The Ambiguous Status of Crowdfunding today in Morocco

Crowdfunding refers to the use of small amounts of capital from a large number of people to finance a new business venture. It is an emerging financing method in Morocco that consists in soliciting funds via a specialized online platform from any interested contributor.

In concrete terms, a project owner (individual or professional) publishes an announcement to present his or her initiative and specifies the amount of money he or she wishes to raise. Interested visitors can then make a contribution of their choice. If the desired amount is not reached, the amounts are automatically returned to the investors.

There are two types of Crowdfunding, which are:

Loan-based Crowdfunding (Crowdlending): All the funders of your business will get their money back after a while when you’re able to pay it with your new business, sometimes they get their money back with interest.
Investment-based Crowdfunding (Equity Crowdfunding): The funders in this type don’t get their money back after funding the business; instead, they get shares of the business. These shares value fluctuates up and down depending on the market situation, so if it’s a very innovative idea that solves a major concern, the funders will find their shares getting higher and higher, potentially getting way more than what they put in at the start.

Crowdfunding gets mistaken often with Fundraising but the difference is clear; The latter seeks support for different causes and charities with the funders donating money altruistically, while Crowdfunding is purely for business where the funders expect things in return.

Crowdfunding in Morocco:

Presented in March 2018 by the Minister of Economy, Finance and Administration Reform, the Crowdfunding bill is part of the efforts of public authorities to strengthen the financial inclusion of young project holders and support economic and social development.

The bill was finally adopted unanimously on February 2021 by the House of Representatives. Having said that, a series of decrees and circulars remain to be put in place for the effective start of this bill

This legal framework will support the mobilization of new sources of financing for the benefit of very small, small and medium enterprises (TPME) and young innovative project holders. It should also allow the active participation of potential financiers in the country’s development projects via a simple, secure and transparent financing mechanism.

The principle is simple. The project owner launches a campaign on “Crowdfunding” platforms, where they present their project and the use that will be made of the amount they seek to collect. In other words, it is a communication campaign fixed in time, aiming to engage the community and collect a sum of money for a well-defined objective.

However, this law doesn’t make it all good and dandy, in fact, the requirements have been severe enough that some Crowdfunding platform owners shut down their services until a further update or a revision of the requirements.

Requirements for holding a Crowdfunding platform:

To hold and lead a Crowdfunding platform, there are 4 requirements than needs to be met:

Holding a minimum share capital of 300,000 MAD.
Having a prevention and risk reduction policy in place to identify the origin and destination of funds.
Requesting additional information regarding any large amount of funds asked for by a project owner.
Verifying the banking prohibitions of the various actors in the platform, whether it’s an investor or a project owner.

Because of how hard accomplishing these requirements are, most platforms dedicated to Crowdfunding have limited their range of work, but there are still a few out there that are still operational.

Crowdfunding platforms:

Wuluj

Owned by MCISE, Wuluj introduces Pre-sales as an alternative to Crowdfunding. Each project owner presents on his listing a list of items or packs of items with a price tag. So, the investor can choose one or more and pay for them. Once the funding goal is achieved and the business is up-and-running, the project owner has to send all the promised items to the investors.

Cotizi

It’s a Fundraising platform specifically for collecting donations and the signing of petitions. Anyone with needs of some donations can launch his own campaign on it and any interested visitor on the platform can donate an amount of their own choice.

Smala & Co

This is an example of a platform that has suspended their services until further notice or revision from the Moroccan government on the new established requirements of Crowdfunding platforms.

Flowingo

As for the Flowingo platform, it just acts as a gateway and medium to show the projects to its various visitors, if someone wants to fund a project, he’ll have to contact the project owner directly.

It would be a good idea to keep an eye out on these platforms since their services may evolve and improve as soon as the revision on the requirements happen. There are already talks about how the government shouldn’t neglect these platform owners and need to support and help them.

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