Youth entrepreneurship in Morocco: between ambition and structural challenges

Rabat- The main purpose of this investigation is: First, to describe the importance of youth entrepreneurship in morocco. Second, to discuss the key challenges that Moroccan youth entrepreneurs face. Third, to explain the existing programs that have been started to address some of the challenges facing Moroccan youth entrepreneurs .Finally, to identify tools that entrepreneurs need to grow small enterprises into larger.

Morocco has a population of 33.5 million inhabitants; the yearly growth rate is 1.2% and the fertility index 2.1 children per woman, Youth (aged 15 to 29) make up some 30 % of Morocco‘s total population and 44 % of the working age population (aged 15 to 64),  the youth unemployment rate is high.

One of the results of the high number of young people is the growing need for jobs. About 60% of young people with university degrees are unemployed, while 30% are without a job, and only 8% do not hold any diploma. The privatization of the economy does not offer enough jobs and there is a strong demand for jobs in the public sector, which the state cannot afford. This situation creates a challenge and pushes young graduates to engage themselves in self-employment, becoming “entrepreneurs by necessity.”

Faced with the barbed difficulty of unemployment, Morocco is seeking to make it easier for youths to start a business and expand their own jobs. Abdelilah Benkirane, the head of government, has declared on several occasions that young people should not count on employment being provided for them in the public sector. Self-employment and entrepreneurism have by all accounts become central to the governmental program.

In my research, I realized from youthful entrepreneurs that their own hard work is not sufficient. They face greater challenges than their older counterparts, including:

Access to Finance:

Most young entrepreneurs utilize funds from partnerships of family members who are interested to lay in some square deal. Banks have high collateral requirements even when credit guarantee schemes are available. Some small businesses need different financial tools to work and grow. For example, some projects need financing for working fund; others need bank guarantees for tenders, even purely demand bank certificates to participate in tender prequalification. These are complex for youth entrepreneurs to access. Banks tend to work with larger companies and/or family groups and are not ready to assess the risks of SME banking and new clients. Moroccan youth entrepreneurs as well grumble about the lack of knowledge in financial management, analysis and planning.

Corruption and red tape:

Corruption and red tape have been identified by  both young entrepreneurs and adult counterparts as being major impediments to business operations. For instance, in the World Economic Forum Global Competitiveness Report 2011-2012, the surveyed companies cite corruption to be the second most challenging factor after access to financing for conducting business in Morocco. According to the report, public funds are sometimes diverted to companies, individuals or groups due to corrupt practices such as securing a public tender by “a phone call.” This behavior constitutes a competitive disadvantage for the country.

We should say here that the Moroccan public institutions implemented a variety of programs, which highlighted anti-corruption. But it remains a problem, in part due to the low salaries in the public sector.

Analysis of Existing Youth Programs and Services

Morocco has newly stepped up efforts to support young people, diploma holders in particular, to create their own businesses, instead of waiting for other people to hire them. This investigation inspected a large range of institutions and programs that offer diverse services to young entrepreneurs, Among them, in particular:

“Moukawalati”

This program was launched in July 2006, along with the « Taahil » and « Idmaj » initiatives to reduce unemployment. The program targets young Moroccans wishing to launch business projects that need an investment limited to MAD 250,000. It provides pre and post launch support for project holders and facilitates access to credit, guaranteeing up to 85% of the granted credit, plus an interest-free advance of 10%, which should not exceed MAD 15,000.

The government-run initiative also generated an overall investment amount of MAD 248 million in 2009. According to the agency in charge of job promotion, ANAPEC, which is also piloting this program, MAD 230 million of this amount was provided in the form of bank credits, while the government provided the rest (MAD 18 million).

The Ministry of Industry, Commerce and New Technologies launched two programs which are  designed to enable SMEs to obtain financial and advisory assistance.

- Imtiaz program: aims to provide direct financial support from the government to cover 20% of the total investment with a maximum ceiling of €445,572. In 2011, 47 projects benefitted from Imtiaz funding for a total investment of more than €89.11m.

- Moussanada is a program to support SMEs for 60% of the cost and a total support of up to 1 million dirhams.

These projects are expected to generate an additional turnover of €1.36bn over the next five years and create more than 4,500 new jobs.

- The private sector has also endeavored to support SME's by networking with local financial institutions, as evidenced by the recent renewal of the SME support initiative from Groupe  Banque Populaire (GBP) and the Moroccan Business Alliance 9 to provide advice and training.

What next?

Under suitable governance and encouraging environment, young Entrepreneurs can make a fundamental contribution to the socio-economic development by redoubling their efforts. Many Moroccan young entrepreneur don't effectively believe in the impact on Existing Youth Programs and Services in their strategic planning. They don’t only fail to request all or  part of the incentive's benefit, but also neglect to identify all applicable incentives prior to making strategic decision. The key is to deem incentives during the company's strategic planning processes.

Moroccan youth entrepreneurs should consider an incentive in terms of their complete strategic plan, not as a singular event or task. First they must determine where they want to take their business, identify applicable choices for achieving their goal and then evaluate the incentive programs that best bring into line with their choices.

Businesses tend to do a better work considering incentives that apply to physical plant or other large, high-profile investments, but they often fail to notice incentives that could apply to routine investments over time, such as adding new equipment and reconfiguring a process to enhance productivity. State-level economic development agencies are increasingly receptive about helping with what companies might plan to do over the next five years to keep jobs and maintain local operations. Some incentives help businesses make existing facilities more environmentally  friendly. Understanding the programs and matching them to their business objectives and vice versa, is essential to success.

Moroccan young entrepreneurs must connect together as a network to oblige our policy makers to be active in their best interest. They  have a very strong argument to present to their obligation bearers. They create jobs and they reduce poverty. They must shove our governments to create more incentives especially in the areas of raising of capital for small businesses. Moroccan young entrepreneurs must be willing to work for the long haul. Entrepreneurship is not a short distance competition. It is a marathon! They must arrange their minds and souls for this travel. Moroccan young people shouldn’t mislead themselves that opening their own business will make them rich overnight. In fact the odds are against their business from being succeeding. But, with the correct mentality and education, they can make it! As a young person.

Types of Successful Youth Enterprise Promotion Program

The micro finance sector in Morocco is a very dynamic sector. In 2010, 12 Micro Finance Institutions ( MFIs) were registered and they reached 915,000 active borrowers. It is estimated that less than 20% of potential demand for microfinancial services is being met. The activities of MFIs are concentrated in urban and peri-urban areas (80% of clients). Most programs are aimed at men and women micro-entrepreneurs, but some of them target only women. In general, the solidarity-group lending methodology is used although some MFIs are increasingly experimenting with individual loans. 76% of the total clients are served by just two MFIs: the Association Al Amana and the Fondation Banque Populaire Zakoura.

Association Al Amana:

 It was founded in 1997 with a mission to foster social integration and economic development through microfinance and microenterprise by providing financial and non-financial services. Al Amana is a leader in the micro finance sector in Morocco. It has achieved a good positive financial performance and managed to reach the maximum number of borrowers while having an important economic and social impact on its clients.

Foundation FBP Zakoura:

It was founded in 1995 with a mission to bring significant change to the quality of life of the poor - in particularly women- by helping them to develop or create their own income-generating activities. Its services include solidarity-group and individual loans to women living below the poverty line, as well as training.

Giving Small Businesses and Entrepreneurs the Tools They Need to Grow

It is true that Moroccan youth entrepreneurs face many challenges. But, even with their current conditions, they have a pivotal role to play. They should introduce themselves with regional and global business dynamics in order to reinforce their wagers in the international business environment. At the moment, businesses are notably affected by factors beyond their borders. It is time for Moroccan entrepreneurs to connect with one another within the continent and outside. Globalized and regionalized economic and business relations are needed more than ever among Moroccan stakeholders and international counterparts.

Ignorant of what is pushing the global truth, most Moroccan entrepreneurs still consecrate their time and energy to the local market. This close outlook might not guarantee business sustainability and growth. Unpreparedness to boldly face up to the global business and socio-economic reality is one of the causes of the inopportune death of many indigenous business ventures in the world. This gloomy position should be radically changed in the future by all means and through genuine cooperation and partnership leading to win-win results.

Although Morocco has made great steps in improving its overall business environment, more needs to be done; is not that there should be more or different programs, but that there should be a more explicit involvement to entrepreneurship and small business development as a priority for the economic development of the nation. This means:

- The government should offer specific laws restricting and clarifying, and therefore providing certain sort of financial contracts or financial business, including factoring, venture capital, structured finance, credit guarantee system, and credit information bureau etc…, which are not in attendance or have ambiguities in respective legislations.

- There is a need to improve financial information infrastructure. Better coordination between the existing Credit Information Bureau and the business’s plans for a new bureau will be significant to ensure the development of an information system, which can effectively avail supervisory and SME needs. The government should explore undertaking a few urgent measures to better respond to the current need of small businesses, improve information reliability and enhance the central bank’s capacity to monitor the rapid credit expansion, including the improvement of information timeliness, data quality, coverage, and system interoperability.

- The government should urgently accelerate the process of providing laws and regulations on e-banking or mobile-banking services regarding authenticity and the finality of e-transactions, the verification of e-signatures, customer privacy protection, banking information confidentiality, etc.

Finally, the government should improve the financial literacy of entrepreneurs and individuals. The capacity of individuals and entrepreneurs to take advantage of available financial services (and to avoid risks) depends to some degree on adequate financial education.