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Risk-averse banks: the special case of Morocco

Morocco offers a small ecosystem for the development and financial support of start-ups. The lack of available financing, especially for start-ups and for "green entrepreneurs" in general is confirmed by the fact that banks remain very risk-averse, although there is indeed an interest in new products.

Photo credit: mabanqueislamique.com

It’s no secret that any new initiative needs a concerted effort in order to succeed. Silicon Valley, the cutting edge of innovation and start-up success, wouldn’t have happened without a mix of public sector, investors, universities and entrepreneurial spirit. Therefore, it only makes sense that, in order to establish a “new” type of economy, multiple stakeholders should be taken into consideration. Morocco is no exception, and it looks like the stars are aligning. Let’s see if Morocco has what it takes.

Bolstered by the recent COP22 conference in Marrakesh, the concept of Green Economy and related concepts – among which is Sustainable Consumption and Production – are becoming increasingly widespread, also outside the specialists’ panels. The Moroccan Government is looking more and more willing to support the emergence of this new declination of doing business, given that it could create jobs and preserve some of the most scarce and important resources in Morocco, such as water.

Entrepreneurship is one of the most successful ways of creating long-term jobs and growth, empowering citizens at the same time. If new enterprises, or start-ups, could be fostered in a way that not only avoids the destruction of the fragile ecosystem, but also actively preserves it, we are looking at the textbook definition of sustainable development. Becoming an entrepreneur is gaining traction among Moroccan youngsters, seen as a way to take control of their own lives and create their own job.

So we have almost all the ingredients. What about investments? Investment is the catalyst that can transform a stuttering engine into a powerhouse. This can help a lot when setting up a start-up, all the way into expanding and consolidating the firm. In order to do this, the financial system needs to be strong and diversified.

Morocco doesn’t have a big financial sector but presents some strengths, especially in a highly developed microfinance system. Other important parts are incubators, accelerators, business angels (many of which are in their infancy), foundations and, obviously, banks. Banks – when they work properly and do their job – are one of the most important pillars in the everyday functioning of a modern society. They pool the savings of their clients and provide them with credit. Therefore, it would be great to have them on board in fostering Green Entrepreneurship, right?

Unfortunately, the reality is that banks don’t really finance the Green Economy (at least consciously), nor start-ups. While this is certainly too bad, it doesn’t necessarily mean that the situation’s so simple as it seems.

To begin, banks aren’t supposed to finance start-ups. They are risk-averse (due to the fact that they have to protect their clients’ savings) and tend to invest in real-economy projects only after they’ve proven their resilience and sustainability for a couple of years – something start-ups can’t do, for obvious reasons. So, if you’re a new entrepreneurs looking for financing your brand new business, probably a bank isn’t the best option – try microcredit, for example (it also depends on how much you need).

As for the fact that banks don’t finance Green enterprises… we can talk about it. As I said before, the Green Economy is becoming more and more of public domain but, in order to transform ideas into action, time is needed. Also, banks are interested in creating new products that satisfy their clients. If more and more people demand Green products, the supply (in this case the banks) will follow suit.

Another challenge for the banks is that the Green Economy is a horizontal grouping. It can refer to agriculture, industry, tourism, waste management and there is no clear, shared definition of it. This obviously creates some issues when analysing a business plan, especially when the Green Economy isn’t mainstream yet.

To sum up, the situation is not too bad. Morocco presents an ecosystem for the development and financing of Green start-ups in its infancy. Banks are one of the most important links in the financing chain, but due to their structure and function they aren’t the first step in financing a start-up – but they can definitely be a key actor in the successive steps in the life of an enterprise. The Moroccan system, thanks to a mix of political will, increased awareness and sheer necessity, is evolving. It’s likely that banks will evolve in order to keep their customers satisfied and they always keep an eye on new products and new possibilities.

Gian-Luca Gasparini is Project Officer at SEFEA Consulting, an Italian company dedicated to the promotion of ethical finance and sustainable development. For more information see his Linkedin .