New mechanism to support innovative projects in Morocco .. What is the added value of cooperative financing?

Mariam Taidi-Rabat

After a long time in search of support for his project, Youssef, a young 20-year-old, looks like a sign of stress. .

Like other young Moroccans aspiring to develop creative and innovative projects, or projects with a developmental, social or cultural dimension, Youssef is eager to find funding for his projects that suit his aspirations, but access to finance is one of the biggest obstacles hindering entrepreneurs, in a reality where youth unemployment reaches 20%.

New funding mechanism
The Moroccan government approved in late August 2019 the draft law "15/18" on cooperative financing, known as public or collective funding.

According to draft law 15/18, co-financing is an additional and new mechanism for financing projects in Morocco.

Cooperative financing is a mechanism based on the collection of limited funds through an electronic platform called the cooperative financing platform, managed by a company for this purpose.

Public funding is defined as a modern form of financing, whereby the project holder presents his idea to people through electronic platforms for a specified period of time, until he gets the amount required to implement his project.

According to the project memorandum, cooperative financing is managed by establishing a direct relationship between project holders and shareholders (the public).

Fund innovative initiatives
The Moroccan government said that cooperative financing will enable a large number of small entrepreneurs to access the funding sources their projects require.

In a memorandum to the draft law, the government explained that cooperative financing aims to finance innovative initiatives and support the development of social, cultural and creative projects.

Financial expert and financial advisor Abdel Rahman Helou said the openness of the Moroccan legislator to cooperative finance in general is "excellent."

He believes that this type of financing will contribute to the improvement of "financial inclusion" and expand the environment of "financial inclusion", providing project holders with a public source of funding, and is an investment arm for as many people as possible.

Helou adds that cooperative financing contributes to direct savings, and helps to reach the groups concerned with cultural, developmental and creative projects.

Only 29% of adult Moroccans have bank accounts through which they can conduct formal transactions, which is lower than the average in the Middle East (44%) and in developing countries (63%).

Only 17% of Moroccan women have bank accounts in 2017, and only 12% of borrowers in Morocco from formal financial institutions.

Financial inclusion is the integration of groups that are not allowed to engage in banking system operations because of their low income, through a digital system that allows the completion of financial transactions electronically.

Financial inclusion is concerned with the provision of financial services using easy, simple and low-cost methods, such as mobile payments.

New job opportunities
Abdel Rahman Helou believes that cooperative financing will enable the mobilization of new sources of funding for innovative and creative projects, and projects with a developmental, cultural and social dimension. It also opens the way for mobilizing the contributions of Moroccans abroad, especially in development projects of interest to their regions of origin.

Expanded access to finance is expected to contribute to raising the development index, thereby creating new employment opportunities and contributing to the economic empowerment of youth and women.

The project aims at supporting civil society organizations in financing projects with high social impact and contributing to human development.

Concerning the convergence of this type of funding with the rest of the existing funds, Abdul Rahman Al-Helou said that cooperative financing is proceeding within the framework of integration, covering areas that cannot be covered under regular financing, and the determination of the amounts approved by the legislator has made cooperative financing intersect with targeted microfinance. For small income-generating projects.

Co - operative financing
Cooperative financing in Morocco includes a section on co-operative financing operations, which, prior to the establishment of any platform directed to shareholders, is required to issue a view of conformity from the Supreme Scientific Council (Central High Council of Fatwa in Morocco) on the project management platform.

The characteristics of the model contracts for co-operative cooperative financing by the Bank of Morocco or the Moroccan Capital Market Authority shall be determined, as the case may be, after the opinion of conformity issued by the Supreme Scientific Council.

The law shall determine the means of supervision and control of these activities by Bank Al-Maghrib, in connection with loan operations and donations, and by the Moroccan Capital Market Authority with respect to investment operations.

The competent authorities shall set conditions governing platform management companies, control of sources of funds and guarantees of access of funds to project holders and the amounts of funds allowed in this type of transaction.

Will Youssef ever turn to this type of financing, and will cooperative finance appeal to young Moroccans and contribute to reducing unemployment? Or it will be added to the list of available funds without actually developing action.