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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 75522-MA
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GRANT
IN THE AMOUNT OF US$4.9 MILLION
FROM THE MIDDLE EAST AND NORTH AFRICA TRANSITION FUND
TO THE
KINGDOM OF MOROCCO
FOR A
MICROFINANCE DEVELOPMENT PROJECT
June 27, 2013
Finance and Private Sector Development Group
Middle East and North Africa Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective June 5, 2013)
Currency Unit = Moroccan Dirham (MAD)
US$1 = MAD 8.52
MAD 1 = US$0.12
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AMC Associations de Micro-Crédit (Micro-Credit Associations)
BAM Bank Al Maghrib (Central Bank of Morocco)
CCG Caisse Centrale de Garantie (Central Guarantee Fund)
CDG Caisse de Dépot et de Gestion
CGAP Consultative Group to Assist the Poor
CM6 Centre Mohammed VI pour la Microfinance Solidaire
CMU County Management Unit
CPS Country Partnership Strategy
CQS Selection Based on Consultant's Qualifications
DAAG Direction des Affaires Administratives et Générales (Directorate of Administrative and
General Affairs)
DECDG Development Economics, Development Data Group
DPL Development Policy Loan
DPTF Deauville Partnership Transition Fund
DPTF OM Deauville Partnership Transition Fund Operations Manual
FM Financial Management
FNAM National Federation of Micro-Credit Associations
GDP Gross Domestic Product
GID Gestion Intégrée des Dépenses (Integrated Expense Management)
GNI Gross National Income
IBRD International Bank for Reconstruction and Development
IC Individual Consultants
IDA International Development Association
IFC International Finance Corporation
IFI International Financial Institution
IFMIS Integrated Financial Management Information System
IGF General Inspectorate of Finance
IMF International Monetary Fund
INTOSAI International Standards on Auditing
ISA International Standards on Auditing
IT Information Technology
IUFR Interim Unaudited Financial Report
J-PAL Jameel Latif Poverty Action Lab
M&E Monitoring and Evaluation
MAD Moroccan Dirham
MCA Millennium Challenge Account
MENA Middle East and North Africa
MFI Microfinance Institutions
MIS Management Information Systems
MoEF Ministry of Economy and Finance
MSME Micro Small and Medium Sized Enterprises
NCB National Competitive Bidding
OP Operations Policy
PAD Project Appraisal Document
PDO Program Development Objective
PEFA Project Economic and Financial Assessment
PFM Public Financial Management
PFS Project Financial Statements
PJD Parti de la Justice et de Développement (Justice and Development Party)
PMU Project Management Unit
PPP Purchasing Power Parity
QCBS Quality and Cost Based Selection
SBD Standard Bidding Documents
SME Small and Medium Enterprise
TA Technical Assistance
TF Trust Fund
UN United Nations
USAID United States Agency for International Development
USD United States Dollar
VAT Value-Added Tax
Regional Vice President: Inger Andersen
Country Director: Simon Gray
Sector Director: Loic Chiquier
Sector Manager: Simon C. Bell
Task Team Leader: Teymour Abdel Aziz
KINGDOM OF MOROCCO
Morocco Microfinance Development Project
TABLE OF CONTENTS
Page
I. STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context ................................................................................. 3 C. Higher Level Objectives to which the Project Contributes .......................................... 8
II. PROJECT DEVELOPMENT OBJECTIVES ................................................................8
A. Project Development Objective (PDO) ........................................................................ 8
B. Project Beneficiaries ..................................................................................................... 8 C. PDO Level Results Indicators ..................................................................................... 11
III. PROJECT DESCRIPTION ............................................................................................11
A. Project Components .................................................................................................... 11
B. Project Financing ........................................................................................................ 13 C. Lessons Learned and Reflected in the Project Design ................................................ 14
IV. IMPLEMENTATION .....................................................................................................16
A. Institutional and Implementation Arrangements ........................................................ 16 B. Results Monitoring and Evaluation ............................................................................ 17
C. Sustainability............................................................................................................... 17
V. KEY RISKS AND MITIGATION MEASURES ..........................................................18
A. Risk Ratings Summary Table ..................................................................................... 18 B. Overall Risk Rating Explanation ................................................................................ 18
VI. APPRAISAL SUMMARY ..............................................................................................19
A. Economic and Financial Analyses .............................................................................. 19
B. Technical ..................................................................................................................... 19 C. Financial Management ................................................................................................ 19
D. Procurement ................................................................................................................ 20 E. Social (including Safeguards) ..................................................................................... 21 F. Environment (including Safeguards) .......................................................................... 21
Annexes
Annex 1: Results Framework and Monitoring...............................................................................22 Annex 2: Detailed Project Description ..........................................................................................25 Annex 3: Implementation Arrangements .......................................................................................28
Annex 4: Operational Risk Assessment Framework (ORAF) .......................................................40 Annex 5: Implementation Support Plan .........................................................................................43
i
PAD DATA SHEET
Kingdom of Morocco
Morocco Microfinance Development Project
PROJECT APPRAISAL DOCUMENT
Middle East & North Africa
Financial and Private Sector Development
.
Basic Information
Date: June 27, 2013 Sectors: Private Sector Development (100 percent)
Country Director: Simon Gray Themes: Private Sector Development, Micro and small
Finance
Sector Manager/Director: Simon C. Bell/ Loic Chiquier EA
Category:
C
Project ID: P144500
Lending Instrument: Investment Project Financing
Team Leader(s): Teymour Abdel Aziz
Joint IFC:
.
Recipient: Kingdom of Morocco
Responsible Agency: Ministry of Economy and Finance
Contact: Nouaman Al Aissami Title: Chief of Credit Division
Telephone No.: Email: [email protected]
.
Project Implementation Period: Start Date: July 31, 2013 End Date: July 31, 2017
Expected Effectiveness Date: July 31, 2013
Expected Closing Date: January 31, 2018
.
Project Financing Data(US$M)
[ ] Loan [ ] Grant [ X ] Other (Trust Fund Grant)
[ ] Credit [ ] Guarantee
For Loans/Credits/Others
Total Project Cost (US$M) : 5.9 Total Bank Financing :
Total Transition Fund
Financing (US$M) :
4.9
Financing Gap :
ii
.
Financing Source Amount(US$M)
BORROWER/RECIPIENT 1.0
IBRD
IDA: New
IDA: Recommitted
Other 4.9
Financing Gap
Total 5.9
.
Expected Disbursements (in USD Million)
Fiscal Year 2014 2015 2016 2017 2018
Annual 0.1 1.5 1.6 1.6 0.1
Cumulative 0.1 1.6 3.2 4.8 4.9
.
Project Development Objective(s)
The project objective is to promote access to finance to low income households and micro and small enterprises
through the promotion of a sustainable and inclusive microfinance sector.
.
Components
Component Name Cost (USD Millions)
Component 1: Strengthening the institutional, legal, regulatory, tax and
governance framework for microfinance
1.9
Component 2: Strengthening the market infrastructure, product innovation
and funding sources for microfinance
1.5
Component 3: Integrating Microfinance into a national financial inclusion
strategy
1.5
.
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ]
.
Does the project require any waivers of Bank policies? Yes [ ] [X]
Have these been approved by Bank management? Yes [ ] [ ]
Is approval for any policy waiver sought from the Board? Yes [ ] [X]
Does the project meet the Regional criteria for readiness for implementation? Yes [X] [ ]
iii
.
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X
.
Legal Covenants
Name Recurrent Due Date Frequency
Recruitment of additional procurement specialist and
additional financial management specialist
No four (4) months
after the Effective
Date
Once
Description of Covenant
The Project Management Unit (PMU) shall recruit, by not later than four (4) months after the Effective Date, an additional
procurement specialist and an additional financial management specialist each of whose qualifications, experience and
terms of reference shall be acceptable to the World Bank.
.
Team Composition
Bank Staff
Name Title Specialization
Teymour Abdel Aziz (TTL) Economist, TTL Financial Sector Development
Gabriel Sensenbrenner Lead Financial Economist Financial Sector Development
Peter McConaghy Junior Professional Associate Financial Sector Development
Philippe de Meneval Senior PSD Specialist Private Sector Development
Steve Wan Operations Analyst Operations
Abdoulaye Keita Senior Procurement Specialist Procurement
Khadija Faridi Consultant Procurement
Lamyae Hanafi Benzakour Financial Management Specialist Financial Management
Laila Moudden Operations Assistant Financial Management
iv
Hassine Hedda Finance Officer Disbursements
Suzanne Parris Program Assistant Operations
Jean-Charles de Daruvar Senior Counsel Legal
Maya Abi Karam Counsel Legal
Alexandra Sperling Legal Analyst Legal
Non Bank Staff
Name Title Office Phone City
.
Locations: The regions of Tanger-Tetouan, Taza-Al-Hoceima-Tatounate, Fez-Boulmane, Meknes-Tafilalt, Tadla-Azilal,
Doukkala-Abda, Rabat-Sale-Zemmour-Zaër, Casablanca, Oriental, Marrakech-Tensift-El Haouz, Chaouia-Ourdigha,
Gharb-Chrarda-Beni Hsen, and Souss-Massa-Draâ; and the provinces of Guelmin, Assa- Zag, Tantan and Tata.
Country: Kingdom of
Morocco
First Administrative
Division
Location Planned Actual Comments
.
1
I. STRATEGIC CONTEXT
A. Country Context
1. The wave of democratization that the Middle East and North Africa (MENA) region has
experienced since the start of the Arab Spring has also reached Morocco, although its experience
has been reasonably peaceful. In March 2011, King Mohammed VI proposed a broad and
comprehensive package of political reforms that garnered the support of the electorate in a
constitutional referendum held on July 1, 2011. The new Constitution sets the basis for a more
open and democratic society, provides mechanisms for the construction of a modern state of law
and institutions, and lays the foundation for extended regionalization. Transparent parliamentary
elections, held on November 25, 2011, were won by the Parti de la Justice et du Développement
(PJD), a party that had traditionally been in active opposition. The PJD formed, in early January
2012, a four-party coalition government, with Mr. Benkirane, the head of the PJD, becoming the
Head of Government.
2. In this context, Morocco’s unique experience reflects its political distinctiveness in the
region, even though many of the same grievances among the population exist (lack of economic
opportunities, corruption, widespread poverty, social inequality, unemployment). This
experience has shown that Moroccans seem more inclined to seek evolution within the system –
gradual change continuous with the country’s history and religious values.
3. The movements associated with the political transition and constitutional changes
represent real pressure on the Moroccan State for meaningful and quick change. While the
people seem to be willing to support the Government and its mandate, they are expecting and
indeed demanding that it breaks with the past and ushers in more credible and faster reforms,
notably in the areas of job creation and improvement of the quality of public services delivered.
If the Government can assume more ownership of the political process and genuinely deliver,
then this will go a long way to transforming the social and political landscape of Morocco.
4. Morocco made significant economic headway during the decade preceding the Arab
Spring. Growth averaged 4.8 percent over 2001-12, compared to 2.8 percent in the 1990s.
Inflation was less than 2 percent over the period. Gross domestic product (GDP) per capita
doubled to reach US$2,951 in 2012; unemployment declined from 13.6 percent in 2000 to 9
percent in 2012; absolute poverty decreased from 15.3 percent to roughly 8.8 percent between
2001 and 2008.
5. Morocco weathered the first round of the global financial crisis relatively well,
maintaining an investment grade rating since 2007. This reflected sustained efforts to implement
sound macroeconomic policies and ambitious structural reforms. Morocco liberalized a number
of sectors, including transport, energy, and telecommunications, and signed many Free Trade
Agreements, including with Europe. The financial sector was strengthened to support the new
dynamism of the nonagricultural sector and (although much still remains to be done) the
microfinance segment is among the most developed in the MENA region.
6. However, Morocco has confronted growing economic challenges in the second round of
the global financial crisis. Developments in the Euro area and continued high fuel and food
2
import prices are expected to put sustained pressure on fiscal and external balances. The current
account deficit is estimated to have reached 9.6 percent of GDP in 2012 from further losses in
terms of trade, and lower tourism receipts and remittances. The fiscal deficit deteriorated to 7.6
percent of GDP in 2012 and central government debt jumped to 58.8 percent of GDP. This fiscal
deterioration stems mainly from higher-than-expected expenditures, especially on food and fuel
subsidies, wages and salaries, and transfers to public agencies and state-owned enterprises.
Financing the deficit through classical external borrowing from multilateral and bilateral
creditors, along capital grants proved insufficient, which led the Government to raise US$1.5
billion bonds on international financial markets in December 2012. As a result, the central
government debt increased by 5.1 percentage points of GDP in 2012 to reach 58.8 percent of
GDP.
7. The recent shocks have left the Government with much smaller policy margins at a time
when the population has higher expectations for job creation and poverty alleviation.
Unemployment remains high (9 percent), especially among the urban youth, despite one of the
lowest participation rates (49 percent) among comparator countries. Four out of 5 unemployed
are urban, 2 out of 3 are youth aged 15-29, 1 in 4 jobless holds a university diploma. About a
quarter of the population–around 8 million people–is either in absolute poverty or under constant
threat of falling back into poverty. Seventy percent of poverty is still rural and in 2007 the urban
poverty rate was 4.8 percent compared to 14.5 percent in rural areas. Income of the poor has
been growing at a slower rate than the average income.
8. In the current political and economic environment, inclusive growth and job creation by
the private sector dominate the policy debates. With government increasingly financially
constrained, there are high expectations that SMEs and micro-enterprises can increasingly
contribute to private sector job creation in Morocco. The World Bank’s 2011 financial sector
flagship report showed that access to finance is a key constraint in areas underserved by
conventional banks, such as the informal sector.
9. Microfinance institutions (MFIs), by the very nature of their business model and cost
structure, are particularly well equipped to provide financial services to the informal sector.
Morocco’s MFIs have established a solid track record in expanding access to the informal sector,
despite problems resulting from an initial period of high growth without an adequate institutional
and governance framework. The recent consolidation of the sector, as well as other central bank
measures that led to improved governance, supervision, and more and better sharing of
information on the borrowers of microloans, paved the way for further expansion of access.
10. MFIs contribute significantly to the production of quality credit information on borrowers
in the informal sector. When these borrowers are seasoned and reach a critical size, they become
more attractive to traditional banks and can transition to the more productive formal sector where
they typically benefit from a better safety net. By enabling this transition, MFIs may also
contribute to net job creation, though only with long lags and in limited quantity. More
importantly, greater MFI penetration lays the foundation for a financial system less geared to the
few borrowers with valuable collateral, prominent supporters or implicit guarantees.
3
B. Sectoral and Institutional Context
11. Morocco has a well thought-out strategy for the sustainable development of its financial
sector, inspired by a drive to learn from and adapt best practices to the need of Morocco’s
modernizing economy. Over the past 20 years, important reforms of the institutional and legal
framework helped sustain the development of a capable financial industry. The sector is wide
open to international practices, with a view to balance financial sector stability objectives with
diversification and innovations that meet the needs of households and enterprises. Advances
include the governance of financial institutions and of regulatory authorities, oversight practices
and crisis preparedness, finance for small enterprises, capital market development, and financial
inclusion. The strategy aims to establish Morocco as a regional hub for the dissemination of best
practices in financial sector development, and Moroccan financial institutions have established
important beachheads in Africa. The strategy has been supported by Bank-financed development
policy loans (DPLs) and several Technical Assistance projects, as well as IFC investments in and
advisory services to the larger Microcredit Associations (Associations de Micro-crédit, AMC).
12. Financial inclusion is one of three dimensions of the strategy, with capital market
development, and continuous refinements of oversight standards and practices. The Bank has
partnered with Morocco on financial inclusion under successive financial sector DPLs, the
MENA MSME Technical Assistance Facility, and the Morocco MSME Development Project (to
ramp up the provision of guarantees to MSMEs). Several dimensions of a full-fledged financial
inclusion strategy have achieved consensus and are being launched. In particular, Bank Al-
Maghrib (BAM) has been working since 2007 with the national association of banks and finance
companies, and has launched an action plan that includes: a foundation for financial education; a
center for financial mediation; the licensing of a second credit bureau; the licensing of
intermediary banking agents for wider access to banking and payment services; dedicated bank
reporting to monitor inclusion; a financial literacy survey; and other initiatives to enhance
consumer protection and choice. However, the lack of a well-funded microfinance lobby
(FNAM) and the sector’s heterogeneity delayed a full integration of microfinance initiatives in
BAM’s plans. Accordingly, there is a need to take stock, and through a process of consultation,
achieve synergies, and mitigate implementation risk across various inclusion initiatives.
13. Despite limited institutional capacity from the industry association lobby, demand from
underserved segments of the population has led to the emergence of large microcredit
institutions. Indeed, Morocco leads in microcredit in the Arab world. The Moroccan
microfinance sector represents 40 percent of all microfinance clients across the region, 80
percent of branches, and 50 percent of MFI employment (Livre Blanc, 2012), for a share of Arab
World population of 10 percent. The Moroccan microcredit sector consists of 13 not-for-profit
associations (Associations de Micro Credit - AMC) with some 800,000 accounts and outstanding
loans of MAD 5 billion (0.4% of GDP; 0.7% of credit to the private sector) (MixMarket,
December 2012).1 The four largest AMCs account for 95 percent of the outstanding loans, and
the five smallest, 1 percent. With AMCs prohibited from collecting deposits, liabilities are 80
percent bank lines, 15 percent subsidized refinance facility for the ones not fulfilling bank
lending conditions (through Jaida – a private fund aimed at refinancing MFIs), plus government
and donor funds. In 2010, the sector’s equity/asset ratio was 25 percent and its return on equity
1 Not-for-profit status means that net earnings accrue entirely to equity and all activities are tax-exempt, incl. VAT.
4
was 15 percent.
14. The Microcredit Law of 1999 provided a framework for the nascent industry to take off.
The law established Jaida and attracted equity support from international donors. Government
sources (e.g., Fonds Hassan II) also contributed equity during take-off. In just four years, from
2003 to 2007, MFI loan portfolios grew 11 times and outreach four times, to 1.2 million accounts
(Consultative Group to Assist the Poor – CGAP 2010). Growth was driven by four leading MFIs
(Zakoura, Al-Amana, Fondation des Banques Populaires (FBP), Fondep) with 90% client
outreach. With the emergence of socially systemic AMCs, oversight responsibilities shifted from
the Ministry of Finance to BAM, which started to supervise the sector in 2007, although the
Ministry retained licensing power until 2012.
15. Unbridled growth overwhelmed not-for-profit governance arrangements, risk control, and
information systems. Starting in 2007, BAM inspections revealed alarming financial conditions,
sometimes from outright fraud. BAM’s interventions resulted in the clean-up of loan portfolios, a
pause in lending, and consolidation. Portfolio-at-risk greater than 30 days (PAR30) increased
from 2% in 2007 to 10% in 2009, and client accounts quickly dropped below 1 million, including
through paring back cross-borrowing.2 The sector and regulators had focused on quick gains
(building size and outreach) at the expense of qualitative actions to develop the literacy of the
client base, implement responsible lending practices, and introduce risk management and
commercial standards. In May 2009, Zakoura, Morocco’s leading MFI, reported a PAR30 above
30% and the authorities organized its absorption into FBP, backed by a large commercial bank.
16. The authorities and key financial stakeholders took swift action to stabilize the sector. In
addition to the Zakoura operation, local commercial banks have kept their financing lines, and
other financial backers have maintained their stakes or waived financial covenants. The
confidence of financiers was buttressed importantly by BAM’s close oversight of MFIs’
deleveraging measures, through slower growth and efforts to collect from delinquent or
fraudulent borrowers.
17. Stabilization was accompanied by the launch of root-and-branch reforms designed to put
the sector on a sustainable commercial and financial footing. BAM mandated a comprehensive
review of underwriting and credit appraisal, improvement of risk and internal controls, and
governance arrangements more in line with those of financial institutions. Assistance from key
donors, such as the Millennium Challenge Account or IFC, focused on introducing modern
banking practices, obtaining external ratings, developing human resource strategies, and better
meeting client needs.
18. Under BAM’s impulse, particular attention was paid to sector-wide information systems
to identify and control concentration risk and weed out risky borrowers. MFIs entered
agreements with the private credit bureau providing them access to the database at preferential
rates in exchange for information on client profiles. As of 6 June 2011, 50 percent of MFI clients
were in the credit bureau database, about a fifth of economy-wide records. With donor support,
the more advanced MFIs are in the process of updating their information management systems,
for example, in order to consult the database in real time or feed transactions initiated by MFI
2 40 percent of beneficiaries had loans from different institutions, with no integrated view of cross-borrowing.
5
agents on the ground directly into accounting and risk management systems.
19. The crisis and comprehensive reforms that followed have primed the sector for a phase of
more mature growth. Key stakeholders engaged in wide-ranging consultations that culminated in
the October 2012 First International Symposium on Microfinance in Morocco. The aim of the
Symposium was to present and discuss a white paper outlining a national strategy for
microfinance in a public forum. Workshops covered the job creation potential of microfinance;
integration of global best practices; from microcredit to microfinance; and funding needs.
20. In addressing the event, His Majesty the King endorsed the strategy and emphasized its
key principles: help the informal sector create jobs; develop new products and practices to reach
the underserved; incorporate best financial management and control practices; achieve synergies
by integrating the objectives of government policies across regions, types of income generating
activities, age or gender. The King also called on continued support from international entities.
21. As part of the national strategy, Parliament passed in 2012 important amendments to the
1999 microcredit law. One amendment formalizes a framework for the consolidation of micro-
credit associations, through acquisitions or mergers. This amendment introduces into law the
kind of operation that underpinned the resolution of Zakoura. The authorities have been
encouraging the smaller AMCs to consolidate in order to achieve critical mass. A larger AMC
can more easily partner with a bank to secure funding in exchange for distribution and outreach
services. It is expected that the promulgation of the new law will trigger such moves. A second
amendment allows AMCs to create finance companies under Morocco’s corporate law. The aim
is to attract new investors into the finance company, which in turn can borrow from banks at
more attractive terms than the AMC, given BAM’s tighter prudential rules. So-called
“transformation” into finance company would allow AMCs to secure more stable funding of
current assets, as well as increase capital to support future growth.
22. The 2012 law calls on the MoEF to regulate the costs that AMCs can pass through to
microcredit beneficiaries. This amendment came about during parliamentary review of the draft
amendment to the microcredit law and was not envisaged in the reform strategy. The industry
has worked closely with MoEF and BAM to devise a solution. The current proposal envisages an
all-in cost comprising staff costs, other operational expenses, funding costs, credit risk premia
(reflecting recent credit losses), remuneration of capital, plus a margin.3 The large MFIs have
indicated that attracting new investors in the context of “transformation” hinges on maintaining
the prior regulatory regime and generally the tax-free regime of not-for-profit entities (VAT
exemption).
23. Through “transformation” and other measures, the sector aims in the next ten years to
multiply by four the number of accounts (to 3.2 million), and by five the volume of credit (to 2%
of GDP). If reached, 40-50 percent of the population would be served, assuming 4-5
beneficiaries per account. Comprehensive financial inclusion would be well within reach given
overlap between these targets and parallel financial inclusion initiatives. The postal bank created
in 2009 as part of BAM’s inclusion plan already has in excess of 5 million accounts, although it
3 MoEF has regulated the all-in-cost of credit extended by banks and finance companies since 1997, and limits the
margin to 200 basis points.
6
does not yet offer lending services, but partners with a large MFI to this end. The commercial
banks are also developing inclusion tools (so-called “low income banking”) through partnerships
with telecom or remittance operators, with 3.5 million accounts opened in the recent past.
BAM’s targets under its financial inclusion plan are for two-thirds of the population formally
accessing banks by 2014, either directly or via intermediaries.
24. MFI stakeholders are working on other financial inclusion projects that are at various
stages of maturation. However, the design of transformational projects has been hampered by a
lack of knowledge management platforms and integrated information systems for analysis and
policy formulation. Stakeholders indicated that much data is available, and with suitable
granularity. However, the data is dispersed and highly unwieldy for analysis, outreach, and
policy. A leading industry advocate that attempts to conduct analysis has been the Centre
Mohammed VI pour la Microfinance Solidaire (CM6), which was established in 2007. Its
mission is to: train AMCs, including in the development of innovative products; studies and
outreach (it hosts the microfinance observatory); market access and basic management advice for
microenterprises; and financial education. The Centre aims to develop new products and design
common technology and information platforms that could provide industry-wide services,
especially to the small AMCs. For example, CM6 and Jaida are conducting background work to
assess the regulatory and technical feasibility of a mobile-banking platform that would be
common to all AMCs. However, CM6 does not engage in policy formulation or interface with
the regulatory authorities on behalf of the industry.
25. FNAM as the microfinance industry association has been absent from inclusion
initiatives. The 1999 law provided that all AMCs are members of FNAM to ensure a strong
interlocutor for the authorities in what was then a nascent industry. The mission of FNAM is to
represent the industry in the public arena and with oversight authorities, and spearhead sector-
wide initiatives. However, lack of resources since inception means that FNAM has no permanent
staff, nor offices, and is thus unable to fulfill its mandate. A critical factor preventing agreement
among FNAM members to develop the institution appears to have been heterogeneous
membership, with large and financially savvy MFIs at odds with small charitable MFIs. For the
past several years, a large commercial bank with an AMC subsidiary has been filling in for
FNAM on its own resources. The bank has also been trying to organize and provide basic
financial services to a loose grouping of smaller AMCs. FNAM estimates it would need a budget
of US$ 0.5 million per year to begin work. A key aim of the proposed project is strengthening
FNAM.
26. Microfinance donors are in various stages of evaluating the impact of their strategies and
planning possible follow-on projects. Donor activities are generally coming to a close or have
already been discontinued. In particular, MCA/USAID will close a wide-ranging microfinance
project (see table below) that began in 2007, with MAD 42 million in technical assistance to
finish disbursing by June 2013 and MAD 33 million in IT, management information systems and
risk control systems. The size of these projects (compared with the sector’s need for additional
capital of MAD 5 billion to support MAD 25 billion lending by 2023) suggests that substantial
investments in human capital, processes and systems may come to an end, with no replacement
contemplated at this stage. The Bank has conducted a series of consultations with microfinance
donors active in Morocco to coordinate efforts and better identify the Bank’s value added. A
7
brief summary of donor activities is provided below:
TA provider Beneficiaries Focus Duration Funding
Source IFC Al-Amana,
Fondep
Governance, Risk
Management
ongoing MENA MSME
Facility (50%
Cofinance)
MCA Ardi, Réseau
microfinance
solidaire
Marketing
Diversification of
funding sources
Geographical
coverage strategy
2007-13 80% USAID
The rest by
beneficiaries
MCA All MFIs Strengthening
internal controls,
improving risk
management and
organization of
MFIs
2007-13 80% USAID
The rest by
beneficiaries
MCA RMS, FONDEP-
MC
Change
management
2007-13 80% USAID
The rest by
beneficiaries
MCA Al AMANA
FONDEP-MC
Implementation of
Mobile Banking
Improving
customer
relationship
2007-13 80% USAID
The rest by
beneficiaries
GiZ CM6 Financial
education of
micro-
entrepreneurs
2011-13 GiZ
Banque de
France/AFD
CM6 Microfinance
observatory
2012 AFD
Source: World Bank staff interviews with donors and implementing agencies.
27. The MoEF asked the World Bank to be the implementation support agency for the proposed
grant under the MENA Transition Fund in light of its long-standing engagement with the
Moroccan authorities on financial inclusion issues. In addition, the Bank hosts the secretariat of
the G-20 Global Partnership for Financial Inclusion (GPFI) and develops policy documents with
the Financial Inclusion Expert Group for the GPFI. The Bank also has close links with and hosts
the Consultative Group to Assist the Poor (CGAP), the leading policy group on microfinance. A
financial sector DPL planned for end-2013 will include an important financial inclusion pillar
and the proposed grant will help inform the design of the DPL.
28. Morocco received considerable assistance from the donor community (see section III B
for additional details) and as such, incorporating core lessons and designing a project that
complements rather than duplicates other donor activities is of significant importance to the
overall success of the project.
8
C. Higher Level Objectives to which the Project Contributes
29. The proposed operation contributes directly to the objectives of the World Bank Group’s
Country Partnership Strategy (CPS) for Morocco (FY2010-2013) discussed by the World Bank’s
Board of Executive Directors on January 26, 2010. The CPS proposes three thematic pillars
aligned with the development priorities of the country. The first pillar states that the structural
transformation of the Moroccan economy will require a comprehensive and coordinated set of
policies in many areas, underpinned by a financial sector that better serves smaller firms and
microenterprises. The proposed operation is targeting precisely the financial inclusion of this
underserved segment of the Moroccan economy, as well as women, which have been amongst
the key beneficiaries of the Moroccan microcredit sector: of all microloans issued in Morocco,
55.3% have benefitted women and 46.9% have benefitted age groups between 30 and 49 years.
These objectives are also central to the MENA Regional Strategy, discussed by the Board in
January 2013.
30. The Government’s support for a strong and sustainable microfinance sector has been
endorsed in the First International Symposium on Microfinance in Morocco held in October
2012. At this public forum, the country’s microfinance strategy was introduced and discussed.
Workshops covered the job creation potential of microfinance; integration of global best
practices; product diversification away from credit-led models; and funding needs. In addressing
the event, His Majesty the King endorsed the strategy and emphasized its key principles: help the
informal sector create jobs; develop new products and practices to reach the underserved;
incorporate best financial management and control practices; achieve synergies by integrating
the objectives of government policies across regions, types of income generating activities, age
or gender. The King also called on continued support from international entities. The proposed
operation supports the roll-out of the national microfinance strategy by strengthening the
resilience and impact of the microfinance sector, both for lending to enterprises as well as
households for investment. Microloans to households are often the initial steps toward
consumption smoothing, which helps raise living standards and thereby worker productivity in
formal enterprises. MFIs also generate “self-employment” which helps alleviate the incidence of
absolute poverty in the informal economy.
II. PROJECT DEVELOPMENT OBJECTIVES
A. Project Development Objective (PDO)
31. The project objective is to promote access to finance to low income households and
micro and small enterprises through the promotion of a sustainable and inclusive microfinance
sector.
B. Project Beneficiaries
32. The project’s direct and indirect beneficiaries fall into five categories and reflect key
actors at different institutional levels within the microfinance sector in Morocco. Beneficiaries
are: i) industry regulators and policymakers including BAM and the Ministry of Finance; ii)
coordinating agencies/service providers including FNAM and the Centre Mohammed VI; iii)
microfinance institutions; iv) low-income individuals, particularly women, and v)
9
microenterprises and small businesses, including women-led firms.
33. Industry Regulators and Policymakers: The project will provide technical assistance
through diagnostic studies and policy development support on key legal, regulatory, and
governance issues affecting the microfinance sector. Policy support will also be provided to
promote innovation and regulate new product development such as mobile banking. The project
will also develop a financial inclusion strategy (based on stock-taking and impact evaluation
work) and provide assistance in disseminating this strategy accordingly. These activities will
benefit industry regulators and policymakers, most notably the BAM and the Ministry of
Finance, allowing them to develop an enabling environment that promotes efficiency, stable
growth, and access to finance for underserved people in Morocco.
34. Coordinating Agencies/Service Providers: This project seeks to provide FNAM the
capacity and strategy needed to become an effective and sustainable industry association.
Technical assistance provided through the project will allow FNAM to effectively coordinate
information amongst MFIs and engage with policymakers on key sectoral issues. Similarly, the
project also seeks to reinforce key service providers within the industry, most notably Center
Mohammed VI, which will benefit from project assistance to expand their role in financial
education, knowledge management, and research. Together these activities seek to strengthen the
market infrastructure surrounding MFIs through enhancing the capacity of coordinating agencies
and service providers.
35. Microfinance institutions: Microfinance institutions (MFIs) will benefit directly from
technical assistance and policy work designed to build common platforms to enhance the
efficiency of the sector. MFIs will benefit from technical assistance designed to mutualize back
office and other support functions, diversify and expand funding sources, and provide guidance
on transforming to finance companies. MFIs will also benefit from policy guidance on product
innovation, particularly mobile banking. More indirectly, MFIs will benefit through a
strengthened industry association (FNAM) and an improved regulatory and legal environment
through assistance provided to regulators and policymakers.
36. Low-income individuals, particularly women: The project seeks to enhance the ability
of low-income individuals, particularly women, to access quality microfinance services. Low-
income individuals will benefit from more efficient and strengthened MFIs, which can translate
into greater product offerings, expanded geographic reach, and more competitive pricing for
clients. They will also benefit from the development of a national financial inclusion strategy
that seeks to address gaps in financial access and usage, particularly for rural poor and the
poorest segments of society who are not served by banks or microfinance institutions. Low-
income individuals will also benefit from financial education training that is prioritized in this
project. Finally, low-income individuals will benefit indirectly through more effective legal,
regulatory, and governance environment for the microfinance industry developed through the
project.
37. Microenterprises and small businesses, including women-led firms: Microenterprises
and small firms will benefit from the project through a strengthened and more efficient MFI
sector. MFIs will be able to offer microenterprises and small firms more innovative product
10
offerings, more competitive pricing, greater geographical reach, and improved efficiencies when
accessing microcredit. Microenterprises and small firms will also benefit indirectly from the
policy guidance provided through the project to MFIs transforming into finance companies.
Transformation allows MFIs to tap into significantly more diverse funding sources, most notably
equity investments through shareholders. This additional funding will help MFIs serve
microenterprises that have larger financing needs than average MFI clients but are not yet served
by banks or non-bank financial institutions. Additional financing as a result of transforming will
also enhance the geographic reach through which MFIs can serve small firms.
Box 1: Inclusion of Gender in Project Design and Implementation
Microfinance is considered a successful example of gender-inclusive development. Globally 75% of
more than 205 million customers served by MFIs are women, including 82% of the 137.5 million
poorest clients (Microcredit Campaign Report 2012). In Morocco 27% of women have an account at
a formal financial institution (Findex 2012) while 43% of women have taken a loan (formal or
informal) in the past year. Approximately 46% (368,000) of total MFI clients are women in
Morocco. Women are viewed as key beneficiaries for MFIs because they are often responsible for
the well-being of the family, and thus seen as a conduit for conferring income and consumption
smoothing benefits to the greatest number of people. Microfinance also supports females’ economic
empowerment because it creates opportunities for business expansion and productive investment at
the household level, bypassing many socio-economic barriers that prevent women from participating
in the local economy. Qualitative and quantitative studies (e.g. those from Women’s World Banking)
have demonstrated that access to microfinance services empowers women through an increased
likelihood to own assets (land, houses, etc.), greater control over household assets, and an ability to
invest and grow in microbusinesses.
An impact evaluation in Morocco (Duflo et al 2011) estimated the effect of Al Amana opening 60
new branches in sparsely populated rural areas on credit allocation, consumption, and business
activity, among others. The main effect of improved access to credit was to expand the scale of
existing self-employment activities of households, including both keeping livestock and agricultural
activities. The evaluation revealed important limitations to female empowerment in rural areas in
Morocco. The studies found that only a small proportion of women borrow in rural areas. Out of
those women who borrowed there was little change with regards to bargaining power in the
household, decision-making, or mobility between villages.
Recognizing the gender-specific benefits of microfinance, as well as challenges outlined by the
recent impact evaluation (detailed above), this project seeks to mainstream gender into all activities.
All diagnostic work to be completed will incorporate gender analysis. For example, an assessment of
regulatory burdens on MFI growth will include gender-specific consideration and policy suggestions.
Policy guidance on product development will prioritize how to effectively innovate for female client
segments. The financial literacy activities will include specific modules on financial literacy of
women and girls, recognizing the differences in asset allocation and household bargaining power
women are subject to. An impact evaluation will be completed to measure the effect of existing
financial literacy efforts (mainly by BAM although also supported by MFIs) on the economic
participation of women. In addition, women will be placed at the center of the national financial
inclusion strategy, particularly for strategies addressing female microfinance access in rural areas.
Specific gender targets have been included and will be tracked by the M&E framework.
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C. PDO Level Results Indicators
38. The performance of the project will be assessed against the following indicators that will
also serve as project milestones:
Percentage of adults (and women) with an account at a formal financial institution,
including low-income households
Volume of outstanding microloans (USD mn)
Number of end-beneficiaries of MFIs, including low-income households,
microenterprises and small firms
Portfolio at Risk of MFIs
III. PROJECT DESCRIPTION
39. The project aims to support access to finance to low income households, micro- and
small enterprises through the promotion of a sustainable and inclusive microfinance sector. This
objective will be achieved through a comprehensive package of analytical work and technical
assistance aimed at supporting the enabling environment for microfinance and financial
inclusion. The program is structured around three core components: (i) strengthening the
institutional, legal, regulatory, tax and governance framework for microfinance, (ii)
strengthening the market infrastructure, product innovation and funding sources for
microfinance, and (iii) integrating microfinance into a national financial inclusion strategy. A
brief description of the respective components is included below (See Annex 2 for detailed
project description).
A. Project Components
Component 1: Strengthening the institutional, legal, regulatory, tax and governance
framework for microfinance (US$ 1.9 million)
40. This component aims to support activities contributing to the strengthening of the
institutional, legal, regulatory and governance framework of the microfinance sector. This
component aims to a) prepare an action plan to assess and reinforce the capacity of the National
Federation of Microcredit Associations of Morocco (FNAM) and b) support activities
contributing to the strengthening of the legal, regulatory, tax and governance framework of the
microfinance sector. This component will also finance goods, services, travel, and incremental
operating costs incurred by the PMU in the implementation and management of the project.
a) Prepare an action plan, including a comprehensive assessment to reinforce the capacity
of the National Federation of Microcredit Associations of Morocco (FNAM): FNAM is
the primary industry association responsible for development of the microfinance sector
in Morocco through policy guidance, MFI coordination, and engagement with key actors
including funders and regulators. The institutional capacity of FNAM needs to be
strengthened to ensure the sector can effectively restructure, expand, and respond to
changing regulatory and market conditions. The project will assist the FNAM in fulfilling
its core mandate of acting as the industry’s steering body by centralizing information and
disseminating studies, acting as an intermediate body between state regulating bodies and
12
microfinance institutions, developing and delivering services that address member’s
needs/issues, and providing support across all levels and in all regions and districts in the
country. FNAM also plays the role of an intermediary between Microfinance Institutions
and key stakeholders of microfinance services of Morocco, including the Government,
Central Bank, donors, development partners, financiers, investors and clients of
microfinance services.
This component will be implemented in two stages: First, an action plan will be prepared,
including a comprehensive assessment of the role, funding structure, statutes, governance
and capacity of the FNAM, measuring the gap between its current status and desired
future role, benchmarking it with other global best practice examples. In a second step, a
technical assistance program will be developed building on the recommendations of this
diagnostic, with the objective of transforming the FNAM into a proactive industry
organization and knowledge hub of the Moroccan microfinance sector.
b) Carrying out studies to inform the development of a modern legal, regulatory, tax and
governance framework for microfinance: This sub-component aims to support activities
contributing to the modernization of the legal, regulatory and fiscal framework for
microfinance, as well as the development of governance and risk management standards
for the microcredit sector. Activities will include, inter alia, studies that inform the
development of a tax policy adapted to the specific needs of the MFIs, review the cap on
borrowings for clients of MFIs, the regulation of remuneration of credit, reviews and
adapt the solvency and liquidity ratios of the MFIs, and strengthen the financial reporting
and regulatory oversight of BAM over MFIs. Improving the use of judicial and non-
judicial (arbitration, mediation) means for recovering unpaid loans will also be a key
activity of the project under this component.
Component 2: Strengthening the market infrastructure, product innovation and funding
sources for microfinance (US$ 1.5 million)
41. This component focuses on activities aimed at a) building common platforms improving
the efficiency and effectiveness of microcredit associations, b) building market infrastructure in
support of microenterprises, and c) promoting the strengthening and diversification of funding.
a) Promoting innovative common platforms and new products for MFIs. This sub-
component will support the development of common platforms, systems and products
aimed at improving the efficiency and effectiveness of MFIs. Activities will include
studies on the development of new products for the microfinance sector, the
development of a mobile banking platform for MFIs, which is expected to have a
transformational impact on the sector through the significant reduction of transaction
costs for cash transfers for low income households and microenterprises. Other
proposed activities include the development of a training and certification program for
officers of Microfinance Institutions.
b) Building market infrastructure for micro entrepreneurs: This sub-component will
support the development of market infrastructure aimed at facilitating microenterprises’
13
access to markets. Activities supported will include studies on how microenterprises
can improve the commercialization of their products, and the development of an
electronic platform allowing microenterprises to market their goods, or the
development of a e-project platform through which micro entrepreneurs can get
information on innovative business models, and supporting the development of a
micro-credit mediation function within the framework of BAM’s mediation center.
c) Strengthen and diversify funding sources: This sub-component aims to support
activities which would inform policymakers, regulators, supervisors and MFIs on how
the microfinance sector can diversify and strengthen its funding sources to ensure its
financial sustainability over the medium and longer term. Proposed activities include,
inter alia, studies aimed at assessing refinancing possibilities to MFIs and amend
existing regulations to allow MFIs tapping into new financial resources, and structuring
and designing a guarantee mechanism including all stakeholders. In a second phase,
this sub-component would, building on the findings of the aforementioned studies,
finance the design and structuring of mechanisms (e.g. stabilization fund, guarantees,
etc.) aimed to strengthen the financial sustainability and stability of the sector.
Component 3: Integrating Microfinance into a national financial inclusion strategy (US$
1.5 million)
42. This component aims to integrate the national microfinance roadmap into a wider,
comprehensive national financial inclusion strategy. In a first step, this component aims to
conduct a cross-cutting stocktaking exercise of all previous and ongoing activities aimed at
promoting financial inclusion, putting the microfinance sector in a larger financial sector
development context. This component will also finance the design and roll out of financial
literacy programs for low income households and microenterprises, the key beneficiaries of
microfinance, within the framework of the proposed ‘foundation for financial education’, which
is in the process of being rolled out under the leadership of BAM. This component will also
finance studies and impact evaluations assessing the effectiveness of public policies and private
initiatives aimed at promoting financial inclusion, as well as the impact of financial inclusion,
including microfinance, on employment creation, poverty reduction and growth.
43. In a second phase, this component aims to build on the findings of the aforementioned
activities to develop a comprehensive national financial inclusion strategy, to be developed in a
structured consultative process with all key public and private sector stakeholders, and develop
an action plan with specific objectives and targets to achieve the aims of the strategy, as well as a
clearly defined M&E framework to measure progress.
B. Project Financing
Project Cost and Financing
44. The proposed Investment Project Financing will be financed through a trust fund grant in
the amount of US$4.9 million from the MENA Transition Fund. The MoEF will provide an
estimated in-kind contribution of US$1 million. The project costs and financing are detailed in
the table below.
14
Project Components Project cost
(US$M)
Trust Fund
Financing
(US$M)
% Financing
Component 1: Strengthening the
institutional, legal, regulatory, tax
and governance framework for
microfinance
2.9 1.9 65.5
Component 2: Strengthening the
market infrastructure, product
innovation and funding sources for
microfinance
1.5 1.5 100.0
Component 3: Integrating
Microfinance into a national
financial inclusion strategy
1.5 1.5 100.0
Total Project Costs
Interest During Implementation
Front-End Fees
Total Financing Required
5.9
5.9
4.9
4.9
83
C. Lessons Learned and Reflected in the Project Design
45. The project design is reflective of key lessons from existing projects providing support to
the Moroccan microfinance both inside and outside of the World Bank Group. The project is also
reflective of recent analytical and research work on the microfinance sector.
46. Existing Development Projects to the Sector: The Millennium Challenge Corporation, as
part of a broader US$700 million global compact signed with the Government of Morocco, is in
its final year of implementing a US$42.6 million financial services project. Project activities
consisted mainly of providing technical assistance to MFIs to increase institutional capacity.
Assistance was provided to nearly every MFI in the sector and focused on strengthening
institutional capacity on topics including internal management (human resources, employee
skills training), systems development (MIS, internal audit, risk management, credit scoring), and
market development (new product development, expanding funding sources). Equally, the
International Finance Corporation (IFC) has a robust TA program with leading MFIs Fondep and
Al Amana that has recently focused on streamlining credit operations.
47. Lessons leant from these projects are three-fold. First, large MFIs have been relatively
successful at completing TA projects and have relatively robust internal and external procedures.
Thus, a project seeking to provide TA to these MFIs risks duplicating efforts. Any direct TA
provided to MFIs should focus on smaller MFIs that lack capacity and resources to grow and
sustain themselves. Second, there is a need to address the institutional, regulatory, and
governance framework that surrounds the sector for a number of these TA initiatives to prove
successful. For example, scoping and diagnostic work on mobile banking was completed with a
leading MFI (Fondation Banque Populaire) although currently there lacks a legal and regulatory
framework to support this. Finally, there is a significant need to deepen sectoral reforms through
increased coordination between MFIs and regulators through common platforms that promote
communication and policy dialogue. This can help reduce duplication, help market actors learn
from each other, and promote innovation and growth in the sector.
15
48. Analytical and Research Work in the Sector: This project is informed by recent research
work on the microfinance sector utilizing a variety of approaches, including randomized control
trials, financial diary research, qualitative focus groups and analytical studies.4 This research has
pointed out limitations in both impact and outreach of microfinance institutions. Impact
evaluations have pointed out that while microcredit access is crucial for low-income households
to smooth consumption, manage risks, invest productively, and respond to financial shocks, it
often has little impact on poverty alleviation.5 Similarly, improved data, for example global
Findex data and Finmark Trust Finscope’s surveys, have pointed out that despite exponential
growth in the microfinance sector, a significant majority of the world’s poor are not served by
formal financial services. For example, recent survey work completed by the Jameel Latif
Poverty Action Lab (J-PAL) pointed to the fact that only 2.5% of those in Morocco living on less
than US$2/day borrow from formal credit sources.
49. These research findings have led to a shift in industry thinking away from enhancing
MFIs alone towards an interest in developing the broader financial ecosystem. In addition to a
renewed focus on consumers (demand), this approach acknowledges the need for effective and
appropriate supporting functions such as credit bureaus or payment systems and rules that govern
the system. Ensuring adequate infrastructure and developing a policy and regulatory environment
that enables increased outreach in a way that meets the needs of poorer consumers, has become a
priority for governments and other stakeholders. The result has been a much more holistic view
of the sector and a more coordinated effort by government and industry to focus on increasing
financial inclusion and ultimately, making microfinance work better for the poor.
50. This project incorporates this recent research and subsequent shift in industry thinking by
focusing on the institutional change required at both the MFI level as well as the broader market
eco-system. Significant project resources are dedicated to diagnostic work, stock-taking, and
impact evaluation, recognizing the importance of understanding in scientifically rigorous way
current impediments to growth in the microfinance sector. Similarly, the project focuses on
changes to the legal, regulatory, and governance framework surrounding MFIs. These activities
provide strategic investments in an enabling environment that will allow MFIs and other
providers to overcome current market bottlenecks (for example, transformation or lending
limits). The project also focuses on building a national financial inclusion strategy, seeking to
coordinate diverse market actors towards promoting financial inclusion of all Moroccans. This
extends significantly beyond the purview of MFIs alone. Finally, the financial literacy
components in the project help ensure the project supports the direct financial needs of low-
income Moroccans themselves, embodying the recent research shift towards understanding client
needs. This project complements a related World Bank regional project “Enhancing
Microfinance Access amongst Women and Youth in MENA”, under preparation, focusing on
completing demand-side research and implementing financial literacy modules across Egypt,
Morocco, and Tunisia.
4 For example, national level FinMark Trust’s FinScope surveys www.finmark.org.za and Global Findex databases
www.data.worldbank.org/data-catalog/financial_inclusion; Also see, see Financial Access Initiative (FAI)
http://financialaccess.org/; Abdul Latif Jameel Poverty Action Lab (J-Pal) http://www.povertyactionlab.org/about-j-pal;
Innovations for Poverty Action (IPA) http://poverty-action.org/ 5 See: Bauchet, Jonathan et al. Latest Findings from Randomized Evaluations of Microfinance. Report. Washington: CGAP,
December 2011.
16
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
Institutions
51. The project will be implemented by the Ministry of Economy and Finance (MoEF). The
Ministry is in charge of the regulation of the microcredit sector: Its competencies include the
regulation of the maximum amount of microcredit (currently capped at 50,000 MAD); the
sector’s accounting framework; the maximum interest rate; asset/liability ratios, etc., in
consultation with the Micro-Credit Advisory Board (see Box 2). This overarching regulatory role
qualifies the MoEF as a well suited implementing agency for this cross-cutting project.
Box 2: Micro-Credit Advisory Board
The micro-credit advisory board is consulted on all matters related to the licensing and the
development of micro-credit associations. It is composed of the following members:
Representatives of the administration;
Representatives of professional associations;
Representatives of the National Federation of Micro-credit Associations (FNAM);
a representative of Bank Al-Maghrib;
a representative of the Moroccan Banking Association;
a representative of the Moroccan Association of Finance Companies.
The number, operating procedures and terms of appointment of members of the Advisory Board are
set by decree.
Implementation of Activities
52. The MoEF will be responsible for the implementation of all project components, in close
collaboration with FNAM, BAM and Centre Mohamed VI. The MoEF has ultimate
responsibility for the implementation of the project and exercises oversight functions including
approval of the Project Implementation Manual (PIM), work plan, and budgets, and oversight of
fiduciary implementation and progress towards implementation and results. Detailed
implementation arrangements are available in Annex 3.
53. The MoEF prepares an annual work plan describing activities, timeline, and budgets for
activity implementation. The MoEF has developed the PIM which describes the policies to be
followed for all project components. Any modification of the PIM requires the Bank’s no
objection.
54. Project Team: The Project will be implemented by Project Management Unit within the
MoEF, supported by a team of consultants. The MoEF will contribute an estimated in-kind
contribution of US$ 1,000,000 to support the implementation of this project (US$ 400,000 in
17
staff time and US$ 100,000 in other expenses [travel, material, etc.], US$ 500,000 in
contributions to project components).
55. Ad-hoc Advisory Committee: An ad-hoc advisory committee comprising
representatives from BAM, FNAM and Centre Mohamed VI has been formed to advise the
project based on ad-hoc briefings provided by the MoEF throughout the lifetime of the project.
The advisory committee provides strategic input and guidance throughout project
implementation. The committee provides technical expertise to project implementation and help
ensure the project is effectively addressing key regulatory, legal, governance, and market
development issues in order to successfully help the industry overcome market bottlenecks. The
committee also serves coordination and communication functions, ensuring all partners involved
are aware of progress and key lessons learned across project sub-components.
56. Coordination Activities: The project will be implemented in coordination with
complementary projects to take advantage of synergies between different donor-funded
activities. The team has undertaken consultations with a number of donors active in private and
financial sector development in Morocco, and this project has strong potential complementarities
with many planned and ongoing activities, including, among others, the Financial Sector
Strengthening Project of the USAID/Millennium Challenge Account (MCA). The MCA/USAID
project began in 2007 and provided MAD 42 million in technical assistance to MFIs and MAD
33 million in IT, management information systems and risk control systems. The MCA/USAID
project will finish disbursing in June 2013. This project has been designed to build on the
USAID/MCA project while minimizing duplication (see paragraph 46 for additional
information). The project has also been designed and will be implemented in close coordination
with the IFC.
57. This project also fits within a broader, long term engagement with the Moroccan
authorities aimed at expanding access to finance for households and MSMEs. The World Bank
has supported crucial institutional and legal reforms through a series of DPLs focusing on
financial inclusion and stability, and promoting enhanced access to financing to MSMEs though
the support of the national partial guarantee mechanism [MSME Development Project (Report
No. 68550-MA)], technical assistance in support of the MSME sector [MENA MSME Facility
(P124341)], as well as the regional project on “Enhancing Microfinance Access amongst Women
and Youth in MENA”.
B. Results Monitoring and Evaluation
58. The results framework for the project is centered around the PDO and specifies PDO
level and intermediate indicators which will be monitored to evaluate project performance
towards the objectives (see Annex 1). Primary responsibility for results monitoring will fall on
MoEF, which will present an M&E report to the World Bank on a quarterly basis.
C. Sustainability
59. The sustainability of the project results will be achieved through adoption of policies and
programs informed by the diagnostic and capacity building work completed during the project. A
core focus of the project is to provide industry actors - regulators, government, MFIs, service
18
providers, and micro entrepreneurs – knowledge and capacity building to overcome sectoral
bottlenecks and impediments to growth. These bottlenecks include the institutional capacity of
FNAM, regulatory and legal impediments to MFI transformation and growth, information
asymmetries preventing access to finance amongst micro entrepreneurs, or the lack of a
coordinated strategy on financial inclusion. This project equips industry actors with the capacity
and resources needed to overcome such bottlenecks to promote growth and diversification in the
microfinance sector, to bridge microfinance with larger financial inclusion efforts, and to
promote an enabling regulatory and legal environment. These changes lay the foundation for
long-term future growth in the sector, particularly as the sector continues to mature and diversify
in terms of products offered, geographic reach, institutional capacity of MFIs, and the
prioritization of financial inclusion.
60. The project’s sustainability is further strengthened through the project’s focus on
expanding national financial literacy efforts. Financial literacy equips low-income beneficiaries
and micro entrepreneurs with the knowledge, skills, and motivation to make effective financial
decisions across a variety of contexts. This behavior is sustainable in that once financial literacy
skills are taught and adopted, they can be used over and over again across a variety of contexts.
Furthermore, there are many secondary benefits to financial education. More efficient financial
behavior can increase productive activity, which can promote private-sector development, job
creation, and innovation. Financial education also allows for more effective management of
household financial assets, which can help women specifically as they often play dual roles of
income generators and household financial managers.
V. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary Table
Stakeholder Risk Moderate
Implementing Agency Risk
- Capacity High
- Governance Moderate
Project Risk
- Design Moderate
- Social and Environmental Low
- Program and Donor Low
- Delivery Monitoring and Sustainability Moderate
Overall Implementation Risk Moderate
B. Overall Risk Rating Explanation
61. The overall risk for this operation is moderate. There is a key risk associated with
ensuring the implementing agency’s capacity to implement the project, in part due to the lack of
full time dedicated staff working on the project and the PIU’s limited experience with the Bank's
19
procurement guidelines. The key risk with regards to project design is a possible conflict of
interest between implementing agents and industry actors, but is considered to be mitigated
through a well-designed and balanced institutional structure, promoting the effective
participation of key actors in various project components.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analyses
62. The Microfinance Development project is a comprehensive, demand-driven approach
aimed at increasing employment and incomes of poor segments of the Moroccan population
which are currently underserved by the Moroccan financial system. Economic benefits and
outcomes include:
Enhancing income generating activities and job creation though the
improved access to financing for microenterprises and small firms.
Positive spillover effects to the overall private sector by enhancing the
competitiveness of microenterprises and small firms.
Substantial growth in revenue and employment for microenterprises and
small firms though an improved market infrastructure.
Fiscal return for the government from taxation on incremental revenues,
income and employment.
63. The outcomes of capacity changes, incremental revenues, and employment effects
generated by this project would, as seen in other similar projects, be only visible atcompletion.
The project incorporates an M&E framework that aims to measure the impact of this project, as
well as the impact of other public policies on employment generation, poverty reduction and
growth.
B. Technical
64. The project is appropriate to Morocco’s needs and technically viable. It focuses on key
economic development priorities in the Government of Morocco’s economic and social
development strategy: The promotion of very small enterprises and the microfinance sector has
been endorsed by the highest levels of Government, most recently during the international
microfinance symposium held in October 2012 (see paragraph 30 for more information). The
design is informed by lessons learned from previous World Bank-financed projects and other
studies on the impact of the microfinance sector on poverty reduction, employment generation
and growth.
C. Financial Management
65. The implementing entity of the project is the MoEF. The financial management system
within the MoEF was appraised to determine if it complies with the requirements of the Bank in
respect to OP/BP10.00. The financial management assessment of the MoEF covered the areas of
accounting and financial management, as well as the reporting and auditing processes of the
20
project. The financial management system, including necessary arrangements to respond to the
needs of the financial monitoring of the project, satisfies the minimum requirements of the Bank.
66. The assessment concluded that the MoEF, strengthened by the hiring of an additional
financial management specialist by the Project Management Unit (PMU), will have sufficient
capacity to manage project financial matters and administer grant funds. The hiring of the
additional financial management specialist is a dated covenant and shall be completed by not
later than four (4) months after the Effective Date. The main responsibilities will include Project
budgeting, treasury, general accounting and reporting. The FM inherent risk for the country, the
entity, and the project is considered moderate.
67. Disbursement will be handled through the PMU at the MoEF following established
procedures.
68. The PMU within the MoEF ensures that interim unaudited financial reports for the
Project are prepared and furnished to the World Bank not later than forty five (45) days after the
end of each calendar semester, covering the semester, in form and substance satisfactory to the
World Bank. Financial flow of funds will come from the grant funds of the Transition Fund.
Flow of funds between the World Bank the MoEF will be organized according to the
Disbursement procedures of the Bank.
69. The MoEF shall have its Financial Statements for the Project audited in accordance with
the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial
Statements shall cover the period of one fiscal year of the Recipient. The audited Financial
Statements for each such period shall be furnished to the World Bank not later than six months
after the end of such period.
D. Procurement
70. Procurement for the Project will be carried out in accordance with the World Bank’s
Guidelines: Procurement of Goods, Works and non-consulting services under IBRD Loans and
IDA Credits and Grants by World Bank Borrowers dated January 2011 and Guidelines:
Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by
World Bank Borrowers dated January 2011 and the provisions stipulated in the Grant
Agreement.
71. Procurement under the project is mostly for the selection of consultants for study or local
market assessments, support for post-creation business development, development of training
product/curricula and tools for capacity building, technical assistance and strategic advice to all
microcredit stakeholders, capacity building to the FNAM and project management and
monitoring. It concerns also goods and services related to project management, organization of
training and other capacity building events under the 3 components. The project is proposed to
be implemented by a Project Management Unit (PMU) within the MoEF, comprising members
of the division in charge of credit institutions (“Division des établissements de credit”, DEC) of
the Directorate of treasury and external finance (“Direction du Trésor et des finances
extérieurs”), the Directorate of Administrative and General Affairs (“Direction des affaires
21
administratives et générales”) as well as additional specialists.
72. A capacity assessment of the DEC and the Directorate of Administrative and General
Affairs (DAAG) were conducted on January 14 and 23, 2013. Overall, it shows that the DAAG
through its division of Administrative and General Affairs and the procurement unit is well
staffed (in number: 16 public buyers) to carry out procurement activities. For procurement
execution and monitoring, the DAAG has adopted simplified Excel based electronic tools which
enormously facilitates both procurement process and contracts management. In addition, the
DAAG’s procurement unit staff has good experience of using the GID system for project follow
up and statistics data generation. However, the DAAG has very limited exposure to Bank
procurement procedures and its staff has not been trained in Bank procurement procedures in the
past. On the other hand, the DEC has experience in Bank funded operation in very recent years
but with no procurement involved.
73. The overall risk for procurement is considered substantial. This is because of: (i) the lack
or limited experience in Bank procurement procedures of the DEC and DAAG and their staff
working directly on project implementation; (ii) the absence of training in Bank procurement
procedures for those staff; and (iii) the availability of staff to work for the project will be partial
and therefore possibly cause delays in the project implementation.
74. To help mitigate the risk and facilitate project implementation, the following measures
have been implemented: (i) launch of the recruitment of an additional procurement specialist to
help carry out procurement and build capacities within the MoEF; (ii) organization of workshop
for procurement training for all staff involved in the project implementation; (iii) preparation of
Standard bidding documents (SBD) for National Competitive Bidding (NCB) complying with
procedures for NCB acceptable to the Bank; and (iv) preparation of an implementation manual
for the project. The hiring of the additional procurement specialist and shall be completed by not
later than four (4) months after the Effective Date. More details are provided in Annex 3.
E. Social (including Safeguards)
75. Social safeguard policies are not triggered, and the social impacts of this project are
expected to be positive.
F. Environment (including Safeguards)
76. Environmental safeguards policies are not triggered. The nature of most of the activities
will be procurement of services and other intangibles, with possible small scale goods or
equipment which are not anticipated to have any major or irreversible environmental impacts.
22
Annex 1: Results Framework and Monitoring
MOROCCO: Microfinance Development Project
Results Framework
Project Development Objective (PDO): The project objective is to promote access to finance to low income households and micro and small
enterprises through the promotion of a sustainable and inclusive microfinance sector.
PDO Level Results Indicators*
Co
re Unit of
Measure
Baseline
(Dec 2012)
Cumulative Target Values**
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Description
(indicator
definition etc.)
YR 1 YR 2 YR3 YR4
Indicator One: % of adults (and
women) with an account at a
formal financial institution,
including low income
households
Percent
increase
(percent female in
brackets)
0 (0) 2% (2%) 5% (5%)
10% (11%) 12% (15%) Bi-annually BAM PMU (MoEF) Access to formal
financial inclusion
is a core indicators
of relative
financial inclusion
levels in a given
country
Indicator Two: Outstanding
Microfinance Loan Portfolio
USD mn 550
(4’589’185
MAD)
560 570 580 590 Semi-
annually
BAM PMU (MoEF) Volume of
outstanding
microloans
Indicator Three: Number of
active loan accounts -
Microfinance
Number 804,000 830,000 900,000 1,000,000 1,100,000 Semi-
annually
BAM PMU (MoEF) This indicator
includes loan accounts held by
low-income
households, microenterprises
and small firms.
Indicator Four: Portfolio at Risk
- Microfinance
Percent 6.7% -- 6.6% 6.5% 6.4% Semi-
annually BAM PMU (MoEF)
23
INTERMEDIATE RESULTS
Intermediate Results (Component One): Strengthening the institutional, legal, regulatory, tax and governance framework for
microfinance
Intermediate Result indicator
One: Regulatory studies
completed
Number 0 0 1 2 3 Annually PMU (MoEF) PMU (MoEF)
Intermediate Result indicator
Two: Number of operational and
regulatory initiatives implemented
by BAM and other key
stakeholders
Number 0 0 0 1 3 Annually PMU (MoEF) PMU (MoEF)
Intermediate Results (Component two): Strengthening the market infrastructure, product innovation and funding sources for microfinance
Intermediate Result indicator
One: Number of alternative
microfinance products developed
and piloted (e.g. Islamic finance,
mobile phone banking, housing)
Number 0 0 1 2 3 Quarterly PMU (MoEF) PMU (MoEF)
Intermediate Result indicator
Two: Number of trainings to
micro entrepreneurs delivered
Number 0 500 700 900 1100 Semi-Annually
CM6 Centre Mohammed 6;
PMU (MoEF)
Intermediate Results (Component three): Integrating Microfinance into a national financial inclusion strategy
Intermediate Result indicator
One: Financial inclusion stock-
taking completed
Binary
(Yes/No)
No Yes Once BAM PMU (MoEF)
Intermediate Result indicator
Two: Evaluation completed of
existing financial inclusion
measures
Binary
(Yes/No)
No Yes - - Once BAM PMU (MoEF)
24
Intermediate Result indicator
Three: Number of beneficiaries
receiving financial literacy
training
Number 6,000
(4,099 from
CM6; 2,000
estimates
from BAM)
8,000 10,000 12,000 14,000 Semi-
Annually
CM6; BAM PMU (MoEF) Modules (class
room or interactive) that
enhance
knowledge and understanding of
financial concepts,
and the skills, motivation and
instill the
confidence to apply such
knowledge and
understanding in order to make
effective decisions
across a range of financial contexts
25
Annex 2: Detailed Project Description
Morocco: Microfinance Development Project
1. The project aims to support access to finance to low income households, micro- and
small enterprises through the promotion of a sustainable and inclusive microfinance sector. This
objective will be achieved through a comprehensive package of analytical work and technical
assistance aimed at supporting the enabling environment for microfinance and financial
inclusion. The program is structured around three core components: (1) Strengthening the
institutional, legal, regulatory, tax and governance framework for microfinance, (2)
Strengthening the market infrastructure, product innovation and funding sources for
microfinance, and (3) Integrating Microfinance into a national financial inclusion strategy. A
description of the respective components is included below.
Project Components
Component 1: Strengthening the institutional, legal, regulatory, tax and governance
framework for microfinance (USD 1.9 million)
2. This component aims to support activities contributing to the strengthening of the
institutional, legal, regulatory and governance framework of the microfinance sector. This
component aims to a) prepare an action plan to assess and reinforce the capacity of the National
Federation of Microcredit Associations of Morocco (FNAM) and b) support activities
contributing to the strengthening of the legal, regulatory, tax and governance framework of the
microfinance sector. This component will also finance goods, services, travel, and incremental
operating costs incurred by the PMU in the implementation and management of the project.
a) Prepare an action plan, including a comprehensive assessment to reinforce the capacity
of the National Federation of Microcredit Associations of Morocco (FNAM): FNAM is
the primary industry association responsible for development of the microfinance sector
in Morocco through policy guidance, MFI coordination, and engagement with key actors
including funders and regulators. The institutional capacity of FNAM needs to be
strengthened to ensure the sector can effectively restructure, expand, and respond to
changing regulatory and market conditions. The project will assist the FNAM in fulfilling
its core mandate of acting as the industry’s steering body by centralizing information and
disseminating studies, acting as an intermediate body between state regulating bodies and
microfinance institutions, developing and delivering services that address member’s
needs/issues, and providing support across all levels and in all regions and districts in the
country. FNAM also plays the role of an intermediary between Microfinance Institutions
and key stakeholders of microfinance services of Morocco, including the Government,
Central Bank, donors, development partners, financiers, investors and clients of
microfinance services.
This component will be implemented in two stages: First, an action plan will be prepared,
including a comprehensive assessment of the role, funding structure, statutes, governance
and capacity of the FNAM, measuring the gap between its current status and desired
future role, benchmarking it with other global best practice examples. In a second step, a
26
technical assistance program will be developed building on the recommendations of this
diagnostic, with the objective of transforming the FNAM into a proactive industry
organization and knowledge hub of the Moroccan microfinance sector.
b) Carrying out studies to inform the development of a modern legal, regulatory, tax and
governance framework for microfinance: This sub-component aims to support activities
contributing to the modernization of the legal, regulatory and fiscal framework for
microfinance, as well as the development of governance and risk management standards
for the microcredit sector. Activities will include, inter alia, studies that inform the
development of a tax policy adapted to the specific needs of the MFIs, review the cap on
borrowings for clients of MFIs, the regulation of remuneration of credit, reviews and
adapt the solvency and liquidity ratios of the MFIs, and strengthen the financial reporting
and regulatory oversight of BAM over MFIs. Improving the use of judicial and non-
judicial (arbitration, mediation) means for recovering unpaid loans will also be a key
activity of the project under this component.
Component 2: Strengthening the market infrastructure, product innovation and funding
sources for microfinance (USD 1.5 million)
3. This component focuses on activities aimed at a) building common platforms improving
the efficiency and effectiveness of microcredit associations, b) building market infrastructure in
support of microenterprises, and c) promoting the strengthening and diversification of funding.
a) Promoting innovative common platforms and new products for MFIs. This sub-
component will support the development of common platforms, systems and products
aimed at improving the efficiency and effectiveness of MFIs. Activities will include
studies on the development of new products for the microfinance sector, the
development of a mobile banking platform for MFIs, which is expected to have a
transformational impact on the sector through the significant reduction of transaction
costs for cash transfers for low income households and microenterprises. Other
proposed activities include the development of a training and certification program for
MCA officers.
b) Building market infrastructure for micro entrepreneurs: This sub-component will
support the development of market infrastructure aimed at facilitating microenterprises’
access to markets. Activities supported will include studies on how microenterprises
can improve the commercialization of their products, and the development of an
electronic platform allowing microenterprises to market their goods, or the
development of a e-project platform through which micro entrepreneurs can get
information on innovative business models, and supporting the development of a
micro-credit mediation function within the framework of BAM’s mediation center.
c) Strengthen and diversify funding sources: This sub-component aims to support
activities which would inform policymakers, regulators, supervisors and MFIs on how
the microfinance sector can diversify and strengthen its funding sources to ensure its
financial sustainability over the medium and longer term. Proposed activities include,
27
inter alia, studies aimed at assessing refinancing possibilities to MFIs and amend
existing regulations to allow MFIs tapping into new financial resources, and structuring
and designing a guarantee mechanism including all stakeholders. In a second phase,
this sub-component would, building on the findings of the aforementioned studies,
finance the design and structuring of mechanisms (e.g. stabilization fund, guarantees,
etc.) aimed at strengthen the financial sustainability and stability of the sector.
Component 3: Integrating Microfinance into a national financial inclusion strategy (USD
1.5 million)
4. This component aims to integrate the national microfinance roadmap into a wider,
comprehensive national financial inclusion strategy. In a first step, this component aims to
conduct a cross-cutting stocktaking exercise of all previous and ongoing activities aimed at
promoting financial inclusion, putting the microfinance sector in a larger financial sector
development context. This component will also finance the design and roll out of financial
literacy programs for low income households and microenterprises, the key beneficiaries of
microfinance, within the framework of the proposed ‘foundation for financial education’, which
is in the process of being rolled out under the leadership of BAM. This component will also
finance studies and impact evaluations assessing the effectiveness of public policies and private
initiatives aimed at promoting financial inclusion, as well as the impact of financial inclusion,
including microfinance, on employment creation, poverty reduction and growth.
5. In a second phase, this component aims to build on the findings of the aforementioned
activities to develop a comprehensive national financial inclusion strategy, to be developed in a
structured consultative process with all key public and private sector stakeholders, and develop
an action plan with specific objectives and targets to achieve the aims of the strategy, as well as a
clearly defined M&E framework to measure progress.
28
Annex 3: Implementation Arrangements
MOROCCO: Microfinance Development Project
Institutions
1. The project is proposed to be implemented by the Ministry of Economy and Finance
(MoEF). The project will be implemented by the MoEF. The MoEF will be responsible for
management direction and oversight, financial management, and procurement.
Implementing Agency Assessment
2. The MoEF has been identified as the most qualified implementing agency to host the
Project Management Unit of the Morocco Microfinance Development project. The Ministry is in
charge of the regulation of the microcredit sector: Its competencies include the elaboration of the
legal and regulatory framework for the sector, the regulation of the maximum amount of
microcredit; the sector’s accounting framework; the maximum interest rate; asset/liability ratios,
etc., in consultation with the Micro-Credit Advisory Board and BAM. This overarching
regulatory role qualifies the MoEF as a well suited implementing agency for this cross-cutting
project.
3. The role of the MoEF as an implementing agency for this project has been fully appraised
by the World Bank during the appraisal mission in January 2013. A Project Management Unit
(PMU) has been established within the MoEF, and has been tasked to manage the day-to-day
implementation of the project. It is composed of the Project Director - an official staff from the
Ministry, assisted by the recruitment of a FM and procurement specialists who will reinforce the
officials supporting the PMU.
4. The Bank has assessed the staffing of the PMU during appraisal and provided
recommendations on how the PMU could be further strengthened. While official staff assigned
to the project is highly qualified, they will not be able to fully dedicate their time to this project
in light of their existing tasks in the Ministry. Hence, the team has suggested reinforcing the
capacity of the PMU through the recruitment of an additional FM and Procurement specialists to
strengthen the team and to provide support to the project. The Project Director will control and
supervise the work of the consultant to ensure ownership of the project by the Ministry. The
Administrative affairs (DAAG) within the MoEF will ensure support to projects. The detailed
functions, task and responsibilities of the PMU and its team members is outlined in the Project
Implementation Manual (PIM).
Implementation of Activities
5. The MoEF will be responsible for the implementation of all project components, in close
collaboration with FNAM, BAM and Centre Mohamed VI. The MoEF has ultimate
responsibility for the implementation of the project and exercises oversight functions including
approval of the PIM, work plan, and budgets, and oversight of fiduciary implementation and
progress towards implementation and results.
29
6. The MoEF prepares an annual work plan describing activities, timeline, and budgets for
activity implementation. The MoEF has developed a PIM, which can be modified subject to the
World Bank’s approval. The PIM describes the policies to be followed for all project
components.
7. Project Team: The Project will be implemented by leveraging the MoEF’s in-house
team with a team of local consultants. The MoEF will contribute an estimated in-kind
contribution of US$ 1,000,000 to support the implementation of this project (US$ 400,000 in
staff time and US$ 100,000 in other expenses [travel, material, etc.], US$ 500,000 in
contributions to project components).
8. Ad-hoc Advisory Committee: An ad-hoc advisory committee comprising
representatives from BAM, FNAM and Centre Mohamed VI will be formed to advise the project
based on ad-hoc briefings provided by the MoEF throughout the lifetime of the project. The
advisory committee will provide strategic input and guidance throughout project implementation.
The committee will provide technical expertise to project implementation and help ensure the
project is effectively addressing key regulatory, legal, governance, and market development
issues in order to successfully help the industry overcome market bottlenecks. The committee
also serves coordination and communication functions, ensuring all partners involved are aware
of progress and key lessons learned across project sub-components.
9. Coordination Activities: The project will be implemented in coordination with
complementary projects to take advantage of synergies between different donor-funded
activities. The team has undertaken consultations with a number of donors active in private and
financial sector development in Morocco, and this project has strong potential complementarities
with many planned and ongoing activities, including, among others, the Financial Sector
Strengthening Project of the USAID/Millennium Challenge Corporation (MCC). The
MCA/USAID project began in 2007 and provided MAD 42 million in technical assistance to
MFIs and MAD 33 million in IT, management information systems and risk control systems.
The MCA/USAID project will finish disbursing in June 2013. This project has been designed to
build off of the USAID/MCA project while minimizing duplication (see paragraph 46 for
additional information).
Trust Fund Arrangements
10. The Deauville Partnership Transition Fund (DPTF) has entered into a Financial
Procedures Agreement with the World Bank as the Implementation Support Agency. The Bank,
acting as Implementation Support Agency (ISA), will enter into a Grant Agreement with the
MoEF which according to the provisions of the DPTF Operations Manual and the TF Grant
Application is a Recipient Entity for the purposes of this grant.
Financial Management, Disbursements and Procurement
11. Public Financial Management: The Bank’s experience in Morocco and the main
conclusions of the 2009 PEFA indicate that the Moroccan public finance system is governed by
an elaborate legal and regulatory framework. The financial management risk of the Moroccan
30
public finance system is considered low.
12. Assessment of the Financial Management System: The Financial Management System
within the Ministry of Finance was appraised to determine if it complies with the requirements of
the Bank in respect to OP/BP10.00. The Financial Management System of the MoEF covered the
areas of accounting and financial management, as well as the reporting and auditing processes of
the project. The financial management system, including necessary arrangements to respond to
the needs of the financial monitoring of the project, satisfies the minimum requirements of the
Bank.
13. General framework: The project is financed by the Transition Fund for US$ 4.9 million
and by the Moroccan Government for US$ 1 million in kind contribution. The total estimated
project cost is US$ 5.9 million. The project will be executed in a period of four years.
Risk Analysis: Inherent risk Risk Rating Mitigation of risk Risk rating
after
mitigation
Country level The Moroccan public finance system is
governed by a complex legal and regulatory
framework that offers guarantees of high
reliability and transparency.
Morocco’s compliance with rules and
regulations and existing accountability
arrangements provide an adequate framework
for the use of public funds and public financial
management (PFM) is considered broadly
transparent.
Low
Project level The Ministry of Economy and Finance has
long experience with the World Bank at the
county and project levels. The PIU is based at
the Ministry. Its Staff are fully qualified but
will not be assigned full-time to the Project as
they have other tasks within the Ministry.
Moderate
A Project Management
Unit will have a consultant
for Financial Management
and Procurement that will
work closely with the
Director of the PMU.
Capacity building of
financial management
staff of the project.
Close monitoring by the
World Bank financial
management team
A Project implementation
manual acceptable to the
World Bank to ensure that
project activities are
covered in their entirety
and that the risk level is
mitigated.
Low
Inherent risk before mitigation Substantial Inherent risk after mitigation Moderate
31
Control Risks
14. The assessment concluded that the MoEF, strengthened by the hiring of an additional
financial management specialist by the Project Management Unit (PMU), will have sufficient
capacity to manage project financial matters and administer grant funds. The hiring of the
additional financial management specialist shall be completed by not later than four (4) months
after the Effective Date. The main responsibilities will include Project budgeting, treasury,
Risks Rating Mitigation of risk
Rating after
mitigation of
risk
Budget
Low
Accounting
The accounting system is based on accounting
regulations applicable to public institutions
(Royal Decree n° 330-66, April 21, 1967)
BO. n° 2840, April 26, 1967, p. 452) ; relating
to the maintenance of public accounting in
accordance with General Code of accounting
Standards.
Low
Financial Reporting
The Implementing agency is using GID to
administer its accounting.
The financial reporting for the project can be
extracted from GID.
While presenting the funds to the MoEF to be
budgeted, the split of the grant into
components will be clearly presented to allow
the bank funds to be reported in GID by
components.
Moderate The FM consultant will
extract the report from GID
and will ensure that
complementary information
requested in the financial
report, if not able to extract it
from GID, are completed in
an excel spreadsheet and
reviewed and submit it to the
Director for approval and
submission to the Bank.
Low
Funds Flow
Financial flows come from the World Bank
and in kind contribution from the counterpart
The flow of funds from the World Bank are
organized according to the Bank's
disbursement procedures
Low
Internal control
No formalization of the internal control
functions within the Ministry.
Substantial An implementation Manual
details the control
environment to be applied for
this project.
The external auditor of the
project will submit a report on
internal control
Moderate
Auditing Delay in submitting audit report.
Moderate The Bank team will ensure the
auditor, its term of reference
are acceptable to the Bank and
that the audit work is started
timely to deliver the required
report within the deadlines.
Low
Inherent risk before mitigation Substantial Inherent risk after
mitigation
Moderate
32
general accounting and reporting. The FM inherent risk for the country, the entity, and the
project is considered moderate.
15. Support to PMU: The Project Director will be assisted by a specialist in procurement
and a specialist in financial management. The Directorate of General and Administrative affairs
(DAAG) within the MoEF will ensure support to the project while the FM consultant will
strengthen the DAAG capacity, and will assist in ensuring good management of funds, and
timely production of the required financial reporting.
16. Procedures and policies: The MoEF has a manual of procedures for the DAAG unit but
doesn’t have a manual of accounting and organizational procedures. Hence, to allow a good
implementation of the project, a PIM outlines the procedures to be applied for the funds and the
level of controls to be applied.
17. Budgeting: In Morocco, each Ministry prepares its own budget and submits it to the
MoEF for approval through the “Loi de Finance”. In the case of grants, they can also use an
alternate way “le fond de concours” when it needs to be budgeted during the year. The MoEF
will ensure that the Budget is well presented and that the separation of the funds in the different
budget lines will allow identifying the grant component. This will allow the funds budget
presentation for this grant to be presented in Gestion Intégrée des dépenses (GID) accordingly,
and hence, extract the financial reporting directly from the system.
18. Accounting: An acceptable cash based accounting system with the outline of budget
components is operational according to the regulations described in the public accounting law.
The transactions in terms of commitments and disbursements are reflected in the well-
functioning Integrated Financial Management Information System (IFMIS) named GID.
19. The overall principles for project accounting are outlined below: (a) Books of accounts
for the project will be maintained on cash basis principles. Maintaining the reporting financial to
reflect all the transaction flow of funds and issuing of the interim unaudited financial report
(IUFR) each semester; and (b) Project accounting will cover all sources and utilization of project
funds. This will include payments made and expenditures incurred.
Financial Management Reporting of the Project:
20. The PMU within the MoEF ensures that interim unaudited financial reports for the
Project are prepared and furnished to the World Bank not later than forty five (45) days after the
end of each calendar semester, covering the semester, in form and substance satisfactory to the
World Bank.
21. Interim Unaudited financial report (IUFR) will be extracted from GID and complementary
information requested will be maintained on an excel spreadsheet. GID allows to extract the
commitments and disbursements of the project, but not to present the commitment by categories.
GID will allow the extraction of the commitment and disbursements by component only. Hence,
this complementary information will be prepared by the FM specialist who will compare the
information prepared with the total of the component extracted from GID to ensure accuracy.
The head of the Administrative and Financial Management Unit will review and approve and
33
submit it to the PMU Director for approval and submission to the Bank. The FMR’s include, in
addition to a summary of project progress the following:
- Summary of funding sources and uses of funds
- Uses of funds by project component and by project category
- Cash withdrawal
- Cash forecast
22. The Bank guidelines on financial monitoring will be communicated to the project. A
sample of FMR to use for the project has been agreed on and annexed to the manual of
implementation of the project. Interim Unaudited Financial Reports and Annual Financial
Statements will be used as a financial reporting mechanism and not for disbursement purposes.
23. Controls: In Morocco, the rules governing funds commitment and payment authorization
are clear, well known, and enforced. The control framework is based on the segregation of duties
between the Commitment (ordonnateur) and payment (comptable).
24. The MoEF does not have the internal control procedures formalized. Hence, a Project
Implementation Manual (PIM) has been prepared in order to document the control environment.
The PIM describes, among others: controls mechanisms, transfer and accountability mechanisms
for beneficiaries.
25. Fiduciary responsibility for control of budget execution and monitoring is assigned to the
General Inspectorate of Finance (IGF). The Budget Directorate within the MoEF plays an
important role in controlling transactions financed by external donors.
26. External Audit: Audit Arrangements. Annual Project financial statements audited by
auditors acceptable to the Bank will be submitted to the Bank within 6 months after the end of
each Fiscal Year. The audit will be comprehensive and cover all aspects of the Project (i.e., all
sources and utilization of funds, and expenditures incurred). The audit will be carried out in
accordance with International Standards on Auditing. The Project team will provide the auditor
with access to project related documents and records, and information required for the purposes
of the audit. The implementing agency will retain an auditor acceptable to the bank to perform an
annual audit in accordance with International Standards on Auditing (ISA or INTOSAI), as
issued by the international Federation of Accountants and with terms of reference acceptable to
the Bank. The audit terms of reference should be acceptable to the Bank.
27. Audited Project Financial Statements (PFS) will be submitted to the Bank on an annual
basis. PFS will include: (i) a statement of sources and utilization of funds or Balance sheet,
indicating funds received from various sources, project expenditures, and assets and liabilities of
the project; (ii) schedules classifying project expenditures by components, expenditure
categories; and (iii) a statement of reimbursement made on the basis of statements of
Expenditure (SOEs).
28. The MoEF shall have its Financial Statements for the Project audited in accordance with
the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial
Statements shall cover the period of one fiscal year of the Recipient. The audited Financial
34
Statements for each such period shall be furnished to the World Bank not later than six months
after the end of such period.
29. Staffing: In addition to the PMU staff, the recruitment of an additional FM and an
additional Procurement specialist is important to strengthen the team and to provide support to
the project. The Project Director will control and supervise the work of the consultant to ensure
ownership of the project by the Ministry.
Funds flow and disbursement
30. Financial flow of funds will come from the grant funds of the Transition Fund. Flow of
funds between the World Bank and the MoEF will be organized according to the Disbursement
procedures of the Bank. The funds after their budgeting in the “Loi de Finance” will be
transferred to MoEF according to Bank disbursement guidelines and according to the method
agreed on the Disbursement Letter. Disbursement will be handled through the PMU at the
MoEF following established procedures.
31. The payment justifications supporting documents will be sent to the Directorate of
Budget (MoEF) for verification, approval and then electronically submitted to the Bank.
The MoEF have the below options:
a) Pre-finance the expenses, and grant disbursement will be made based on documentary
evidence or on presentation of statement of expenditures (SOEs) prepared in compliance
with the World Bank disbursement procedures. The Head of the PMU will provide
documentary evidence and SOE, which will be submitted to the Budget
Directorate/MoEF, External financing department, which will review eligibility and
electronically submit them to the World Bank for reimbursement.
b) Direct payment: The Head of the PMU will prepare documentary evidence in compliance
with the World Bank disbursement procedures and will submit them to the Budget
Directorate/MoEF. The Budget Directorate/MoEF, External financing department, which
will review eligibility and electronically submit the Direct payment request to the World
Bank for processing.
c) Advance: The Head of the PMU will open a designated account and can request an
advance on the project. Once documentary evidence and statement of expenditures
(SOEs) in compliance with the World Bank disbursement procedures are submitted them
to the Budget Directorate/MoEF to justify the advance usage, it will be reviewed by the
Budget Directorate/MoEF for accuracy and will submit the justification to the World
Bank. A replenishment request of the designated account will be then submitted
electronically. The head of the PMU will be responsible for submitting monthly
replenishment applications with appropriate supporting documentation. Authorized
signatories, names, and corresponding specimens of their signatures will be submitted to
the Bank prior to the receipt of the first Withdrawal Application.
The disbursement procedures are outlined in the PIM.
32. The minimum application size for direct payment and reimbursement will be the
equivalent of 20% of the Advance ceiling amount. The Bank will honor eligible expenditures
35
completed, services rendered and delivered by the Project closing date. A four months' grace
period will be granted to allow for the payment of any eligible expenditure incurred before the
Grant Closing Date.
33. Statement of expenditures (SOE): During implementation, necessary supporting
documents will be sent to the Bank in connection with contract that are above the prior review
threshold, except for expenditures under Contracts with an estimated value of: (a) US$ 300,000
or less for goods and non-consulting services; (b) US$ 100,000 or less for Consulting Firms; (c)
US$ 50,000 or less for Individual Consultants, operating costs and training, which will be
claimed on the basis of SOEs. The documentation supporting expenditures will be retained at
Project Management Unit and will be readily accessible for review by the external auditors and
periods Bank implementation support missions.
34. In summary, the proceeds of the grant would be disbursed in accordance with the
disbursement procedures of the Bank and will be used to finance project activities through the
disbursement procedures currently used, that is Direct Payment, Reimbursement and Advance,
accompanied by appropriate supporting documentation (Summary Sheets with records and/or
SOEs) in accordance with the procedures described in the Disbursement Letter and the Bank's
“Disbursement Guidelines”.
35. e-Disbursement. The Bank has introduced e-Disbursement for all projects in Morocco.
Under e-Disbursement, all transactions will be conducted and associated supporting documents
and SOEs scanned and transmitted online through the World Bank’s Client Connection system.
The use of e-Disbursement functionality will streamline online payment processing to (i) avoid
common mistakes in filling out WAs; (ii) reduce the time and cost of sending WAs to the Bank;
and (iii) expedite the Bank processing of disbursement requests.
36. Planning of Implementation Support: Implementation support missions will be
conducted every six months based on the risk assessment of the project. The missions’ objectives
will include: (i) ensuring that strong financial management systems are maintained for the
project throughout its life; and (ii) semi-annual review of IUFRs, review of annual audited
financial statements and management letters.
Procurement
General
37. Procurement for the proposed project would be carried out in accordance with (i) the
World Bank’s Guidelines On Preventing and Combating Fraud and Corruption in Projects
Financed by IBRD Loans and IDA Credits and Grants, known as the ‘Anti-Corruption
Guidelines’ dated October 15, 2006 and revised in January, 2011; (ii) the ‘Guidelines:
Procurement of Goods, Works, and non-consulting services under IBRD Loans and IDA Credits
and Grants by World Bank Borrowers’ (known as Procurement Guidelines) dated January 2011;
(iii) the ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA
Credits and Grants by World Bank Borrowers,’ (known as Consultant Guidelines) dated January
2011; and (iv) all the accompanying standard bidding documents for any new procurement and
the provisions stipulated in the Grant Agreement. The various items under different expenditure
categories are described in general below. For each contract to be financed by the grant, the
36
different procurement methods or consultant selection methods, the estimated costs, prior review
requirements, and agreed time frame are set out in the Procurement Plan. The procurement
procedures and Standard Bidding Documents (SBD) that will be used by the recipient has been
included in the PIM, which includes specific and detailed sections regarding Procurement.
77. Procurement under the Project is mostly for the selection of consultants for study or local
market assessments, entrepreneurship training for Microcredit beneficiaries, support for post-
creation business development, development of training product/curricula and tools for capacity
building, technical assistance and strategic advice to all microcredit stakeholders, capacity
building to the FNAM and project Management and Monitoring along with drafting a national
financial inclusion strategy. It concerns also goods and services related to project management,
organization of training and other capacity building events under the 3 components. The project
is proposed to be implemented by a Project Management Unit (PMU) within the MoEF,
comprising members of the division in charge of credit institutions (“Division des établissements
de credit”, DEC) of the Directorate of treasury and external finance (“Direction du Trésor et des
finances extérieurs”), the Directorate of Administrative and General Affairs (“Direction des
affaires administratives et générales”) as well as additional specialists.
Category Amount of the
Grant Allocated
(expressed in USD)
Percentage of Expenditures to be Financed
(inclusive of Taxes)
Goods, non-consulting
services, and consultants’
services, Training and
Operating Costs under the
Project
4,900,000
100%
TOTAL AMOUNT 4,900,000
38. National Competitive Bidding (NCB) procedures adjusted as indicated below will be
used for all Goods and Non-Consulting Services contracts estimated to cost less than the
equivalent of US$ 3,000,000. To ensure broad consistency with the Procurement Guidelines, the
following provisions will apply when using NCB under this project. Said procedures shall ensure
that, inter alia:
a) The bidding documents include explicitly the bid evaluation method, award criteria and
bidder qualification criteria;
b) Technical, administrative and financial envelopes are opened immediately after the bid
opening session has started and prices are read aloud;
c) The bids are evaluated on the basis of the price and any other criteria expressed either in
pass/fail terms or in monetary terms;
d) Contracts are awarded to the qualified bidder who has submitted the least-cost evaluated
and substantially responsive bid as stipulated in the bidding document; and
e) Standard bidding documents and bid evaluation reports found acceptable by the Bank are
used.
37
39. Moreover, it has been agreed with the beneficiary that each contract financed from the
proceeds of this grant shall provide that suppliers, contractors and subcontractors shall permit the
Bank, at its request, to inspect their accounts and records relating to the bid submission and
performance of the contract and to have said accounts and records audited by auditors appointed
by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of
such provision may amount to “obstructive practice”.
40. The procedures and standard bidding documents (SBD) of the beneficiary adjusted to
be acceptable by the Bank will be used under National Competitive Bidding (NCB). Thus prior
to issuing the first call for bids, a draft SBD to be used under NCB procurement must be
submitted to the Bank for approval.
41. Procurement Plan: A Project Procurement Plan dated June 13, 2013 in a format
acceptable to the Bank has been prepared and will be updated at least once a year. The
procurement plan for the first eighteen (18) month period has been agreed upon. The
procurement plan shall indicate which contracts shall be subject to the Bank’s prior review. All
other contracts shall be subject to Post Review. No Works contracts are contemplated under the
project.
42. Procurement of Goods and non-consulting Services: Procurement of Goods and Non
consulting services comprising the acquisition of equipment, material and office supplies for the
PMU, logistics for workshops, capacity building events among others, will be carried out using
the following methods:
a) National Competitive Bidding (NCB): Each package estimated to cost less than the
equivalent of US$ 3,000,000 may be procured on the basis of NCB procedures as found
acceptable by the Bank. Bidding documents acceptable to the Bank will be used.
b) Shopping: Goods and non-consulting services estimated to cost US$ 500,000 or less may
be procured using Shopping procedures.
c) Direct Contracting: Under circumstances which meet the requirements of paragraph 3.7
of the Procurement Guidelines, goods, non-consulting Services and works may be
procured in accordance with the paragraph 3.7 of the Procurement Guidelines using the
Direct Contracting procurement method.
43. Selection of Consultants: Consultants services comprise mostly the selection of
consultants for study or local market assessments, entrepreneurship training for Microcredit
beneficiaries, support for post-creation business development, development of training
product/curricula and tools for capacity building, technical assistance and strategic advice to all
microcredit stakeholders, capacity building to the FNAM and project management and
monitoring along with drafting a national financial inclusion strategy. It concerns also goods and
services related to project management, organization of training and other capacity building
events under the 3 components. The following Bank methods and corresponding standard
documents will be used:
38
a) Quality & Cost Based Selection (QCBS) for all types of consultant services.
b) Least-cost Selection. Services for assignments which meet the requirements of paragraph
3.6 of the Consultant Guidelines may be procured using the Least-cost Selection method
in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultant Guidelines.
c) Selection Based on Consultant’s Qualifications (CQS). Services estimated to cost less
than US$100,000 equivalent per contract may be procured in accordance with the
provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines.
d) Single Source Selection. Under circumstances which meet the requirements of paragraph
3.8 of the Consultant Guidelines for Single Source Selection, consultant services may be
procured in accordance with the provisions of paragraph 3.8 through 3.11 of the
Consultant Guidelines, with the Bank’s prior agreement.
e) Individual Consultants (IC). Services for assignments that meet the requirements set forth
in the paragraph 5.1 of the Consultant Guidelines may be procured under contracts
awarded to individual consultants in accordance with the provision of paragraph 5.2 and
5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.6 of
the Consultant Guidelines, such contracts may be awarded to individual consultants on a
sole-source basis.
44. Short lists may be composed entirely of national consultants for contracts of less than
US$ 200,000 equivalent per contract, complying with the remarks mentioned above.
Publication of Results and Debriefing
45. Online (UN Development Business, and /or Client Connection) publication of contract
awards would be required for all Direct Contracting, and the Selection of Consultants for
contracts exceeding a value of US$ 200,000. All consultants competing for an assignment
involving the submission of separate technical and financial proposals, irrespective of its
estimated contract value, should be informed of the result of the technical evaluation (number of
points that each firm received) before the opening of the financial proposals. The beneficiary
would be required to offer debriefings to unsuccessful bidders and consultants should the
individual firms request such a debriefing.
Fraud, Coercion, and Corruption
46. All procuring entities, as well as bidders, suppliers, and contractors shall observe the
highest standard of ethics during the procurement and execution of contracts financed under the
project in accordance with paragraphs 1.16 and 1.17 of the Procurement Guidelines and
paragraphs 1.23 and 1.24 of the Consultants Guidelines.
Frequency of Procurement Supervision
47. Supervision of Procurement by the World Bank is an integral part of Project
39
implementation support and monitoring. In addition to the prior review supervision to be carried
out from the Bank’s Rabat office, it is recommended that two implementation support missions
take place during a year to visit the project and to carry out post review of procurement actions.
48. Based on the risk associated with procurement (substantial), as mitigation measures, the
following actions have been implemented:
a. Initiation of recruitment of an additional procurement specialist to help carry out
procurement and build capacities within the MoEF. The hiring of the additional
procurement specialist shall be completed by not later than four (4) months after the
Effective Date;
b. Organization of workshop for procurement training for all staff involved in the
project implementation (MoEF);
c. Preparation of Standard Bidding Documents for NCB in accordance with the
Procurement Guidelines and found acceptable by the World Bank for Goods and
Non-consulting Services.
d. Adoption of a Project Implementation Manual. The manual describes procurement
procedures, responsibility sharing and document flow among the parties involved in
Project implementation. The annex of the PIM also comprises all standard bidding
documents that will be used under the project.
e. Preparation of the procurement plan for the first eighteen (18) months.
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Annex 4: Operational Risk Assessment Framework (ORAF)
MOROCCO: Microfinance Development Project
Stage: Approval
Project Stakeholder Risks Rating Moderate
Description:
(i) Agencies receiving technical assistance may not have the
institutional capacity to effectively absorb project resources.
This may prevent effective translation of capacity building to
changes to institutional policies and procedures and may
prevent project outputs from being attained.
Risk Management: The project will only extend technical assistance to entities which are considered to be
sufficiently prepared of integrating the changes. In a number of components, TA is preceded by a
diagnostic effort to measure the status quo and highlight structural aspects/ weaknesses which need to be
addressed before any assistance can be provided.
Resp: Bank Stage:
Preparation/Implementation
Due Date : 31-Jan-
2018 Status: In progress
(ii) A number of donors supporting the microfinance sector in
Morocco are engaged in capacity building work, leaving a
potential risk of duplication/ lack of coordination
Risk Management: The Bank has conducted extensive consultations with key donors engaged in
Morocco’s microfinance sector during project preparation, and will continue to do so throughout the
implementation period to ensure that this projects contribution is harmonized and complementary with
existing initiatives and activities.
Resp: Bank and
Client Stage:
Preparation/Implementation
Due Date : 31-Jan-
2018 Status: In progress
(iii) There is a risk that the MFIs might not be supportive of the
proposed capacity building of the FNAM, other MFIs or
microenterprises.
Risk Management: Project outreach during both preparation and implementation phases will focus on
clearly communicating project activities and proposed benefits to participating MFIs and other financial
institutions serving low-income communities in Morocco. The project has been developed in close
consultations with MFIs, which have provided useful inputs to the project’s design.
Resp: Bank and
Client Stage:
Preparation/Implementation
Due Date : 31-Jan-
2018 Status: In progress
Implementing Agency Risks (including fiduciary)
Capacity Rating: High
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Description: The MoEF may not have the necessary dedicated
resources to act as primary implementing agency, and its
capacity to implement the project might be hampered due to the
lack of experience of managing World Bank grants
(procurement and financial management) and technical
expertise in microfinance.
Risk Management: The WB team has assessed the institutional capacity of the MoEF and identified
certain areas on which the PMU could need support (financial management, procurement). The MoEF has
agreed to reinforce the capacity of the PMU, and the WB will monitor the adequate staffing of the PMU
throughout project implementation.
Resp:
Bank
Stage:
Preparation/Implementation
Due Date : 31-Jan-
2018 Status: In progress
Governance Rating: Moderate
Description : There is the potential for conflict of interest of a
member of the steering committee (FNAM) as a representative
of MFIs, with a risk of prioritizing interests of financial service
providers over other industry actors (government, clients, etc).
Risk Management: The Bank is aware of this risk, but believes that their inclusion into a broader based
steering committee comprised of the MoEF, BAM and potentially more members significantly mitigates
this risk. The team will continue to monitor this risk throughout project implementation.
Resp: Bank
and Client
Stage: Preparation and
Implementation
Due Date : 31-Jan-
2018 Status: In progress
Project Risks
Design Rating: Moderate
Description : Technical assistance provided is not truly
responsive to the needs of the industry and as a result, policies
and procedures are not modified over the long-term
Risk Management: The Bank has held extensive consultations with industry regulators, government, and
key players to identify market gaps and determine what is needed in the way of technical assistance to
expand access and usage of microfinance services. Similarly, preparatory missions have included meetings
with key market players to determine how to best deliver technical assistance and implement each project
component. These sessions will allow a project design that provides TA in a manner that is responsive to
institutional concerns, thereby promoting long-term sustainability.
Resp: Bank and
Client
Stage: Preparation and
Implementation
Due Date : 31-Jan-
2018 Status: In progress
Social & Environmental Rating: Low
Description: Gender Inclusivity: Project components may not
adequately support microfinance access and usage amongst
women; activities may not fully account for specific access and
usage challenges facing female microfinance clients.
Risk Management: Dedicated resources will be placed into each project components to focus specifically
on ensuring they are gender-inclusive. For example, under component three dedicated TA will be provided
to MFIs to enhance their ability to serve women clients. Under component 3, data and diagnostics will be
accumulated specifically to provide a snapshot of women’s access to microfinance. The financial inclusion
strategy will prioritize extension of financial services amongst women and develop action plans from this
prioritization accordingly.
Resp: Bank and
Client
Stage: Preparation and
Implementation
Due Date : 31-Jan-
2018 Status: In progress
Program & Donor Rating: Low
Description : Donor Coordination, Commitment, and
Integrating into Existing Work: A number of donors supporting
the microfinance sector in Morocco are engaged in similar
capacity building work; risk of duplication
Risk Management: Microfinance remains an important donor priority in Morocco. Donor activities over
the past ten years have yielded significant dividends. The microfinance industry in Morocco is the largest in
the region and boasts a strong regulatory system and robust market infrastructure. As such, the risk of lack
of donor interest is considered low. There is, however, risk of duplication. Consultations with donors have
been undertaken (and will continue throughout project implementation) to ensure activities are not being
duplicated and that there is a strong synergy between existing work and proposed activities.
42
Resp: Bank Stage: Preparation and
Implementation
Due Date : 31-Jan-
2018 Status: In progress
Delivery Monitoring & Sustainability Rating: Moderate
Description: Institutions receiving technical assistance
(FNAM, MFIs, etc.) may find it difficult to sustain changes
beyond the duration of immediate assistance.
Risk Management: TA activities will be delivered with sustainability in mind, implying a significant focus
on integrating skills and knowledge into ongoing institutional processes and procedures. Attention will be
placed on training local staff to provide ongoing training to other staff members. Strong oversight and
project management can help identify potential sustainability issues throughout the life of the project and
move forward solutions accordingly. Similarly, all institutions the project will be provided capacity
building and TA to have extensive experience in microfinance (e.g. MFIs and FNAM). Thus, the capacity
and mandate to continue with newly adopted practices exists.
Resp: Bank
and Client
Stage: Preparation and
Implementation
Due Date : 31-Jan-
2018 Status: In progress
Overall Risk Following Review
Implementation Risk Rating: Moderate
Comments: The overall risk for this operation is moderate. There is a key risk associated with ensuring the implementing agency’s capacity to implement the project, in part
due to the lack of full time dedicated staff working on the project and the PMU’s limited experience with the Bank's procurement guidelines. The key risk with regards to
project design is a possible conflict of interest between implementing agents and industry actors, but is considered to be mitigated through a well-designed and balanced
institutional structure, promoting the effective participation of key actors in various project components.
43
Annex 5: Implementation Support Plan
MOROCCO: Microfinance Development Project
Strategy and Approach for Implementation Support
1. The World Bank will support the implementation of this project through a combination of
fiduciary and technical support, technical assistance, and coordination. These activities will be
implemented through a combination of Bank staff and consultants.
2. Fiduciary and technical support. World Bank fiduciary staff in the Bank’s Rabat office
will provide routine supervision of FM and procurement activities. Review and clearance of the
Implementation Manual, interim financial reports, withdrawal applications, and procurement
actions will provide the basic necessary controls during implementation. In addition, technical
assistance and guidance will be provided when necessary on fiduciary issues, which are
anticipated to most likely be on procurement issues. Technical support will be provided by Bank
staff and local consultants at key design and implementation decision points, including
adjustment of design features during the course of the project.
3. Technical assistance - policy. Providing ongoing, just-in-time technical assistance to the
Government of Morocco on policies and programs concerning the development of the
Microfinance sector is an integral part of this project. The Bank will employ staff and
consultants, including staff from the anchor Financial and Private Sector Development Global
Practices and CGAP, to support technical assistance needs.
4. Coordination: The Bank will maintain coordination with other national entities and
international agencies concerned with financial sector development, particularly in the areas of
the development of the Microfinance sector and financial inclusion, to ensure continued synergy
and complementarity with other interventions.
Implementation Support Plan
5. Technical inputs needed: The PMU might require technical inputs during project
implementation. In addition, technical inputs on the design of the M&E system, as well as
training to PMU staff on M&E principles and implementation might be required. The World
Bank will provide implementation support in these areas if needed, in close collaboration with
key partners, including the IFC and CGAP.
6. Fiduciary requirements and inputs: the PMU will hire a FM and procurement specialists.
World Bank fiduciary staff will provide implementation support including capacity building
where needed.
What would be the main focus in terms of support to implementation during:
Time Focus Skills Needed Resource
Estimate
Partner Role
Throughout
project
Operational Aspects
(TBS)
Project
Management,
Procurement,
44
Selecting consulting
firms/ WB staff
Measure project
outcomes
Financial
Management
Microfinance
Measurement and
Evaluation
Skills Mix Required
Skills Needed Number of Staff Weeks Number of Trips Comments
M&E Specialist
Fiduciary Specialists
1-2 weeks of time for each 1-2