Impact of microcredit in rural areas of Morocco: Evidence from a Randomized Evaluation1

Microcredit has rapidly expanded in the past years, providing access to financial services to a large population previously excluded from the financial system. However, whether it helps the poor has been a subject of intense debate on which, until very recently, there was no rigorous evidence. This paper reports the results of a randomized experiment designed to measure the impact of microcredit in rural areas of Morocco. Within the catchment areas of new MFI branches opened in areas that had previously no access to microcredit, 81 pairs of matched villages were selected. The treatment villages, randomly selected within each pair, were offered microcredit just after Al Amana opened the branch, while the control villages were offered access only two years later. Al Amana program increased access to credit significantly. Its main effect was to expand the scale of existing self-employment activities of households, for both non-livestock agriculture and livestock activities. We find little or no effect on average consumption as well as on other outcomes such as health, education, etc. However, treatment effects are heterogeneous depending on whether the households had an existing self-employment activity at baseline. Households that had a pre-existing activity decrease their non-durable consumption and consumption overall, as they save and borrow to expand their activities. Households that had not a pre-existing activity increase food and durable expenditure and no effects on business outcomes are observed. 1 We are deeply indebted to the whole team of Al Amana without whom this evaluation would not have been possible, in particular, to Fouad Abdelmoumni, Zakia Lalaoui and Fatim-Zahra Zaim. We thank Aurélie Ouss and Diva Dhar for outstanding field coordination, as well as Stefanie Stantcheva for excellent research assistance. We are also very grateful to the Agence Française de Développement for funding this study. We finally want to thank the International Growth Center at the London School of Economics for providing extra financial support allowing to complete this study successfully. 2 The authors are from CREST and J-PAL Europe, PSE and J-PAL Europe, MIT (Department of Economics and J-PAL), and Université Catholique de Louvain and J-PAL Europe. 2