Banking and unemployment in Morocco Morocco's banking industry has been described as one of the best in Africa. It has some of Africa's largest commercial banks, but three out of nineteen control more than two-thirds of the market. These three have grown mostly through mergers and it is expected more mergers will occur between Moroccan banks in the future. The banks make use of brand names, set their own interest rates on loans and provide some different services. The larger banks tend to lend to large firms. Small and medium sized firms find it more difficult to get loans. More than 60% of the population now make use of the services of commercial banks. The proportion of families opening savings accounts at commercial banks is increasing. Moroccan banks now have branches in 22 African countries as well as a number of European countries. They are also expanding in Morocco, creating more jobs. Morocco has a relatively high unemployment rate. Fig. 1 shows the unemployment rate in 2015 in a range of African countries including Benin, a relatively poor country. Benin has a large labour-intensive, subsistence farming sector. Fig. 1 also shows youth unemployment and population growth. Unemployment rates vary between different groups. Youth unemployment is often twice the rate of the overall unemployment rate. [Figure 1.1: Bar chart showing The unemployment rate, youth unemployment rate and population growth rate in selected African countries in 2015 for Benin, Egypt, Morocco, Nigeria, Uganda] In Morocco, the population is increasing at a faster rate than new jobs are being created. The rising unemployment rate is affecting wage rates in the country. As with unemployment, wage rates vary between different groups. Older workers, for example, tend to be paid more than younger workers.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

1. [1] Providing savings accounts
2. [1] lending
3. [1] setting interest rates on loans
4. [1] Three banks control more than two-thirds of the market
5. [1] implies high % of market/dominance/not large number of small firms/ price maker
6. [1] The banks use brand names
7. [1] there is no advertising/no brand loyalty in perfect competition
8. [1] Set own interest rates
9. [1] in perfect competition, firms are price takers/prices determined by the market
10. [1] Provide different services
11. [1] the product is homogeneous in perfect competition
12. [1] It may make more profit
13. [1] demand for banking services may be higher
14. [1] demand may be falling in home country but rising abroad
15. [1] due to e.g. higher incomes/larger population
16. [1] less competition
17. [1] Costs of production may be lower abroad/efficiency higher
18. [1] due to e.g. lower rents/lower wages
19. [1] There may be a greater availability of skilled labour abroad
20. [1] due to better education
21. [1] Foreign governments may provide subsidies
22. [1] have lower rates of tax
23. [1] Unfavourable domestic policies
24. [1] e.g. restrictions on the money supply
25. [1] limits the bank's ability to make profits domestically
26. [1] Selling services abroad may help to reduce risks
27. [1] Generally no
28. [1] supporting evidence e.g. countries with the highest population growth rate, Uganda and Benin, had the lowest unemployment rates
29. [1] Generally yes
30. [1] Supporting example
31. [1] Egypt is the exception (youth unemployment rate almost four times as high)
32. [1] Morocco is exactly twice
33. [1] no other country is exactly twice
34. [1] Older workers may have been with a firm for a long time
35. [1] may have gained promotion
36. [1] developed skills
37. [1] gained experience
38. [1] may have undertaken training
39. [1] may be in managerial jobs
40. [1] may be more productive
41. [1] May be less productive
42. [1] less fit for physical work
43. [1] may be out of date with new technology
44. [1] lack new ideas
45. [1] may have had less education in the past
46. [1] May be less occupationally mobile
47. [1] less willing/able switch jobs
48. [1] May be less geographically mobile
49. [1] less willing/able to move in search of higher paid employment
50. [1] A large proportion of its population is employed in agriculture
51. [1] in subsistence farming (will employ family members)
52. [1] labour-intensive
53. [1] would employ a high proportion of labour
54. [1] relative to capital
55. [1] Lack finance to invest in new (labour-saving) technology
56. [1] No specific skills required for (subsistence) agriculture / low entry requirements for unskilled
57. [1] The merger would give the banks / firms more market power
58. [1] a relatively quick way to grow
59. [1] may be able to raise price
60. [1] without losing too many customers
61. [1] It could be a horizontal merger
62. [1] which may enable greater advantage to be taken of economies of scale
63. [1] example
64. [1] lower (average) costs
65. [1] lower prices / increased demand
66. [1] higher profit
67. [1] The reduction in competition may make the banks / firms complacent
68. [1] may not try to keep costs down
69. [1] The firms may experience diseconomies of scale
70. [1] example
71. [1] higher (average) costs
72. [1] higher prices / reduced demand
73. [1] lower profit
74. [1] Costs of integrating firms such as redundancies/loss of morale
75. [1] Large firms may lose customers due to lack of personal touch