The largest credit union for agricultural communities in Morocco, Credit Agricole has continuously provided for Moroccos’ farmers and rural populations.
Rabat – Agricultural credit unions provide financial assistance for agricultural development and housing projects for rural communities. In Morocco, where upwards of 40% of the population is agriculturally dependent, these institutions are vital for the growth of the community.
The most well known of these credit unions is Credit Agricole of Morocco Group (GCAM), a French bank operating in more than 50 countries. In 2017, GCAM was not only recognized as the best credit union in Morocco, but was named the best development finance institutions in Africa by the Association of African Development Finance Institutions (AADFI).
Since the founding of Credit Agricole in Morocco in 1961, the bank “has been committed to agriculture and socio–economic development in rural areas.”
The bank works to improve the standard of living among rural communities through seven main methods. One is assisting farmers in their access to modern and profitable forms of exploitation, such as new farm equipment, fertilizers, and seeds. Others include mobilizing national savings that have been set aside for rural development, developing the banking of farmers and rural people with specific microfinance and “meso-finance” systems, and supporting the new agricultural businesses making it easier to get credit and loans.
Further methods include offering advice and expertise for farmers and rural communities to increase production and profit, encouraging “agro–industrial integration and marketing” to help farmers get their products to large scale markets, and providing both small and medium farms different types of financial assistance.
Each of these provisions is vital for Morocco’s rural communities and farmers to continue to grow.
Ruralness and geography
However, it is not always easy for Credit Agricole to meet the needs of the rural community.
According to a 2018 World Bank report, more than 45 percent of the heads of farming families are over 55 years old and 81 percent are illiterate. This lack of formal education can make the language of financial contracts more complicated and difficult to fully understand.
Likewise, many Credit Agricole locations are concentrated along coastal regions. The 338 locations that serve more than 800,000 people face some challenges in providing for the farming communities in the interior of the country. Less developed infrastructure further compounds these difficulties, making it difficult for farmers to implement the bank’s success strategies.
On the financial side, Credit Agricole faces challenges in accounting for “risk” due to unpredictable economic, social, and environmental factors in different regions of the country.
Meeting the needs of thousands
Despite these challenges, the bank is able to assist thousands of people who were previously left out of the traditional financial system.
According to the ARDI Microfinance Foundation, a subsidiary group of Credit Agricole, only 20% of Morocco’s 1.5 million farms were able to find appropriate resources in Morocco’s traditional banking systems before Credit Agricole mobilized support.
Now, GCAM is able to serve 40% of farmers whose previous income was subsidized by non-farm activities, such as trade and craft sales, through their microfinance programs.
For an additional 40% of farmers who do not qualify for the specific microfinance program, Credit Agricole utilizes a “meso-finance” strategy to empower medium-sized farms that lack collateral or that would otherwise be turned away at a bank.
By guaranteeing loans to these farmers, they are allowing the next harvest to be secured.
The specifics
To account for financial risk, especially the risk that accumulates with 70% of small- and medium-sized farms in Morocco depending entirely on rainfall (and thus an acute drought risk), Credit Agricole offers agricultural loans up to MAD 100,000 ($10,000), with interest rates of 5–5.5%. For the “meso-finance” program, GCAM offers loans with interest rates of 8-8.5% for medium-sized farms with no collateral.
For farmers who want to continue their non-farming activities for additional income, the ARDI Microfinance Foundation offers loans averaging MAD 5,000 ($500).
Paperwork challenges
Despite these provisions, loans remain difficult to apply to the Moroccan agricultural industry for multiple reasons. One is that around 75% of agricultural land is privately owned, but improperly registered or not registered at all. This is due to traditional relationships with land ownership and farming practices that do not dictate the need of the state, and thus the paperwork.
Another reason is the idea of collective, or community, land that is often considered to be owned based on historical ties and the ethnic makeup of those living and working on the property.
Other reasons that agricultural loans are difficult to establish among Morocco’s farmers are the agricultural insurance system, the low levels of cooperative and community connections between farmers and more distant markets, issues with financial literacy among target populations, and the challenges of financial risk with factors such as climate change.
Widespread success
Although there are multiple microfinance programs throughout Morocco, Credit Agricole is considered the most wide-spread and effective institutional approach to loans for small- and medium-sized farms.
There is little opposition to the group, even among the competing banking systems, and it can be argued that the pervasive advertising and signage throughout most of Morocco’s major cities makes it clear that there is only one option when it comes to securing a loan for a small- or medium-sized farm: Credit Agricole.
Pandemic response
In light of the current pandemic, the Credit Agricole is receiving international monetary assistance, mostly from the French Development Agency and various international actors, to continue to support Moroccan farmers under lockdown.
Employees of the bank have also contributed their personal funds to combat the spread of coronavirus in Morocco, raising $1.5 million.
