TUNISIA MICROFINANCE BAROMETER
The Microfinance Supervisory Authority (MSA) publishes on its website quarterly up-to-date data about the microfinance sector in Tunisia (microfinance barometer). Based on these publications, we have developed this paper which presents the achievements of the microfinance sector over the period 2018-2021 and its contribution in the development of the financial inclusion of the population and entrepreneurs.
2. Microfinance institutions in Tunisia
The Tunisian microfinance sector, which dates back to the 1960s, is now supervised by a regulatory organization called the Microfinance Supervisory Authority (MSA).
Microfinance institutions are classified according to the provisions of Decree-Law No. 2011-117 of 5 November 2011, as amended by Law No. 2014-46 of 24 July 2014, as follows:
- Microfinance institutions constituted in the form of limited company (MFI-LC)
- Microfinance institutions constituted in the form of an Association (MFI-Ass)
Before the promulgation of Decree-Law No.No. 2011-117, microfinance is exercised by microcredit associations (MCA) financed by budgetary resources through Banque Tunisienne de Solidarité (BTS Bank). These MCAs are required to comply with the current legislation by December 31, 2022, in time to complete their restructuring, in order to continue to operate.
To date, seven (7) MFI-LC and one (1) MFI-Ass have obtained their accreditation and are operating in compliance with current regulations.
At the same time, 185 MCAs continue to operate their microfinance business with funding from BTS Bank in 2021.
In order to develop their proximity to customers and improve their geographical coverage of the territory, the MFI-LC has significantly expanded their branch network. Their number of branches has increased by 31% over the last four years, from 151 in 2018 to 198 in 2021. However, it remains very low relative to the microfinance target population and its geographical distribution.
On the other hand, the number of MFI-LC agencies did not develop over this period, maintaining to 6 agencies.
3. Evolution of MFI activities
For a large part of the population and entrepreneurs, microfinance institutions are one of the main means of financing through microcredit.
The annual amount of microcredits disbursed by MFIs in all categories, including MCAs, increased sharply in 2019 and 2021, by 21.4% and 19% respectively. However, it was stable in 2020 compared to 2019 due to the COVID-19 health crisis and the lockdown imposed on the population. In 2021, microcredit disbursements reached 1.7 MD.
In terms of the number of microcredits disbursed, the evolution was also positive in 2019 and 2021, recording an increase of 4.5% and 13.1% respectively. On the other hand, it fell sharply in 2020 compared to 2019 (-13.7%). This development in terms of numbers was less marked than that in terms of amounts. This has led to an increase in the average amount of microcredits from 2,522 D in 2018 to 3,600 D in 2021.
At the end of 2021, 704,072 clients had a microcredit for a total commitment of 1.8 MD, or an average outstanding amount of 2,494 D per client. This represents an increase of 17.9% in terms of number of customers, 69.1% in terms of outstanding and 43.3% in terms of average outstanding per customer compared to the end of 2018.
4. Evolution of MFI-LC compared to MCA
First of all, it should be noted that the financial resources of the MCAs are currently exclusively limited to government funding through BTS Bank. In addition, the maximum amount of microcredit that can be granted by the MCA is limited to 5,000 D compared to 40,000 D for the MFI-LC. Finally, the MCAs are being restructured with the objective of merging them into regional associative MFIs, with one MFI-Association per governorate, for a target total of 24 associative MFIs.
With the exception of 2020, MFI-LC production increased year-over-year, while MCA production even declined in 2021. Thus, the share of MFI-LC in the production of the microfinance sector increases from one year to another by 94.7% in 2021 against 91.6% in 2018. This trend is also the same in terms of outstanding, given that the outstanding microcredits of the MFI-LC represent 83.3% of the total outstanding of the sector at the end of 2021.
However, the share of MCA clients has remained relatively stable and fairly significant since 2018 at around 38%. This share in number is higher than in terms of outstanding (18%). This illustrates in other ways the important role of associative MFIs in financing a category of population that would not be well served by the MFIs-LC.
5. MFIs contribution to financial inclusion
Through the financial services offered by MFIs to their clients, and in particular microcredit, they contribute to the financial inclusion of people who do not have access to financial services at traditional and formal financial institutions, like the banks.
According to the microfinance barometer, about 80% of MFI-LC clients have no commitments to banks or leasing companies and about 84% of MCA clients have no commitments. As a result, MFIs have enabled this clientele to access financial resources to generate income or improve their living conditions.
However, in terms of commitments, the outstanding customers common to the banks and MFI-LC represent 30.4% of the total outstanding MFI-LC at 31.12.2021! This percentage has increased compared to 2018 (26.2%). This would mean that MFIs-SA are moving a little more towards banked clients.
6. The quality of the MFI-LC portfolio
Quarterly microfinance barometers established by the MSA do not provide information on the quality of MCA portfolios. On this subject, they are limited to MFI-LC data.
In this regard, we are seeing a continued deterioration in the quality of the MFI-LC ‘s portfolio, due in part to the COVID-19 health crisis. Indeed, the PAR30 increased from 1.4% at the end of 2019 to 2.9% at the end of 2021. Similarly, the PAR01 increased over the same period from 2.3% to 4.3%.
However, and in comparison with international standards, the quality of MFI-LC risk remains acceptable with a PAR30 of less than 3%. However, operators must be vigilant to keep this ratio within this limit.
7. Microfinance sector Outlook
According to studies carried out in recent years, the Tunisian population that could be affected by microfinance is around 3 million. As a result, the development potential of MFIs is still significant compared to their current portfolio of approximately 700,000 clients. This should lead MFIs to invest significantly in the development of the digitalization of their services and to a lesser extent in the development of their number of agencies and/or partners.
Beyond microcredits, the financial, economic and social inclusion of the population requires other financial and non-financial services such as insurance, savings, financial education, support for the marketing of products, etc. To achieve this, the legal and regulatory environment must evolve to foster the development of this type of products and services by the IMF to better support their clients in order to reinforce and sustain the positive impact of microfinance on the economic inclusion of populations and the significant reduction of poverty.
According to the microfinance barometer, we find that the population served by MCAs and MFIs in associative form remains quite large, knowing that the population not yet served by microfinance remains high. This calls on operators and decision-makers not to neglect/forget this category of population that risks being abandoned in favour of other segments positioned at the top of the pyramid of the target population of microfinance (up-scaling).
Finally, MFIs should continue to strengthen their financial foundations and risk management to ensure their sustainability and resilience in challenging contexts such as the recent COVID-19 health crisis. In this sense, they should also be helped to mobilise low-cost financial resources to better support the financing of the target population. Among the solutions to explore for this, we can consider access to customer deposits and/or the establishment of a fund dedicated to refinancing MFIs.
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