper documentation necessary, or have poor financial education.
As of 2017, 3.1% of the population lived on $1.90 a day, approximately 15.5% of the population lived under $3.10 a day, and nearly 19% of the rural population lived in poverty. More specifically, rural populations in Morocco have been left behind and without the proper technology, this will unfortunately result in higher levels of poverty.
One major issue in Morocco is the lack of data specifically on vulnerable groups such as those living in rural areas. This is the consequence of a weak identification infrastructure and poor data-sharing platforms. The World Bank calls this infrastructure a “fundamental foundation for financial access and inclusion.”
Without an efficient identification infrastructure, interbank system, payment processing platforms, interbank settlement system, and a strong communications infrastructure, a national payment system is not able to take advantage of modern payment tools. This leads directly to disadvantageous effects on financial inclusion.
What is financial inclusion and where does Morocco stand with it?
Microfinance non-profit FINCA International, also known as the “World Bank for the Poor,” defines financial inclusion as the “delivery of financial services at affordable costs to disadvantaged and low-income segments of society,” and it is a universal priority.
According to the World Bank, financial inclusion is crucial in the alleviation of poverty. Account ownership is important as it allows for the deposit and saving of money, the acquisition of credit, the ability to make purchases, and the capacity to receive and send remittances, making it a World Bank financial inclusion indicator.
The results of the World Bank’s Global Findex 2017, published in October 2018, indicated that only 29% of Moroccan adults had a bank account and there was a gender gap of nearly 25% between men and women in account ownership. In developing economies, the report found an overall 9% gap between account ownership for men and women.
According to the World Bank’s 2017 data, around 16.8% of Moroccan females (15 years and older) owned accounts with either a financial institution or with a mobile-money-service provider, compared to 41.5% of Moroccan males (15 years and older). Also, around 0.3% of Moroccan females had a mobile money account compared to 1.1% of Moroccan men.
The growth in mobile money accounts in developing economies has fostered new opportunities to better serve women, poor people, and other groups traditionally excluded from the formal financial system.
Among the eight countries where 20% or more of adults have only a mobile money account, six countries — Cote d’Ivore, Gabon, Kenya, Senegal, Uganda, and Zimbabwe — have no gender gap in terms of this metric.
A basic income system can advance economic and social progress
In Morocco and countries in the Middle East, elderly women often rely on men such as their husbands and sons for a source of income. By providing unconditional payments from the government to all citizens of Morocco, the most vulnerable groups, such as elderly women or unemployed youth, would be able to receive much-needed income.
Basic income, or BI, is a cash transfer that is given to any person regardless of their income, age, or employment. It is a simple means of providing those in poverty with an income to cover their necessities. There are different ways to create a program for basic income such as using dividends from national resources, increasing taxes from different sources, or moving funds from other social programs. According to the OECD, a basic income would likely change the living standards for large parts of the population.
Experts have associated cash transfer schemes with improvements in education, health, gender equity, and the economic system at large. Research that evaluated the effects of a cash transfer on education showed improvements in attendance, a reduction in drop-out rates, an increase in school enrollment, and a reduction in child labor.
Morocco currently holds 50 billion tons of phosphate rock reserves out of the world total of 69 billion tons, or 72% of the planet’s known reserves of phosphorus, which gives it a near-monopoly on the multi-billion-dollar global trade of the mineral. Phosphorus export taxes could help finance a basic income program.
Poverty alleviation can be encouraged through the “Lbaraka” basic income system by providing lower-income families with the financial resources they need, dispersing funds using fraud-proof blockchain technology and relying on Morocco’s strong mobile infrastructure.
The potential of improved microfinancing
Rural areas with high levels of poverty can also experience significant levels of economic growth through the use of a redesigned microfinance system. This “Salaf” microfinance system can help those with innovative ideas, a lack of financial resources, and the will and desire to make Morocco the greatest country that it can be moving into the future.
It will also drive growth in Morocco’s currently robust microfinance industry. The “Salaf” system’s focus on women will give one of the country’s vulnerable groups the ability to start their own business, contribute positively to the economy, alleviate poverty, and drive national gender equity efforts.
Challenges in Morocco’s national ID systems
Morocco has issued approximately 20 million CNIE, which indicates that there is still effort required to make the program universal. The enrollment cost is expensive at MAD 75 ($7.73), certainly an unaffordable amount for poor families.
This cost deters registration in the nationwide ID system. Furthermore, children under 18 years of age are normally not covered. The CNIE program is estimated to cover approximately 60% of the total Moroccan population.
The CNIE is used in the creation of a bank account and replaces birth certificates, proof of life, certifications of nationality, and certificates of residence.
The World Bank has identified the weaknesses of Moroccan identity registers: Lack of digitization and complete decentralization of identity information in the Civil Register, proliferation of identity numbers, strong online but non-transactional presence, no authentication infrastructure, the improper completion of biometric enrollment, absence of a national identity strategy, and high costs of the CNIE smart card.
The National Social Security Fund (CNSS) register, which includes the formal workforce, has three million workers, or around 85% of the formal workforce. A major weakness with the CNSS system is its lack of integration with other national programs. The issues arising from identification systems such as the CNIE and Medical Assistance Plan (RAMED) are obstacles that Morocco must overcome for the total and complete inclusion of the Moroccan population.
One of the nation’s identification systems, the National Register for Children (MASSAR), covers 100% of school children registered in any of over 10,000 educational institutions. Given the World Bank net enrollment ratio of 98% for primary schools, 98% of children ages 6-10 are contained in the register.
The combination of MASSAR and CNIE on their own would lead to a database of 23.5-26.5 million unique identities, meaning a 70-80% coverage of the population.
Innovative approaches for a prosperous, financially inclusive Morocco
Morocco would do well to create and implement a distributed, decentralized, digital ledger as the infrastructure of a biometric nationwide ID program, which would be used to collect and store unique financial and personal data, facilitate vital collaboration between various domestic and/or international governmental and monetary institutions, and provide each Moroccan with an account at the Bank of Morocco.
This innovative application of blockchain technology, integrated with a Basic Income system, would promote gender equity and financial inclusion, assist in the alleviation of poverty, and ultimately ensure the perpetuation of economic growth. It would also serve as a framework which developing economies in the Middle Eastern and North African (MENA) region can utilize.
By redesigning a national ID system and utilizing blockchain technology, among other measures, Morocco would be taking the first steps towards alleviating poverty, eliminating high rates of corruption, and establishing the societal infrastructure needed to pursue sustainable levels of future economic growth and the pursuit of an even more prosperous Morocco tomorrow.
A more prosperous Morocco is an entirely financially inclusive Morocco, one that creates and provides its youth with greater opportunity, a Morocco where no family sleeps hungry, and a Morocco that serves as the model for gender equality in the Arab world.
The author would like to thank Dr. James Winder for working so closely with him in developing this research, with unique insight, resourcefulness, passion for Finance, and an ability to make even the most difficult challenges enjoyable.