By Karthik Krishnan
New York – Morocco’s young start-ups have been making headlines and justifiably so. Some have gone as far as to dub them the ultimate hub of job creation and I do concur there is some truth to it. About three years ago, a report was published by a World Bank Group -Jobs or Privileges – that intricately detailed the ins and outs of job creation in the country’s manufacturing industry. Going by their findings, young start-ups seemed to out-do older firms in the creation of jobs despite being plagued with the most barriers when it came to gaining access to funds.
The Financing Crisis
One of the biggest bugs in the country’s financial sector is how adamant the banks are when it comes to extending loans to businesses that cannot provide substantial collateral. Worse still, other forms of financing such as crowdsourcing, angel investors, and equipment financing are underdeveloped. Unlike the US where a start-up can fall back on small business loans from the government or short-term online loans when the bank rejects their application, these startups have nowhere else to turn to.
To shade more light on this crisis, was a report tabled by AMIC –Moroccan Association of Equity Investors. It detailed how these startups were privy to only a measly six percent of all investments inclusive of venture capital- doled out in the year 2015. This proved to be among the lowest rates in all of North Africa region and the Middle East as well.
Innova Invest Fund
This fund caught the government’s eye and they have since made steps to remedy the situation. For starters, a project dubbed the Innov Invest Fund has been set up. Under this initiative, the World Bank is expected to inject a whopping $50 million to young Moroccan startups in dire need of seed money. Cassie Centrale de Granite has been tasked with the responsibility of implementing this financing program that is anticipated to offer seed and pre-seed venture capital to deserving parties.
Private investors are expected to play a significant part of this initiative. Indeed, through the mandate of fund managers, they will be front and center in investment selection. The Innov initiative is expected to go a step further to haul up the financial sector by supporting incubators, and accelerating the training activities of project developers. To achieve this, the reinforcement of angel of investors and other intermediaries in the financial sector will be necessary.
What will come out of this?
The Moroccan Government is hoping that an overwhelming number of thriving startups will crop up as a result of this initiative and in turn illuminate the great capability this type of investment carries. If all goes well, more and more investors will see the benefits of venture capital and make the most of the opportunity.
Singapore, the United Kingdom, and Australia are a few countries that have doubled in public sector venture capitalism. If their success is any indication, startups in Morocco are about to see a new dawn that will catapult them to stardom and profitability.
