Financial Difficulties Threaten Small Businesses

The Moroccan Confederation of Small and Medium Enterprises has called for the re-establishment of the Small Enterprise Support Fund, which was set up in 2014 to overcome the difficulties of restructuring and avoiding the threat of bankruptcy following a series of economic crises in Morocco.

The Confederation stated in an invitation to the Ministry of Economy and Finance that small businesses face many financial difficulties that threaten their continuity and push them into bankruptcy in the short term.

The Importance of the Small Enterprise Support Fund

Abdullah Al-Ferki, head of the Confederation, said: “This fund was established by the Al-Maghrib Bank, the Professional Group for Children and the Central Guarantee Fund to provide loans at lower interest rates than regular credit and to restore financial balance. companies that can continue to operate but face temporary financial difficulties,” according to the Moroccan Hespress.

Risks Faced by Small Businesses

Al-Farki said that “the suspension of this fund and the difficulty in accessing other loans, like a breakthrough, threatens the continuation of most small businesses and dooms them to bankruptcy with successive shocks of drought, inflation and high commodity prices.”

About 20,000 very small businesses filed for bankruptcy in 2021, according to a report released by the authorities, which rose to 25,000 in 2022 due to the severe effects of the coronavirus epidemic and a series of crises that led to inflation.

The Real Definition of Very Small Businesses

The authorities objected to the adoption of a criterion for the number of transactions in the range of AED 3 to 10 million to classify very small businesses, as they stated that the real definition is to achieve a number of less than AED 3 million and employ less than 10 people, which makes this category of contracts 95% of the entrepreneurial structure.

Lack of Bank Financing and Delayed Payments

Abdullah al-Ferki said: “The vast majority of very small businesses do not receive bank financing due to a lack of in-kind guarantees from banks and high interest rates following the tightening of Al-Maghrib Bank’s monetary policy.”

The Confederation’s warnings also pointed to the problem of delays in payments, stating: “This phenomenon is responsible for 40% of bankruptcies registered last year. If the situation continues like this, the unemployment rate will rise to more than 12.9% recorded this year.” moment”.