A Literature Review on the Regulation of Microfinance Institution’s: Case Studies of Senegal and Morocco

Abstract

Microfinance institutions (MFIs) are essential drivers of financial inclusion in developing economies like Senegal, yet their regulatory frameworks struggle to reconcile institutional stability with client protection. This study investigates the adaptation of MFI regulation to crises, with a focus on the COVID-19 pandemic. Drawing on a qualitative case study methodology, we analyze Senegal's regulatory evolution through document review of the PARMEC Law, BCEAO directives (2008–2023), and data from CAURIE-MF, a leading Senegalese MFI. Post-2010 reforms strengthened prudential oversight, but the COVID-19 crisis exposed vulnerabilities in liquidity support and client safeguards. While temporary measures such as loan moratoria sustained sector stability, reliance on self-reported MFI data constrains comprehensive long-term risk evaluation. Comparative insights from Morocco underscore the advantages of Bank Al-Maghrib's centralized supervision. Our findings advocate adaptive regulatory frameworks, regional harmonization within WAEMU, and independent monitoring to bolster resilience. Senegal's experience provides actionable lessons for reconciling financial inclusion with effective crisis management.