In fintech there is a nirvana known as a ‘cashless society’. Countries given almost mythical status by the lack of transactions involving the press of bank notes in hand or counting up of coins. In Europe the Nordics take the lead of being the least cash dependent, with only 3 -4% of financial transactions taking place using cash. In Asia, South Korea holds the cashless crown.
But what does a fintech industry do in a country where cash still rules – like in the Kingdom of Morocco. In 2021, 74% of transactions in the country were cash-based – and although that was a significant reduction from 98% in 2020, pre-COVID, Morocco is hardly about to challenge Norway for the title of ‘cashless society’.
It’s not just about cash vs digital payments, but also access to bank accounts. As of July 2022, only 44% of Moroccan adults have a bank account, and only 33% of Moroccan women. There is a reliance on traditional banks, if any banking institution is used at all, and bank branch numbers stand at 24 per 100,000. Lending is not seen as something that can be provided safely by a bank with 77% of borrowers going to friends and family.
What makes these numbers even more surprising for a country in 2021 is that digital payments are not being used because of a lack of access to the required infrastructure. 84% of Moroccan adults have access to the internet. As of March 2021,137.61% of the country had a mobile device, meaning that plenty of adults have more than one phone. In 2019 it was reported that 75.7% of the country’s many phones were smartphones. With excellent cell service across the country (it’s even possible to get 3G service in large parts of the Sahara desert), there is plenty of opportunity, infrastructure and technical know-how for Morocco to use digital banking services.
So where does this hesitancy come from? And why does so much of the country simply not interact with banking at all, digital or not?
Morocco’s banking, past and present
In the south of Morocco, perched next to the Atlantic ocean and braced at the foot of the Atlas mountains, is a city called Agadir. Outside the city, in ancient Berber (Amazigh) stores engraved into the rock, you can find what may be the oldest banks in the world. These ancient granaries were used to store grain, barley and possessions, with stone tablets marking the rules around their storage and contents of each store. The granaries stored the worldly possessions of Berber communities and protected them from inclement weather, hardship and foes.
Morocco’s banking history since is a story of development, sometimes sporadic, sometimes fast and centralised, but its recent history begins in 1907 when the Banque d’Etat du Maroc was created. This came after the Algerciras Conference that aimed to bring agreement and peace to a region locked in a tug of war between France and Germany. This state bank would provide access to the European market for the European powers that sought to control Morocco.
In 1959, it became the Bank Al-Maghrib, allowing the bank to issue the nations currency, the dirham, and to take control of its economy into Morocco hands. It was granted enhanced autonomy in 2006. These days, Groupe Banque Populaire and Attijariwafa are in Morocco which are the two largest banks in Africa.
Morocco scores higher in financial regulatory framework and financial safety. As the FinTech Times stated:
“According to a International Fund for Agricultural Development (IFDA) report, Morocco currently has a perfect score of 100 in its indicators pertaining to regulatory permission to process international mobile transfers and also with the presence of mobile services to process such transactions (mobile wallets).”
In 2010, the Casablanca Finance City Authority was created to be a bridge between North Africa and other corners of the continent. The hub is the home of a number of fintechs, hackathons, incubators, as well as headquarters of professional and finance multinationals, providing many local fintechs the ecosystem the need.
Economically, Morocco did not take as big a hit during COVID-19 as many in the world, especially in Africa. The COVID-19 payments to affected citizens became, for some, the first time they had interacted with an ATM machine, online banking, a digital wallet, or even just a bank at all. That brought down the dependence on cash by twenty percent or so – but cash transactions, even those avoiding traditional bankis, are still predominantly more trusted.
The fintech areas with opportunity and challenges
As the fintech industry starts to climb in Morocco, there are a few distinct sectors in which fintech is flourishing and can provide the greatest benefit – but also some immense challenges.
- Remittance. Money that arrives in the country to families from Moroccans who have moved abroad are a huge part of the country’s economy. That didn’t slow down during COVID-19 with Moroccons stuck outside the border of their country, and increased by 40%, accounting for 7.9% of the country’s GDP. Mobile wallets were being created and opened at a faster rate, but there was this glaring stat: only 1% of Moroccans made use of digital wallets. The preference was traditional wiring transfers through major banks. With fintechs like Wafacash facilitating more
- Lending, crowdfunding and personal finance management. Earlier in this piece I mentioned 77% of borrowers in Morocco borrowed from friends and family, swerving financial institutions altogether. Cotizi is the first crowdfunding platform in Morocco. OnePay is a big local player in personal finance management and payments, as is HmizatePay, an e-commerce based in Casablanca that now offers mobile payments
- Cryptocurrency. This is the most fledgling part of Morocco’s expanding fintech industry. In 217 the Kingdom of Morocco banned cryptocurrency, believing it to be an enabler of drugs and weapons trafficking and other nefarious activity. But earlier in 2022, they appeared to have a change of opinion, and in July became the first North African country to make a cryptocurrency regulation framework bill – work that’s being done with Bank Al-Maghrib and the IMF.
As Venture’s Africa put it: ‘…even more interesting is how the countries with anti-crypto governments always end up in front of the pack.’ Morocco is now North Africa’s leader in crypto ownership – despite the fact that the ban is still in place. If that ban does lift, however, and Morocco adopts its leadership position, then it could be a hugely popular location on the African continent for crypto focussed fintech companies.
Morocco’s cashless future
Like many countries around the world, COVID-19 had a huge impact in how Morocco’s citizens interacted with money. Not only was there a fear that physical cash could spread the disease, or the closeness required to hand it over was a threat, but many shops and businesses were simply not even open to accept cash. Digital payments became more commonplace, more desired. But they are still not trusted on a large scale. In the paper ‘A Case Study to a Cashless Society’ the authors highlight that: ‘A comprehensive cashless system needs to be able to facilitate domestic, cross border and international transactions for all these transaction types.’ That same need is being slowly uncovered in Morocco. Whilst in many other parts of the world, the dangerous and often onerous life of storing, transacting and collecting cash has been relinquished in the face of safer online transactions, this doesn’t seem the case so far in Morocco.
It’s clear that fintechs and financial institutions will need to demonstrate the positive attributes of cashless to Moroccans – to receive government payments, use e-commerce, send money across borders to family and friends, and utilise a future of cryptocurrency (if the legislation turns in its favour).