Factors of regional financial inclusion in Morocco

Abstract

The purpose of this paper is twofold: first, provide a comparative analysis of interregional and intraregional inequalities in terms of financial inclusion across Moroccan regions; second, explore the determinants of regional financial inclusion in a panel of 12 Moroccan regions. We used the principal component analysis methodology to construct our regional financial inclusion indexes, and the panel data estimation methodology to identify the determinants of regional financial inclusion. Our regional financial inclusion index shows that the majority of regions have a low level of financial inclusion. This is symptomatic of a very asymmetric distribution. For all regions, we found that intraregional inequalities in access to bank branches by locality/province or prefecture increase as we move away from the region’s main city. Empirical results indicated that a region’s human development level, as proxied by the Human Development Index (HDI), the size of its population, and the industrialization level of its economic fabric are the main determinants of a region’s financial inclusion level. The Moroccan financial system authorities have implemented several reforms (the banking law no. 2‐91‐967 of July 21, 1993) and strategies (National Financial Inclusion Strategy) aimed at promoting financial inclusion in Morocco; however, the increase in the level of financial inclusion at the macrolevel has not benefited all segments of the Moroccan population. This paper is original as, to our knowledge, it is the first to mobilize interregional and intraregional data, as opposed to previous studies that are national‐level oriented. Given the mapping of interregional and intraregional inequalities in access to, and use of, formal financial services, policymakers can rely on our index to formulate useful financial inclusion policies and to target rural localities, provinces or prefectures, and priority regions in Morocco’s National Financial Inclusion Strategy. The financial system should provide financial services tailored to regional financing needs. Moroccan policymakers should focus on filling gaps in levels of regional human development, as the latter is a key factor in regional financial inclusion.