The role of digitalization in enhancing financial inclusion and performance in Moroccan MFIs

Abstract: With digitalization reshaping the financial sector around the globe, MFIs now have a new opportunity, especially in emerging economies, to extend their services to more underserved populations. For this, the study investigates how digital platforms can be leveraged in Morocco to transform the microfinance sector. More specifically, this contribution investigates how digital platforms influence the profitability and financial inclusion of Moroccan microfinance institutions (MFIs). The main objective of the study is to investigate the direct impact that the adoption of digital platforms, their perceived benefits by the client, and the barriers that limit their effective use have on the profitability of Moroccan MFIs. To capture these insights, a survey was used and distributed among MFI clients and staff across urban, semi-urban, and rural areas in Morocco. Using Structural Equation Modeling (SEM), the survey was analyzed, and the results found evidence that digital platforms have a direct influence on Moroccan MFIs. Empirical evidence indicates that the use of digital platforms leads to improved financial inclusion, cost reductions, and more effective services. However, the barriers to using digital platforms, such as digital literacy, security concerns, and lack of access to the internet, have an adverse impact on the profitability and financial inclusion of these institutions. These challenges are particularly pressing in rural areas and must be addressed by the government for digital solutions to reach their full potential. These findings offer actionable insights for Moroccan MFIs and policymakers. By addressing the human and technological barriers to digital adoption, stakeholders can unlock greater financial access for marginalized communities and build more sustainable microfinance systems in Morocco. Keywords: Microfinance institutions; sustainability; profitability; digitalization; Morocco JEL Classification: G00, G21, G51 Paper type: Empirical research