Rebar Index

November 7, 2017

Driving around Morocco, we were surprised to see so many buildings under construction.  A few were obviously active worksites with no current occupants.  A number had occupants but were clearly unfinished.  A large fraction just seemed to be partially-built structures that had been mothballed or abandoned.  One could easily spot these buildings by the rebar sticking up out of the top of the structure, setting the stage for another floor to be built on top of the current one.  Sometimes we would see entire neighborhoods with rebar sticking out of the top of every house.  

 

We asked our guide Mohamed about this.  He explained that building costs were high, even if you were providing your own labor.  It cost a lot to buy the bricks, wood, concrete, etc.  So people just built little by little, as they were able to obtain the money to do so.

Of course, our first thought was "lack of a functioning credit market."  So I decided that there was a financial opportunity for someone to step in and create a market where one did not exist.  And how would you identify exactly where the financial opportunity existed?  You could create an index of number of in-process building projects as a fraction of the entire building stock and call it, maybe, the Rebar Index.  (There is a quranic prohibition against charging interest, which I suppose is the main reason that these markets don't exist, but I understand that it's pretty easy to develop financial structures that mimic the charging of interest in those cases.)