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Unlocking the potential of young micro-entrepreneurs in Morocco

Gloria La Cava's picture
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World Bank | Arne HoelAs you walk through the ancient market in Fes or that of any other medina in Morocco, pass a vibrant hair salon in downtown Casablanca with the feel of a beauty mega-factory, or see young people on a street corner in Rabat waiting to be picked up for a day job in construction, you cannot but be impressed with the entrepreneurial spirit on display. The young people hard at work across the country are part of a huge army of Moroccan youth, many of whom have  less than secondary school degrees, stuck  in the informal sector with limited opportunities for a good, steady income.

A recent World Bank study on Promoting Youth Opportunities and Participation (2012) shows the magnitude of the social and economic exclusion of young people in Morocco. Inactivity runs high, with 51 percent of all 15-29 year-olds out of school and out of work. Moreover 69 percent of all youth have less than a middle-school degree, and 20 percent are illiterate. Girls are particularly vulnerable, with about 82 percent of those not in schools also out of the labor force either for family reasons (63 percent) or discouragement (19 percent). Equally staggering, 87 percent of employed youth in the country are working informally, without a contract.

With the limited prospects of a formal job, a growing number of young people, especially the less educated ones, are attracted to the prospects of self-employment. It is seen as a way out of inactivity, low pay, long working hours, and the hazardous work conditions often associated with the informal sector. But their lack of access to business training and finance constitute major barriers towards setting up viable micro-enterprises. According to the World Bank report, access to finance was identified as a key constraint to creating enterprises by 80 percent of youth who wanted to set up non-agricultural businesses and 70 percent considered high financial risks as the main reason for not creating them.

World Bank | Arne HoelThe identification of these constraints inspired the establishment of a US$ five million entrepreneurship grant that will fund an innovative approach to providing low-skilled youth with first time access to business skills, mentoring and financial services. The grant for Strengthening Micro-Entrepreneurship for Disadvantaged Youth in the Informal Sector was approved today (Wednesday February 20) by the Steering Committee of the MENA Transition Fund at a meeting in the Moroccan capital, Rabat. Launched by the Deauville Partnership as a response to the historical changes underway in several countries in the Middle East and North Africa (MENA) region, the Transition Fund is a broad-based partnership providing grants for technical cooperation to help transition countries strengthen both governance  and  social and economic institutions to promote  inclusive growth. Over the course of four years, the grant is expected to provide at least 5,000 disadvantaged young men and women between the ages of 15 and 29 with access to business development services. With time, strengthening the institutional capacities of national and local stakeholders will enable them to support youth micro-entrepreneurship on a much larger, national scale.

"Youth entrepreneurship supported by access to finance are critical for the successful integration of Moroccan youth into the ongoing economic development that the country has been experiencing over the past decade. This project will help bridge the existing gaps and encourage youth to be innovative and to develop viable businesses, for their own benefit but also for that of their communities" said Simon Gray, World Bank Country Director for the Maghreb.

By lowering the barriers to entrepreneurship, the project will contribute to employment generation and higher incomes, while also promoting young people’s self-confidence and greater trust in institutions.  A champion of youth self-employment opportunities, the Ministry of Youth and Sports will lead this effort with the support of the World Bank, by leveraging its local youth-targeted services, broadening its outreach to more disadvantaged segments, and contributing to more effective use of existing delivery channels to better respond to the needs of young people. The project will also introduce a new model of public, private and NGO partnerships, thereby nurturing a broader ecosystem for youth entrepreneurship support in Morocco.

For more information on Morocco: Household and Youth Survey 2009-2010, refer to: http://microdata.worldbank.org/index.php/catalog/1546

Comments

Submitted by Paula Lytle on
Gloria, Thanks for a thought-provoking piece. Your work on youth inclusion and employment continues to provide solid analysis and innovative solution. Kudos to you and your team.

Submitted by Gloria on
Thank you Paula.

Youth entrepreneurship is a very promising and challenging field. We look forward to exchanging lessons with the Africa Region.

Gloria La Cava

 

Submitted by Milford bateman on
I’m afraid that under the present conditions in the Arab Spring countries this youth employment project makes no economic sense at all. The supply of quality and committed entrepreneurs, of any age, is simply not a binding constraint in Arab Spring countries today: the key binding constraint is the manifest lack of local demand in poor communities that are getting poorer by the hour. Since most Arab Spring countries, including Morocco, are already massively over-saturated with struggling young entrepreneurs and petty self-employment ventures all trying to find a few clients in order to make a few dollars a day, cramming yet MORE poor young individuals into the very same economic space is not just a supremely cynical exercise, it is one that is very unlikely to produce a positive net jobs or income outcome. On the contrary: first, the project will simply displace incumbents who are also selling the very same petty items or services as the proposed entrants. Apart from no net jobs or additional incomes being generated, we know from many other locations that such ultra-competitive circumstances are very likely to stoke up further social unrest and violence. Second, the project will inevitably incur very high microenterprise failure rates, which will mean many of these hapless young individuals losing their land, houses, family savings, remittances and so on when their microenterprise goes down the tubes, and/or they are forced to repay any microloan in the absence of an income flow. Check out a 2012 article by the late Alice Amsden, who typically brilliantly showed why pretty much all such supply-driven projects as this one are irrational on economic grounds.

http://wer.worldeconomicsassociation.org/article/view/42

You might also refer to my own short contribution on the related fantasy that the main barrier holding back a truly massive job creation episode by the poor and unemployed is the supposedly limited supply of microcredit.

http://www.social-europe.eu/2012/05/creating-jobs-in-recession-hit-communities-in-europe-why-microcredit-will-not-help/

The youth in the Arab Spring countries deserve genuine analysis and real solutions to their plight, not more empty PR-driven projects like this one.

Thanks for this insightful and useful article. We run a small charity in Essaouira aimed at helping young people become more employable. The problems they face are many and various, and it's good to see that we are not alone in having picked this up. There are plenty of wealthy people in Morocco, including westerners, and it's important for all of us to do what we can to help this generation find its way to a more prosperous future. For the likes of our little outfit, more transparency about funding and opportunities would be a great next step.

Submitted by James daniel paul on
House aids contribute monthly, rag pickers daily, iddly batter sellers on a daily basis either contribute and withdraw or visa versa. Now the government is trying to regularise the micro finance through nbfcs only. Will increase the cost of finance? Or will it keep the shylocks away. Italian confidies have been a good example. But they only play the role of garunteeing organisation through peer review. I guess peer review is the focus. The problem we face on the street is defining the peer.

Dear Milford:

Thank you for your thoughts to many of which we agree. There is a growing evidence base that micro-finance alone will not automatically result in new firms and additional services. Instead, it is primarily approaches that provide skill training and mentoring in combination with providing access to micro-finance that have high success rates. The mentioned project follows such a comprehensive approach, including novel market analysis to identify new segments for sales and small-scale exports; the involvement of existing entrepreneurs as business-angels and mentors; and a focus on value chain integration during training and mentoring. It also supports a community-based approach which has never been adopted before for youth micro-entrepreneurship in Morocco, but has brought positive results for small scale community infrastructure (i.e. small roads and water supply).

While promoting entrepreneurship will clearly not resolve all the issues that youth face in Morocco and the region, it is among the most promising approaches to generate endogenous economic growth. In addition, this project will be complemented by real-time monitoring and a rigorous impact evaluation, i.e. on income changes and sustainability of entrepreneurial activities over time, to inform any policy decisions concerning upgrading these activities.

Best,
Gloria

This is a crucial initiative for Morocco, kudos to the World Bank for taking the lead on arguably the country's greatest social threat: youth unemployment.

I see two key elements in an initiative like this: sustainable income creation and addressing the dangerously high levels of youth inactivity.

As for income creation, I believe the situation is not nearly as zero-sum as Milford makes it sound. I would point out that true microenterprise loans in Morocco (between $100-600) are not the kind of loans that cause the loss of land and homes. However, youth do NOT have access to microfinance because Moroccan MFIs (such as the largest, Al Amana) require assets and/or proof of income just like commercial banks, so essentially microfinance doesn't exist for aspiring young entrepreneurs. You noted in your reply to Milford that small-scale exports and value chain integration are ways in which this program can be a net job creator. Also, putting new or under-utilized agricultural land to work (agriculture employs roughly 40% of Moroccans), as well as youth developing micro-enterprises in tourism can be net gains. Furthermore, in rural Morocco a living wage is arguably $150 a month, so those "petty self employment ventures...making a few dollars a day" are actually a significant base, especially for unemployed youth that mostly live with their family and often extended family. Sustainable income generation for young entrepreneurs can occur in markets without creating these "ultra-competitive" conditions, but that isn't the most pressing concern.

The other key element of this program is the horrifying levels of youth inactivity. No one can spend long in Morocco without seeing youth everywhere doing nothing (as noted, half of Moroccans neither in school nor employed). This initiative kills two birds with one stone, giving young Moroccans a chance to learn the fundaments of business, create a job/income (yes, questions as to the sustainability of the business), and become actively engaged in society again. This kind of program could even engage that scarily large group of youth that have "given up" trying to do anything.

We run a nonprofit in Imouzzer-Kandar that is piloting a program that sounds nearly identical to this one. I would love to hear more details about how this initiative will be implemented. Thanks again for your post.

Thank you, William, This is an excellent summary of how entrepreneurship training works. To address the challenge of creating new business rather than just crowding-out existing micro-firms, the new project comes with a novel approach. It explictely aims to support sustainable entrepreneurship by combining training of life- and business-skills, and mentorship for young firms with market research.

Dear Gloria,

Thank you for your response. You mentioned that the Ministry of Youth and Sports would take charge of the implementation of this program through "leveraging its local youth-targeted services...and contributing to more effective use of existing delivery channels..."

Could you speak to the ways in which the Ministry plans to use this money more precisely? Are they planning on using their local youth centers or "Dar Shebabs"? Or are they considering partnerships with existing NGOs that already use the program you described above to help youth create microenterprises?

I am concerned that a Ministry that has no experience in youth microentrepreneurship is tasked with implementing this program, when there are established and respectable NGOs like e4e or Fondation du Jeune Entrepreneur who might be able to maximize the impact of this Deauville Partnership grant.

Thanks again for your work in this needy sector here in Morocco.

William,

The Transition Fund of the Deauville Partnership is not geared to give grants to NGOs directly, but rather to strengthen the capacity of new institutional actors which are open to innovation and reforms in different sectors.

Many Moroccan institutions have failed in putting in place effective programming for youth employability or entreprenership because, among other reasons, public officials have been entirely responsible for employment services, without much room for public/private/NGO partnerships. The Ministry of Youth and Sports is committed to work with NGOs and with the private sector, leveraging as much as possible its wide network of youth facilities which covers most of the country.

The fact is that no single NGO, private entrepreneur or Government agency can by itself resolve the very difficult issue of opening new oppportunities for young people, especially for those who have low education and income levels. So the idea is to try to do so through a combination of innovative partnerships, outreach, hands on training and coaching, linkages with the financing opportunities so as to have the kind of platform which can bring to scale successful approaches.

Thank you for your comment.

Submitted by Fatos on
Dear Gloria, This is the great contribution to youth, but from my point of view it is the the best when central and local government continue without any pressure or outside monitoring project. Kind Regards, Fatosi, from Prishtina

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