As the benefits of Morocco’s long-term development plans have become evident, through sustained GDP growth rates and an increasingly liberalised economy, passing on those benefits to the country’s small and medium-sized enterprises (SMEs) has at times eluded policymakers. Although SMEs account for approximately 95% of all companies in the kingdom, they are often faced with a more challenging operating environment with limited access to finance. Although the majority of these firms have annual turnover of less than Dh3m ($313,000), the SME sector has an important role in developing the economy and creating new employment opportunities. As such, the government is prioritising SMEs in its long-term economic strategy.

Morocco’s broader economic development is opening up opportunities that significantly impact the growth of SMEs across the country. Government efforts to modernise transport and logistics infrastructure have not only made it easier for smaller companies to participate in large-scale projects as subcontractors, but have also improved transport and communications networks, allowing for easier access to intended markets. Morocco’s growing system of trade agreements and international commercial relations have helped expose domestic firms to new markets. In addition, the inward foreign direct investment (FDI) expanded by 31.3% to reach Dh34.2bn ($3.6bn) in 2018, according to the Office des Changes, injecting new capital into the economy.

Although the largest share of FDI went to financial services and insurance, other activities that have greater links to the SME network have also benefitted. Manufacturing, for instance, accounted for 14.3% of total FDI in the kingdom in 2018, bolstering the dynamism of local supply chains.


The challenge, however, will be to ensure that these favourable factors have a deeper impact throughout the country’s vast network of SMEs. Conservative lending practices in the banking sector often make it difficult for smaller companies to access financing. Furthermore, heavy regulatory and tax burdens hinder small businesses and entrepreneurs from joining the formal sector. “The private sector has a positive outlook on the government plans that have been established, from the work on key infrastructure projects, to the development of specific industrial sectors through the acceleration plans led by the authorities,” Saad Hamoumi, CEO at Harvard Consulting, a local business development consultancy, told OBG. “Now the question is how to make these projects have a stronger impact on Moroccan SMEs.”

In a speech in October 2019, King Mohammed VI stated that government efforts alone would not be sufficient to increase economic growth, and encouraged the country’s banking system to extend more loans to finance economic growth, particularly to small businesses and entrepreneurs.

Although the rate of SME financing in Morocco, at 17% of GDP, is higher than regional average, many SMEs still struggle to obtain loans. According to the International Finance Corporation, 6% of domestic micro-enterprises had access to the necessary financing as of 2017. A major cause of this is that smaller businesses often struggle to produce adequate collateral, and are more likely to be impacted by payment delays and burdensome regulatory procedures.

Reform Path

While there are still some remaining difficulties, recent changes are expected to have an impact on SME activities. In 2013 Bank Al Maghrib, the central bank, established a refinancing facility for banks that distribute loans to SMEs. The authorities extended the reach of a finance guarantee programme to help secure loans of up to $100,000 for SMEs, through the state-owned Central Guarantee Fund (Caisse Centrale de Garantie, CCG).

In 2019, under a World Bank development policy finance programme worth €611.3m, the government approved a financial inclusion and digital economy development plan. The plan aims to increase financial inclusion and boost access to digital technologies for individuals and small businesses. It outlines the development of new financing instruments and insurance products geared towards micro-enterprises, SMEs and entrepreneurs. Expanding digital access will be key to fostering the development of SMEs and entrepreneurship. Digital tools have allowed small companies to compete with larger and more established firms around the globe and could have a huge impact in Morocco, where household penetration of fixed broadband internet is set to reach the 22% mark in 2020. The World Bank estimated that roughly 56% of rural households will have some form of internet access by 2020. “With a demanding market in terms of digitisation, having a middle-sized business nowadays is an advantage. Smaller market players such as startups are, in fact, often the most nimble at implementing change,” Reda Bakkali, CEO of INEOS Tech, told OBG.

In terms of supportive legislation, in mid-2019 the authorities were preparing the Small Business Act, which aims to develop incentives by providing updated and more comprehensive regulations on financing and taxation for small businesses. The legislation is expected to ease export procedures, giving SMEs greater access to international markets. Furthermore, in 2019 the government approved a law that enlarged the number of potential assets that can be used by companies as collateral for financing, such as movable goods, which should improve access to finance.

Increased Competition

Following the widespread backlash against pricing practices in some key industries – such as fuel distribution and bottled water – which impacted the economy in 2018, the authorities revamped the competition watchdog. Under new leadership, the Competition Council was relaunched with a stronger mandate in late 2018. The new council is expected to help regulate uncompetitive practices, but more importantly, it is widely expected to reduce barriers to entry for the country’s smaller businesses and entrepreneurs.

Additionally, entrepreneurship is increasingly being supported by targeted funds and financing programmes. In October 2017 the CCG launched the Innov Invest Fund, a fund dedicated to supporting innovative start-ups in the kingdom. As of March 2019 the fund had helped finance some 62 start-ups with more than Dh12.3m ($1.3m). Similar initiatives are expected to gradually improve the environment for innovation and new business creation.

Investment Centres

The restructuring of Morocco’s network of regional investment centres (Centres Régionaux d’Investissement, CRI) sought to support local businesses from the ground up. The CRIs were established across the kingdom from 2002 as a means of assisting local business creation, mobilising both domestic and international investment, and supporting entrepreneurs as they navigate the regulatory procedures of establishing a new company. The centres also play a key role in attracting investment in regional areas outside of the traditional economic centres of Casablanca and Rabat, spreading it across the less developed regions of the kingdom.

“The CRIs have been very helpful and effective, as previously not all the information requested by business owners was available,” Hamoumi told OBG. “The initial plan was to create a one-stop shop in order to facilitate business creation; however, the centres will need to have greater technical capabilities to really be able to help entrepreneurs grow over the longer term.”

The restructuring of the centres, which was approved by the Parliament in mid-2018, will seek to transform them into more agile actors of regional investment by simplifying procedures. It will also aim to better align CRI development strategies with the overall plans of regional governments, as well as refocus the investment of these centres towards entrepreneurs and SME activities.

Improving the operating environment for SMEs will bring long-term advantages that go far beyond the creation of new employment opportunities. It will also impact the country’s tax revenue over the longer term, by encouraging more businesses to enter the formal sector. “Many smaller companies in Morocco operate simultaneously in the informal and formal sectors. This is a problem for the administration, which has been attempting to enlarge the fiscal base,” Hamoumi told OBG. “What the private sector wants is to operate in a favourable environment. There is a lot of weight from the administration in terms of regulation and tax collection, which discourages companies from crossing over to, and staying in, the formal sector.”

Improving conditions for SMEs will provide the kingdom’s many smaller operators – which are often family-owned – with the opportunity to grow and expand. In turn, this will help the government to combat the kingdom’s persistently high unemployment rates. Moreover, it will open up the country’s various economic sectors to more innovative ideas as it lowers the barriers to entry for entrepreneurs and start-ups.