Morocco’s Leading Financial Institution Is Banking on a Pan-African Strategy

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Ismail Douiri is co-chief executive officer of Attijariwafa Bank based in Casablanca.

Knowledge@Wharton: Could you tell us a little bit about the bank and its operations?

Ismail Douiri: It’s a financial institution that’s present in all segments of financial services. We are a commercial bank, but on top of that we control the largest insurance company in Morocco. We control specialized financial service companies in consumer credit, in mortgage, rapid transfers, remittances, leasing, even long-term car leasing. We are present in anything financial, usually in a leadership position.

The company is the result of the merger of the largest private sector banks in Morocco. That happened in 2004, and it combined the strength of two leading banks. One of them was very strong in risk management and cost control — more corporate — and the other was very strong in retail, in innovation and in distribution. We are now the leading financial institution in Morocco. We’re listed on the stock exchange in Casablanca with a market capitalization of $7 billion. Our total assets are $42 billion. We rank between fourth and sixth in the continent after the large South African banks and an Egyptian bank.

Knowledge@Wharton: I know that Morocco has very often taken a pan-African view rather than just looking at the country itself. But how is your bank playing a pan-Africa role?

Douiri: Well, the international expansion is fairly new compared to our 110-year history. Our first experience was in Europe 40 years ago, and it was around two topics — immigrant banking and trade finance. So we first set up rep offices and now a fully licensed bank in France. We are present in Spain, Italy, Belgium, the Netherlands, Germany and the U.K. This is because the natural business area of Morocco is Europe. More than 10% of our population that lives in Europe is migrants, and they will continue sending home large amounts [of money]. Approximately 5% of our GDP comes every year in remittances. So we were bound to be there, and this is what I consider part of our Morocco business.

“[In Morocco], we are still a long way from a start-up culture.  But, at the same time, we’re very entrepreneurial.”

But when we started to see the slowdown in financial services in Morocco due to the high penetration within an economy that is fairly small, we had the choice of either accepting the slower growth and becoming a utility stock or finding continued avenues for growth by replicating what we learned in Morocco and in neighboring markets that had lower penetration of financial services. This is exactly what we did after the merger that created Attijariwafa Bank. We did a thorough country scan using a number of indicators in order to prioritize the markets we had to enter.

Ten years later, we are in most of our priority markets. There is one missing part — Algeria, our immediate neighbor where the economy is twice as big as Morocco and the banking industry is approximately the same size but more fragmented. So there is a lot of value to be created in Algeria if we were able to compete. We applied for a license. That was one of our first steps in 2005. But we never got an answer.

Volatility was managed through diversification, because we entered so many countries that a crisis in any given country would not hurt us overall. Plus, Morocco remains big – 80% of the balance sheet. The combination of all this has [led] our board [to] ask us to make larger, bolder acquisitions, which means going into larger markets like Nigeria or Egypt or Ethiopia if it opens up.

Knowledge@Wharton: Take us through the strategic decision-making process you used in identifying your priority markets. What were the risks that you considered, and how did you hedge those risks?

Douiri: The risks are related to the indicators. The top indicator has to do with the macroeconomic situation. We are a bank. So we live with the macro, we live with interest rates, with currency. The second big theme had to do with regulation. We also looked at cultural aspects. How will we be able to conduct cross-border projects? We don’t aim to just plant the flag; we need to work hard on transferring best practices. A good proxy for cultural proximity is language. We needed our teams to communicate easily.

In the top three buckets, we had French or Arabic speaking countries, and this is what we have executed so far. But I believe that language shouldn’t be a barrier; the younger generation in Morocco now speaks English more and more. So, the next step will be outside the French-speaking world.

Knowledge@Wharton: To what degree was the financial crisis in Europe a factor in your planning a pan-Africa strategy?

Douiri: The crisis happened later. When we planned the pan-African strategy it was 2005 and things were going well everywhere — in Europe and also in Morocco. Morocco was still a high-growth country. We were just projecting the fact that banking services would saturate at some point.

Knowledge@Wharton: We would be interested in your perspective on the start-up economy in different countries in Africa. What role is your bank playing with start-ups?

“We had the choice of either accepting the slower growth … or finding continued avenues for growth in replicating what we learned in Morocco in neighboring markets that had lower penetration of financial services.”

Douiri: It’s much more dynamic than we think. I was struck for the first time when in 2014 the Global Entrepreneurship Summit took place in Marrakech. It was a state department-led initiative. But here I was at an event organized by a foreign country with Moroccan entrepreneurs whom we had never really met — whom we don’t get to meet every day because it’s not the same environment. And they were doing a great job explaining their business model, talking to investors, talking to the vice president of the U.S. It opened my eyes to this vibrant environment.

Now, let’s get to the real fundamentals. I think Morocco is a very small market for any start-up. It’s a market where you have many more hurdles than in a developed market because you need to educate people to trust you in a culture where risk taking is not very developed. So I’m not over optimistic. I’m optimistic to see that young people have the energy, the will and the skills. But I don’t think it will be an overnight revolution. There is still one big block missing which is early-stage venture capital.

Knowledge@Wharton: Are you thinking of this in Morocco in particularly, or throughout the continent?

Douiri: Morocco is the place I know best, and I think what I’m saying about Morocco is true for all the other countries where we operate. Maybe it’s not true in countries that are more English-speaking. The missing part for me is not the role of the private sector; it’s the role of governments — co-investment in early stage projects, development of higher education which is not that great in Morocco…. The whole education industry needs to be revamped. The system was built during a period where the ultimate goal was to be a civil servant, not an entrepreneur. We are still a long way from a start-up culture. But, at the same time, we’re very entrepreneurial. This informal economy is very important for a developing country.

To come back to your question: “What do we do?” We believe that private equity is a different business. So we have a subsidiary that manages funds — private equity funds. But we don’t interfere with their strategy. What we’re doing as a bank is to enlarge our lending market to very small enterprises, in particular in the informal sector. This is a new avenue. We’re offering formal credits to informal businesses.

Knowledge@Wharton: I have one last question. All around Africa you see mobile banking on the rise. How do you see the prospect for mobile banking in Morocco and North Africa, specifically with regard to bringing unbanked sections of the population into the financial sector?

Douiri: First, it’s very important to create definitions of mobile banking. The mobile as a channel to interact with your bank is really becoming very important. We invested heavily in that, and we’re seeing the new generation use more and more of that channel — even more than the Internet. Anything you have in the U.S., we have it in Morocco, and soon in the other African countries where we’re present because we’re also developing that. For the rest, it’s mostly about remittances and payments. So it’s not really mobile banking. I would call it mobile payment. So far, mobile operators have not been able to build a bank. They have built a remittance and payment system based on their mobile.

In Morocco, the context is very different. We have already 11 million cards — debit or credit — in the pockets of Moroccans. There is only a 10 million active population. So people who want an electronic payment form have it in their pocket. For us, the challenge is to push people to use their card for more than just withdrawing cash.

All mobile operators who have tried mobile payments in Morocco have failed. Why? Because the infrastructure is not needed. There is no gap to be filled by mobile operators.

Coming to low-income banking, there are a lot of initiatives in Morocco. Everybody in the cities has a bank account, even people in the countryside. So it’s high banking density, very low prices. You can have a bank account for 50 cents a month, and that includes your debit card and even free checkbooks. So in a sense it’s being commoditized. This is the model in Morocco. Elsewhere, we will have to take into account mobile operators that are sometimes making rapid progress. They will be very hard to beat but, at the same time, they will need us when they want to improve their offering. So everywhere else it will be competition. Our subsidiary Wafacash has already applied for licenses in Western Africa and Central Africa. It will be very interesting south of the Sahara. But the game in Morocco is pretty much finished.

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