The World Bank Morocco MSME Development Facility (P132884) For Official Use Only ACTIVITY COMPLETION SUMMARY (ACS) Morocco MSME Development Facility (ID: P132884) Morocco (MIDDLE EAST AND NORTH AFRICA) May 31, 2018 Page 1 of 26 The World Bank Morocco MSME Development Facility (P132884) BASIC INFORMATION Activity Information Project ID Product Line P132884 Advisory Services & Analytics Short Name Full Name Morocco MSME Development Morocco MSME Development Facility Facility Project Status Completion Fiscal Year Closed 2018 Processing For Official Use Only Is this a Reimbursable Advisory Service (RAS)? No What kind of task description is needed? Concept Note with a Review (Track 2, including Programmatic) Is this a Programmatic activity? Does this task require Subtask(s)? Yes No Is this a joint Bank-IFC activity? No Accountability Region Country, Regional or World MIDDLE EAST AND NORTH AFRICA Morocco Requesting Unit Team Leader MNC01(392) Valeriya Goffe Responsible Unit GFCMW(9282) May 31, 2018 Page 2 of 26 The World Bank Morocco MSME Development Facility (P132884) Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation For Official Use Only May 31, 2018 Page 3 of 26 The World Bank Morocco MSME Development Facility (P132884) BRIEF ACTIVITY DESCRIPTION Morocco made significant inroads in expanding access to financial services for MSMEs. A World Bank survey featured Morocco as a regional leader in providing SMEs with access to credit. At the end of 2011, MSMEs reached 10.8% of GDP representing 20% of bank loans to companies (and 27% of companies' financing through bank loans and leasing). Morocco was able to maintain the highest rates of microcredit access in the MENA region, although the sector experienced a crisis in 2008 from which it is recovering. The country's achievements in expanding financial inclusion for individuals and MSMEs were underpinned by important regulatory reforms and policies. The financial infrastructure was substantially strengthened through the establishment of a modern credit bureau, which provides detailed credit information on individuals and MSMEs to banks and Non-Bank Financial Institutions (NBFIs). The credit bureau also started to collect data from microcredit associations and now covering over 90% of microloans. While economic and financial sector development progress of Morocco was impressive, many challenges remained. The “Arab Spring” has shown the powerful consequences of exclusion and high levels of youth unemployment in the MENA Region and this was also at the forefront of the street protests in Morocco during 2011. Jobs were at the forefront of attention and unemployment was the main political and economic issue facing the new government. Despite a relatively For Official Use Only favorable socio-political situation compared to some other MENA countries, the Moroccan population expressed their demands for improved governance, social inclusion, economic development and employment opportunities. While Morocco has made significant process in expanding access to finance to MSMEs, the largest share of bank financing went to the larger enterprise part of the MSME spectrum. Smaller enterprises continued to face challenges in accessing credit especially as they often have less collateral. Access to equity financing often remained a challenge both for start ups and some medium-size enterprises. Access to finance also appeared particularly difficult in rural areas, where financial institutions are less present. In this context, partial credit guarantees (PCGs) for lenders could help to reduce their risk aversion for MSME segment, reduce collateral requirements, and particularly unlock lending to the segment of Very Small Enterprises (VSEs). Morocco already had a PCG provider, Caisse Centrale de Garantie (CCG), but its operations required strengthening to serve their target segment. The authorities therefore embarked on a preparing a new strategic plan for CCG to broaden its product offering to cover identified gaps while strengthening its capacity to prudently manage its risks. A new World Bank project was approved to support capitalization of CCG. There was a clear need for a complementary capacity-building support to CCG and Ministry of Finance in relation to the new project, and the government therefore requested the MSME TA facility.The Morocco TA Facility was part of the broader Middle East and North Africa (MENA) MSME TA Facility. The Morocco MSME TA facility aimed to address remaining constraints for MSMEs in Morocco through the provision of a comprehensive package of technical assistance, advisory services, and policy support, in line with the World Bank Group's and the government's development objectives, and in close collaboration with other donors and multilateral organizations on three levels. The activities led by the IBRD aimed at developing the enabling environment for MSMEs through supporting policy, legal and regulatory reforms to facilitate their access to finance. The activities led by the IFC aimed to provide advisory services to financial institutions to better serve MSMEs and build the capacity of MSMEs through entrepreneur networks, mentoring, and business incubator-type services. May 31, 2018 Page 4 of 26 The World Bank Morocco MSME Development Facility (P132884) DEVELOPMENT OBJECTIVE To improve the business environment for MSME finance, build the capacity of financial institutions for sustainable financing, and support MSME business development services. DELIVERABLES Group By: Pillar DELIVERABLESWITHOUTSUBTASK Completion Processing Modification Since Name Lead Type Status Date Type last Milestone For Official Use Only May 31, 2018 Page 5 of 26 The World Bank Morocco MSME Development Facility (P132884) Improving the Credit Guarantees Schemes Strengthening the effectiveness and outreach of the Moroccan Teymour Abdel DR Not Partial Analytical 15-Aug-2017(A) New Completed Aziz Required Guarantee Programs in Support of MSMEs and housing loans Workshop: Building a For Official Use Only Sustainable Credit DR Not Guarantee Valeriya Goffe Advisory 05-Apr-2018(A) New Completed Required Scheme for SMEs. Sharing Malaysia's Experience Evaluation of the governance framework and the activities of Teymour Abdel DR Not Analytical 20-Dec-2017(A) New Completed the Moroccan Aziz Required Credit Guaranee Scheme Risk management and pricing schemes trainings and Teymour Abdel DR Not Advisory 17-Jan-2018(A) New Completed guidelines for Aziz Required the Moroccan Credit Guaranee Scheme May 31, 2018 Page 6 of 26 The World Bank Morocco MSME Development Facility (P132884) Improving direct finance for SMEs Innovation Financing for Teymour Abdel DR Not Advisory 21-Dec-2016(A) New Completed SMEs in Aziz Required Morocco Report on Teymour Abdel DR Not Analytical 14-Feb-2018(A) New Completed Payment Delays Aziz Required Finance for Teymour Abdel DR Not Smallholder Advisory 16-Dec-2014(A) New Completed Aziz Required Farmers Comments The list of deliverables was re-formatted to properly fit under the pillars and to make sure all reports were included For Official Use Only DELIVERABLE DOCUMENTS Document Title Document Type Document Date Classification Deliverable: Evaluation of the governance framework and the activities of the Moroccan Credit Guaranee Scheme Study of activities and products Report 04/16/2018 Official use only over the last ten years MA - CCG - Revue Institutionelle - Report 05/07/2018 Official use only May 32018 CLEAN Deliverable: Finance for Smallholder Farmers Diagnostic of Tamwil Al Fellah Report 04/16/2018 Official use only (Agrifinance) Summary of Diagnostic of Tamwil Al Report 04/16/2018 Official use only Fellah (Agrifinance) Deliverable: Innovation Financing for SMEs in Morocco Report on Innovation Financing for Report 04/16/2018 Official use only SMEs in Morocco Presentation about Innovation Report 04/16/2018 Official use only Finance in Morocco Deliverable: Report on Payment Delays Report on Payment Delays Report 04/16/2018 Official use only Executive Summary and Key recommendations - Report on Report 04/16/2018 Official use only Payment Delays May 31, 2018 Page 7 of 26 The World Bank Morocco MSME Development Facility (P132884) Deliverable: Risk management and pricing schemes trainings and guidelines for the Moroccan Credit Guaranee Scheme Guidance for stress test Report 04/16/2018 Official use only Guidance for pricing schemes Report 04/16/2018 Official use only User guidance of risk management Report 04/16/2018 Official use only tool Deliverable: Strengthening the effectiveness and outreach of the Moroccan Partial Guarantee Programs in Support of MSMEs and housing loans AT to strengthen the the Partial Guarantee Programs in Morocco to Report 04/16/2018 Official use only support SMEs and housing loans Deliverable: Workshop: Building a Sustainable Credit Guarantee Scheme for SMEs. Sharing Malaysia's Experience Agenda workshop Report 04/16/2018 Official use only List of participants Report 04/16/2018 Official use only For Official Use Only AGE AND BUDGET Activity Age in Months (See Annex A for details) AgeSection At Concept Package Sign-off (Track 2) Actual 70.9 0.0 Budget (See Annex B for details) Source of Fund At Concept Package Sign-off (Track Actual Expenditure 2) Bank Budget 800,000 0 Bank Trust Fund 0 763,028 Grand Total Direct Cost 800,000 763,028 Comments No comments have been entered May 31, 2018 Page 8 of 26 The World Bank Morocco MSME Development Facility (P132884) RESULTS Do you want to track result indicators for this activity? Yes Outcome Indicators Number of reports (assessments and manuals) completed Unit of Measure: Text Number of reports completed by WBG or third party consultants. Baseline Actual (Previous) Actual (Current) End Target Status Value 0 10 10 New Date 10-Apr-2018 27-Apr-2018 For Official Use Only Strengthened capacity of authorities in MSME finance Unit of Measure: Text This indicator tracked the improvement in capacity of financing sector authorities in MSME finance. All the projects had high direct involvement of the authorities for their implementation and therefore, authorities communicated their increased capabilities and understanding to ameliorate MSME finance conditions after the completion of the trainings, reports and conferences received. Baseline Actual (Previous) Actual (Current) End Target Status Improved Value Gaps in capacity Improved capacity New capacity Date 09-Aug-2012 12-Apr-2018 07-May-2018 Number of trainings/conferences received Unit of Measure: Text Three trainings were delivered to the client on risk management, stress testing and pricing schemes. In addition, the client attended a four-day workshop to learn about the evolution of Malaysia's SME finance ecosystem. Baseline Actual (Previous) Actual (Current) End Target Status Value 0 4 4 New Date 08-Aug-2012 11-Apr-2018 07-May-2018 May 31, 2018 Page 9 of 26 The World Bank Morocco MSME Development Facility (P132884) Number of entities receiving in-depth advisory services Unit of Measure: Text The three entities that received direct in depth advisory services were the Caisse General de Garantie (CCG), the working group for SMEs of the Ministry of Economy and Finance, Tamwil El Fellah, a subsidiary of Credit Agricole Maroc that provides agriculture finance for very small agricultural producers and Bank Al-Maghrib (which participated in the capacity-building event on PCGs in Malaysia) Baseline Actual (Previous) Actual (Current) End Target Status Value 0 4 3 New Date 09-Aug-2012 07-May-2018 07-May-2018 Intermediate Outcome Indicators For Official Use Only Disseminated best practices Unit of Measure: Text Disseminated best practices Baseline Actual (Previous) Actual (Current) End Target Status Value N/A 2 N/A Revised Date 09-Aug-2012 11-Apr-2018 31-May-2018 Facilitated exchange of best practice w/ clients Unit of Measure: Text Facilitated exchange of best practice w/ clients Baseline Actual (Previous) Actual (Current) End Target Status Value N/A 2 N/A Revised Date 09-Aug-2012 12-Apr-2018 31-May-2018 Output Indicators No indicators have been added May 31, 2018 Page 10 of 26 The World Bank Morocco MSME Development Facility (P132884) Overall Comments All the targets have been met and the authorities have expressed their satisfaction with the assessments, trainings, conferences and recommendations received. ASSESSMENT Development Effectiveness Rating  Satisfactory(5) Outcomes The Morocco MSME TA facility had two main pillars: (1) improving the credit guarantee schemes and (2) improving direct finance for SMEs. The facility financed a number of analytical and advisory activities in the area of MSME finance in Morocco which were highly valued by the authorities. All planned activities under the TA facility have been successfully completed. For Official Use Only Pillar I. Improving credit guarantee schemes. The MSME TA Facility has contributed to improving the business environment for MSME finance and building the capacity of financial institutions for sustainable financing through strengthening the existing credit guarantee scheme managed by CCG. Provision of partial credit guarantees (PCGs) enabled to increase lending to MSMEs in Morocco. PCGs for lenders help to reduce their risk aversion for MSME segment, reduce collateral requirements, and particularly unlock lending to the segment of VSEs. While data on collateral requirements and interest rates is not available, data on MSME lending in Morocco demonstrates that numbers of MSME loans and volume of MSME lending has significantly increased. There are multiple contributing factors in Morocco to achieve this outcome, but provision of credit guarantees is undoubtedly one of the important contributors. Risk management capacity of CCG has been improved as the result of TA provided under the project. This is essential to ensure that the risks associated with the expanding portfolio and new products are properly managed. Due to capacity-building activities provided to CCG staff, they are now able to make more informed decisions in the administration of the credit guarantees and understand in depth how to manage the funds in relation to the associated risks. CCG staff can apply the tool AIS Finrisk and carry out pricing decisions and the stress tests with autonomy. In addition, they are now able to populate the tool, carry pricing calibration and run stress tests with the new data that will come in the future. Onsite and online training sessions were delivered to staff of CCG strengthening their capacity to analyze credit risks, assess their impact, derive from this assessment economic pricing principles, conduct stress test and calibrate economic capital required to face adverse scenarios. CCG currently compares very favorably to other CGS in the region and follows a lot of best practices. CCG product offering has been significantly expanded to cover needs to SMEs of different sizes, sectors and stages May 31, 2018 Page 11 of 26 The World Bank Morocco MSME Development Facility (P132884) of the lifecycle. The uptake of CCG products by banks has been very strong and the number of guarantees provided has been growing from year to year. The facility also financed a study on the evaluation of governance framework and activities of CCG. The recommendations of the study are currently being reviewed by the authorities. The capacity of the Ministry of Finance staff was also strengthened through a number of activities, including the latest learning event on learning from the experience with credit guaranteed schemes in Malaysia. Pillar II: Improving direct finance for SMEs. The project financed several studies which provided a lot of useful insights into the MSME finance agenda in Morocco and also provided an analytical basis for future operations in Morocco. This work contributed to improving the business environment for MSME finance and building the capacity of financial institutions for sustainable financing. In particular, the MSME TA facility financed a study on innovative financing for MSMEs in Morocco which For Official Use Only created an analytical basis for a new project, “Financing Innovative Start-ups and SMEs” funded by the Government of Morocco through a US$ 50 million World Bank investment project financing (IPF). This project aims to address a market gap in the supply of equity financing for innovative young SMEs and create a demonstration effect of successful early-stage equity investments to help catalyze a venture capital (VC) market. This will be done through a funding program that will invest in innovative SMEs alongside private investors, who will play an important role in the selection of investments. The program will also address weakness in the investment know-how of ecosystem agencies supporting entrepreneurs (which were identified in the study produced under the MSME TA facility) and boost scale in the creation of financially viable enterprises. The new project was approved by the WB board on March 10, 2017 and implementation is in progress. Under this pillar, two other studies were also financed (analysis of payment delays in four cities and analysis of the financing model implemented for smallholder farmers). The support provided by the project team contributed to the successful passage, in March 2016, of a package of regulatory reforms on public procurement payment delays (published in the official gazette on August 4 2016, and entered into force on January 1, 2017). The reform was in line with the recommendations provided and introduced several positive legal changes. Interest penalties became applicable to all public entities (Ministries, Municipalities, State Owned Enterprises, and other local entities). Time to issue payment orders decreased from an average of 90 days to 45 days, and another 15 days to disburse payment. The government’s electronic payment system automatically generates notifications to public accountants when the legal payment deadline is passed. Recommendations of analysis of the financing model implemented for smallholder farmers are currently being reviewed by the authorities. Next steps. May 31, 2018 Page 12 of 26 The World Bank Morocco MSME Development Facility (P132884) There are considerations of the follow-up MSME TA facility for Morocco which would continue providing support to the authorities with advancing MSME finance agenda in the country. One of the topics of interest to the authorities is improving access to credit for export-oriented enterprises. Lessons Learned (1) Clients see a lot of value in the TA facility complementary to a lending project. The authorities underscored the excellent support received from the MSME TA Facility for the implementation of the MSME Development Project. The TA facility was highly complementary to this project, which only provided funding for the capitalization of the credit guarantee scheme, but no advisory support. In many countries clients see a lot of value in a complementary TA facility as the government then does not need to borrow for TA (some governments prefer to limit amounts borrowed for TA), yet, capacity- building is still provided. For Official Use Only (2) TA facility can be effectively utilized to support the design of a new operation. The MSME TA facility financed a study on innovative financing for MSMEs in Morocco which created an analytical basis for a new project, “Financing Innovative Start-ups and SMEs” funded by the Government of Morocco through a US$ 50 million World Bank investment project financing (IPF). (3) High involvement of the client in the assessment processes and analysis better adapts the work to the local circumstances and creates more willingness of the client to implement the recommendations derived from the projects. CCG, one of the main beneficiaries of the MSME TA facility, was actively involved in all of the analysis conducted on credit guarantee schemes and provided timely feedback, which enabled to fine tune the deliverables under the TA facility and make sure they were adopted by the CCG. The risk management tools delivered as part of the project were highly valued by CCG. The staff of CCG significantly increased their understanding of risks and risk management techniques and implemented the tools designed as part of the project. ANNEX A. DETAILED SCHEDULE Revised at the last Latest Name Original Actual milestone Planned May 31, 2018 Page 13 of 26 The World Bank Morocco MSME Development Facility (P132884) ANNEX B. DETAILED BUDGET Budget Plan vs Actual (USD) Cumulative Budget Current FY (2018) Actual Actual vs Activity WPA Expenditure WPA Burn Source of Fund Activity Plan Expenditure Plan (%) Plan Plan (YTD) Rate (%) to Date Bank Budget 800,000 0 0 0 0 0 0 Bank Trust Fund 0 763,028 0 0 0 308,926 0 Budget Plan (USD) For Official Use Only Costing Do you want to plan the budget by FY? Yes Do you want to plan your budget by Subtasks? No Source of Fund Cumulative Budget Table BudgetTotal Grand Grand Total Direct Cost 800,000 Bank Budget 800,000 ANNEX C. DELIVERABLES DETAILS Improving direct finance for SMEs Deliverable Name Decision Review Required? Innovation Financing for SMEs in No Morocco May 31, 2018 Page 14 of 26 The World Bank Morocco MSME Development Facility (P132884) Status Deliverable Creation Date Completed 16-Apr-2018 Planned Completion Date Actual Delivery Date 21-Dec-2016 21-Dec-2016 Lead Type of deliverable Teymour Abdel Aziz Advisory Provide a brief description of the deliverable A report with a complete characterization of the entrepreneurial ecosystem, which helped inform the design of a new lending operation geared to fill the identified equity and entrepreneurship gaps. The report also reviews some successful interventions and presents the main guidelines for the intended operation. The reason behind the design of the lending operation is the financing gap for startups at the pre-seed/seed, early stage and early VC growth stage and the weakness in the entrepreneurship ecosystem know-how. For Official Use Only Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. A report that provides the characterization of the ecosystem, identifying financial and non-financial supports along the life of a company, three case studies of international experiences of government support to the development of the equity capital industry and recommendations to strengthen the Venture Capital and Private Equity ecosystem in Morocco. The report identifies four types of actions that the government can implement:  Strengthening the enabling environment for entrepreneurial finance through the promotion of the entrepreneurial culture, reductions in capital gains tax, enhancing contract enforcement and improving the flexibility of labor laws.  Supply-side interventions to overcome market failures, such as co-investment schemes for business angels and for venture capitalists and funds of funds by which the government could co-invest along private investors.  Demand-side interventions to create a high-quality pipeline of ventures by stimulating innovations.  Attracting the diaspora to build business networks, provide social and financial capital, mobilize foreign direct investment, mentoring local firms, developing international trade links, etc. Finally, the report recommends the creation of a new Seed Early Stage and Venture Capital Facility established through funding by the public sector, which will have an integrated development solution combining equity financing and technical assistance to address the weakness in the know how around investment to create financially viable enterprises in the ecosystem. May 31, 2018 Page 15 of 26 The World Bank Morocco MSME Development Facility (P132884) Per request of the government, the report also includes case studies which are considered as best practice. The results of this work were presented in the 10th Donor Steering Committee of the MENA MSME Facility on April 26, 2017. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. Improving direct finance for SMEs Deliverable Name Decision Review Required? Report on Payment Delays No Status Deliverable Creation Date Completed 16-Apr-2018 For Official Use Only Planned Completion Date Actual Delivery Date 14-Feb-2018 20-Feb-2018 Lead Type of deliverable Teymour Abdel Aziz Analytical Provide a brief description of the deliverable A report that analyzes the delays of public payments, return of the TVA and construction authorizations. This report answers to the will of the Moroccan Government to ameliorate the performance of the public services for SMEs, given that the delays in public services have a direct impact in the balance sheets of the private sector, complicating their cash flow management. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The report includes a detailed analysis of real delay payment data from four important cities in Morocco and defines the creation of performance indicators that can serve in the future to track delays across the country. It identifies therefore the bottlenecks of the system, city by city and the inexistence of traceability in certain processes such as the rejection of documents. The report also provides an evaluation of the regulations for the deployment of the public payments and recommendations to improve the system and processes. Some of the recommendations include the improvement of the regulatory framework to take into account several delays that currently are not regulated, enhancement of the technical skills and human resources within both the public servants and the SMEs and the establishment of clear performance indicators. May 31, 2018 Page 16 of 26 The World Bank Morocco MSME Development Facility (P132884) Given the high involvement of the Moroccan authorities in the elaboration of this report, it is likely that recommendations will be followed. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. Improving direct finance for SMEs Deliverable Name Decision Review Required? Finance for Smallholder Farmers No Status Deliverable Creation Date Completed 16-Apr-2018 Planned Completion Date Actual Delivery Date For Official Use Only 16-Dec-2014 23-Dec-2014 Lead Type of deliverable Teymour Abdel Aziz Advisory Provide a brief description of the deliverable An analysis of the whole business model of “Tamwil El Fellah”, the entity created under the Plan Le Maroc Vert to provide financial services to SMEs in the agricultural sector that do not have a bank account or are covered by microfinance insitutions, given that the agricultural sector is one of the most important sectors of the Moroccan economy. “Tamwil El Fellah” was created as a collaborative effort between the Minister of Finance, Credit Agricole du Maroc and the Prudential Stability Fund. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The report analyses the whole business model of “Tamwil El Fellah”, takes stock of its successes and provides detailed recommendations to ameliorate the performance and increase the activity of the institution. Some of the recommended actions include the introduction of supply-chain finance, the enhancement of the current collaboration among stakeholders, an increase the ceiling of the credits to be offered to agri-business (investments and working capital), the introduction of a credit that could have savings as collateral, enhancing risk management and increase hiring. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. May 31, 2018 Page 17 of 26 The World Bank Morocco MSME Development Facility (P132884) Improving the Credit Guarantees Schemes Deliverable Name Decision Review Required? Strengthening the effectiveness and outreach of the Moroccan Partial Guarantee Programs in No Support of MSMEs and housing loans Status Deliverable Creation Date Completed 16-Apr-2018 Planned Completion Date Actual Delivery Date 15-Aug-2017 09-Feb-2018 Lead Type of deliverable For Official Use Only Teymour Abdel Aziz Analytical Provide a brief description of the deliverable Report to strengthen the effectiveness and outreach of the Moroccan Partial Guarantee Programs in Support of Micro-, Small and Medium Enterprises (MSMEs) and housing loans. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The report contains an overview of the current products of CCG, an analysis of its performance, an evaluation of the financial impact of the guarantees in the government’s budget and the examination of the operational framework and management processes of the CCG. To bring CCG procedures and standards to international best practices, each of the CCG products has been evaluated according to the World Bank principles for Credit Guarantees. The report does a deep dive into each of the three types of guarantee products delivered by CCG, looking at strategy, distribution, marketing, resources, procedures and price setting among other areas and providing detailed recommendations. In addition, the report provides a comparative analysis of the CCG in relation to other best performing credit guarantee schemes considered in the MENA region as well as in Europe, Latin America and Asia. It includes a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) of the current performance, mission and business model of the CCG. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. Improving the Credit Guarantees Schemes May 31, 2018 Page 18 of 26 The World Bank Morocco MSME Development Facility (P132884) Deliverable Name Decision Review Required? Workshop: Building a Sustainable Credit Guarantee Scheme for No SMEs. Sharing Malaysia's Experience Status Deliverable Creation Date Completed 16-Apr-2018 Planned Completion Date Actual Delivery Date 05-Apr-2018 06-Apr-2018 Lead Type of deliverable Valeriya Goffe Advisory Provide a brief description of the deliverable For Official Use Only In an effort to develop the capacity of the Morocco officials in SME finance, the project funded their participation in a four-day workshop to share the evolution of Malaysia's SME finance ecosystem and the key lessons learned from government initiatives on the topic and partnerships with the private sector. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The workshop was directed at officials from government and regulatory agencies from various jurisdictions. Morocco participants included officials for the Ministry of Finance, central bank and CCG. The agenda of the workshop covered the following topics: (i) role of the government enabling SME finance in Malaysia; (ii) SME finance ecosystem and landscape in Malaysia; (ii) evolution of credit guarantees in Malaysia through the government-sponsored Credit Guarantee Corporation (CGC); (iii) how the Credit Guarantee Corporation (CGC) evaluates guarantee applications, manages exposures to credit and market risks, performs loan monitoring and reporting; And (iv) collaboration of financial institutions in supporting SMEs. The workshop had an attendance of 37 participants who were staff from the Central Banks and Ministries of Finance and Credit Guarantee Authorities of Bangladesh, Cambodia, Indonesia, Lao PDR, Myanmar, Morocco, Papua New Guinea, Kingdom of Saudi Arabia and Thailand. Through this workshop participants were able to identify key gaps in the SME finance ecosystem in their own countries, and make comprehensive proposals on major building blocks for a sustainable credit guarantee scheme for SMEs with the action plan for implementation. Improving the Credit Guarantees Schemes May 31, 2018 Page 19 of 26 The World Bank Morocco MSME Development Facility (P132884) Deliverable Name Decision Review Required? Evaluation of the governance framework and the activities of the No Moroccan Credit Guaranee Scheme Status Deliverable Creation Date Completed 16-Apr-2018 Planned Completion Date Actual Delivery Date 20-Dec-2017 08-Feb-2018 Lead Type of deliverable Teymour Abdel Aziz Analytical Provide a brief description of the deliverable For Official Use Only Reports assessing and strengthening the CCG’s institutional framework, as well as the product offering and operational processes. One report analyzes the CCG’s institutional and governance frameworks in relation to the reform planned by the government within the strategic plan for 2017-2021. The objective of this reform is to strengthen prudential control, give responsibility to the CCG over the mission objectives conferred by the government and modernize and simplify the institutional framework and the governance structure. A second report analyzes the activities and products of the CCG over a period of 10 years and gives an overview of the evolution of the objectives and the risks. The analysis cover a wide period of time in which the institution implemented different strategies and operational models. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The report covering the analysis of CCG’s institutional and governance frameworks was delivered to the authorities. The analysis was complemented with detailed recommendations on the different components of the reform. These recommendations include how to best manage and report the accounting of the three activities that the CCG performs, increased prudential supervision by the Central Bank, encouragement to transform CCG into a limited liability organization, a more defined mandate, a more competitive process to hire CCG administrators, etc. The report analyzes the activities and products of the CCG was also delivered to the authorities. The report included a descriptive and multidimensional analysis of each of the activities carried out by the CCG, an analysis of the claims and the behavior of the beneficiaries and a study on the relation of macroeconomic conditions with claims. May 31, 2018 Page 20 of 26 The World Bank Morocco MSME Development Facility (P132884) This report gives the authorities a solid understanding of the performance of CCG’s activities and the strength of the institution reaching its goal. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. Improving the Credit Guarantees Schemes Deliverable Name Decision Review Required? Risk management and pricing schemes trainings and guidelines No for the Moroccan Credit Guaranee Scheme Status Deliverable Creation Date Completed 16-Apr-2018 For Official Use Only Planned Completion Date Actual Delivery Date 17-Jan-2018 01-Mar-2018 Lead Type of deliverable Teymour Abdel Aziz Advisory Provide a brief description of the deliverable This activity supported the delivery of onsite and online training sessions to staff of CCG. Three guidance step- by-step manuals were prepared and delivered to CCG staff during the training. Provide a brief summary of outputs before recommending decision review of the deliverable (if needed) or changing its status to Completed. If applicable, include links to external documents and websites. The deliverables covered a number of areas, such as: (i) risk management process through the application AIS Finrisk (operating method, databases required, how to carry out Value at Risk and probability of default simulations taking into account macroeconomic variables, etc.; (ii) a pricing scheme (installation, update, data base structure, etc.); and (iii) a stress testing mechanism (procedures, calculations, scenario testing, etc.) A final report that explains the links between these three processes was also produced to give an overall perspective on how the different components fit together. The deliverable did not go through an official Decision Review but the team performed quality control by peer reviewing key outputs by experts within the Bank. May 31, 2018 Page 21 of 26 The World Bank Morocco MSME Development Facility (P132884) ANNEX D. SUBTASKS Improving the Guarantee System for MSMEs(P159073) Project ID Short Name P132884 Improving the Guarantee System for MSMEs(P159073) Status Is this a Reimbursable Advisory Services (RAS)? Cancelled No ADM Responsible Team Leader Co-Team Leader(s) Valeriya Goffe Requesting Unit (e.g. ECCU2) Country, Region or World MNC01 (392) Morocco For Official Use Only Responsible Unit (e.g. GEE03) Pillar Name GFCMW (9282) Improving the Credit Guarantees Schemes AIN Sign Off ACS Sign-off 09-Sep-2014 29-Dec-2016 Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation Type of subtask Advisory Describe the contribution of this activity to the overall development objective The national guarantee system, managed by the Caisse Centrale de Garantie (CCG), is one of the cornerstones of the government's strategy in support of access to finance for MSMEs. Partial credit guarantee (PCG) schemes have been identified as one of the most market-friendly types of interventions, as they generate fewer distortions in the credit market and are more consistent with a well-functioning banking system. Through the provision of risk mitigation tools, PCGs provide a strong incentive for banks to get into the MSME market, while retaining sound incentives for loan origination and oversight, thereby improving MSME’s access to finance. This activity aims at strengthening the capacity and sustainability of the CCG through the provision of technical assistance in the areas of risk management and product development. The TA project contains three key pillars, which include: (i) strengthening the effectiveness and outreach of the Moroccan Partial Guarantee Programs in Support of Micro-, Small and Medium Enterprises (MSMEs) and housing loans, in particular by developing a new guarantee product), (ii) strengthening the CCG ‘s capacity to analyze credit risks, assess their impact, derive from this assessment economic pricing principles, conduct stress test and calibrate economic May 31, 2018 Page 22 of 26 The World Bank Morocco MSME Development Facility (P132884) capital required to face adverse scenarios, and (iii) assessing and strenthtening the CCG’s institutional framework, as well as the product offering and operational processes. Measuring Payment Delays for SMEs(P159074) Project ID Short Name P132884 Measuring Payment Delays for SMEs(P159074) Status Is this a Reimbursable Advisory Services (RAS)? Cancelled No ADM Responsible Team Leader Co-Team Leader(s) Teymour Abdel Aziz Requesting Unit (e.g. ECCU2) Country, Region or World For Official Use Only MNC01 (392) Morocco Responsible Unit (e.g. GEE03) Pillar Name GFCMW (9282) Improving the Credit Guarantees Schemes AIN Sign Off ACS Sign-off 17-Oct-2012 26-Dec-2014 Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation Type of subtask Analytical Describe the contribution of this activity to the overall development objective Access to finance is among the top constraints mentioned by Moroccan firms as an investment climate impediment. For SMEs, this problem is exacerbated by the burden on their treasury management resulting in long delays in getting paid when contracting with larger firms or with public administrations. Because they often lack the bargaining power vis a vis these clients, SMEs are often reluctant to actually claim debt payment and interest on late payments they are entitled to. This activity aims to provide technical assistance to the Moroccan authorities to measure and improve predictability of public procurement payment delays, specifically at the municipal level (collectivités locales). Finance for Smallholder Farmers(P159075) May 31, 2018 Page 23 of 26 The World Bank Morocco MSME Development Facility (P132884) Project ID Short Name P132884 Finance for Smallholder Farmers(P159075) Status Is this a Reimbursable Advisory Services (RAS)? Cancelled No ADM Responsible Team Leader Co-Team Leader(s) Teymour Abdel Aziz Requesting Unit (e.g. ECCU2) Country, Region or World MNC01 (392) Morocco Responsible Unit (e.g. GEE03) Pillar Name GFCDR (9086) Improving the Credit Guarantees Schemes AIN Sign Off ACS Sign-off For Official Use Only 17-Oct-2012 27-Dec-2013 Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation Type of subtask Describe the contribution of this activity to the overall development objective Tamwil El Fellah, a subsidiary of Credit Agricole Maroc, provides financing for very small agricultural producers, which lie between the microenterprise and SME segment.This activity aims to conduct a strategic and operational review of Tamwil al Fallah , a subsidiary of Credit Agricole du Maroc (CAM), dedicated to the financing of small farmers and agricultural MSMEs. Venture Capital & PE for SMEs(P159076) Project ID Short Name P132884 Venture Capital & PE for SMEs(P159076) Status Is this a Reimbursable Advisory Services (RAS)? Cancelled No May 31, 2018 Page 24 of 26 The World Bank Morocco MSME Development Facility (P132884) ADM Responsible Team Leader Co-Team Leader(s) Teymour Abdel Aziz Requesting Unit (e.g. ECCU2) Country, Region or World MNC01 (392) Morocco Responsible Unit (e.g. GEE03) Pillar Name GFCDR (9086) Improving the Credit Guarantees Schemes AIN Sign Off ACS Sign-off 01-Aug-2014 27-Feb-2015 Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation For Official Use Only Type of subtask Describe the contribution of this activity to the overall development objective The study aims to assess the venture capital and private equity ecosystem for SMEs in Morocco. It will comprise an alalysis of the current support mechanisms decicated to SMEs, provide recommendations based on global experiences. The study will be conducted jointly with the Trade and Competitiveness Practice and InfoDev. Capacity Building on MSME Finance(P159077) Project ID Short Name P132884 Capacity Building on MSME Finance(P159077) Status Is this a Reimbursable Advisory Services (RAS)? Cancelled No ADM Responsible Team Leader Co-Team Leader(s) Teymour Abdel Aziz Requesting Unit (e.g. ECCU2) Country, Region or World MNC01 (392) Morocco Responsible Unit (e.g. GEE03) Pillar Name GFCMW (9282) Improving the Credit Guarantees Schemes AIN Sign Off ACS Sign-off May 31, 2018 Page 25 of 26 The World Bank Morocco MSME Development Facility (P132884) 01-Jan-2015 01-Jan-2016 Practice Area (Lead) Contributing Practice Areas Finance, Competitiveness and Innovation Type of subtask Advisory Describe the contribution of this activity to the overall development objective This activity aims to support the Ministry of Finance to build their capacity on MSME finance through a series of learning events. ANNEX D. CLIENTS For Official Use Only Clients or Audience Does this activity have a client? Yes Organizations & Contacts Ministry of Economy and Finance Central Ministry, Morocco Contacts Nouaman Al Aissami n.alaissami@tresor.finances.gov.ma Survey Participation: Yes May 31, 2018 Page 26 of 26