Date of Submission to Coordination Unit:
A. GENERAL INFORMATION
1. Activity Name
Promoting financial inclusion via mobile financial services in the Southern and Eastern Mediterranean countries - activities in Morocco2. Requestor Information
Name: Mr. Mohamed Boussaid / Title: Minister of Economy and FinanceOrganization and Address: Ministry of Economy and Finance, Mohammed V Avenue, Chellah, Rabat, Morocco
Telephone : 05 37 76 06 61 / Email:
3. Recipient Entity
Name: M. Abdellatif JOUAHRI / Title: GouverneurOrganization and Address: Bank Al-Maghrib
Telephone: +212 (0) 537 81 81 81 / Email:
4. ISASC Representative
Name: Timothy WINTERS / Title: Policy OfficerOrganization and Address: European Investment Bank, 98 boulevard Konrad Adenauer, L-2950 Luxembourg
Telephone: +352 4379 88331 / Email:
5. Type of Execution (check the applicable box)
√ / Type / Endorsements / JustificationCountry-Execution / Attach written endorsement from designated ISA
√ / Joint Country/ISA-Execution / Attach written endorsement from designated ISA / Due to its regional dimension and approach, which includes two other countries in addition to Morocco, the need for an ISA to execute in coordination with the national authorities is essential. EIB will carry out procurement and financial management. It will also help to coordinate between the three targeted countries to ensure sharing of progress and expertise. The country will be responsible for local coordination and monitoring and evaluation, through the project management team within the Central Bank. The country also directly executes the workshop component. To ensure country ownership of all components of the project, the ISA execution will be closely coordinated with the country activities.
ISA-Execution for Country / Attach written endorsement from designated ISA
ISA-Execution for Parliaments / Attach written endorsements from designated Ministry and ISA
6. Geographic Focus
Individual country (name of country): Morocco√ / Regional or multiple countries (list countries):
This request focuses on Morocco.
This request is part of an approach which has a regional scope in the Middle East and North Africa (MENA) region; as such the Transition Fund will also receive requests to finance related activities in Jordan and Egypt.
The regional aspect of this project is found particularly in the potential for information sharing and common capacity building activities across the region. Although the countries are all at different stages in developing responses to the challenges of promoting and regulating the provision of mobile financial services, the needs-based approach taken in each country proposal provides ample scope for regional sharing of results and best practices in different areas of the mobile finance field. More specifically, the studies to be carried out under some of the proposals are likely to be of use for other countries, and could form the basis for dissemination and collaboration events (workshops, conferences) as well as ad hoc sharing. It is expected that one aspect of this regional sharing would be implemented in the context of an umbrella project for which a Union for the Mediterranean label is under consideration, and which would provide a framework for future initiatives to promote other aspects of mobile financial services in the region.
7. Amount Requested (USD)
Amount Requested for direct Project Activities: (Morocco activities)(of which Amount Requested for direct ISA-Executed Project Activities): / 635,000 USD
600,000 USD
Amount Requested for ISA Indirect Costs[1]: / 42,000 USD
Total Amount Requested: / 677,000 USD
8. Expected Project Start, Closing and Final Disbursement Dates
Start Date: / 1st January 2014 / Closing Date: / 30th September 2014 / End Disbursement Date: / 31st January 20159. Pillar(s) to which Activity Responds
Pillar / Primary(One only) / Secondary
(All that apply) / Pillar / Primary
(One only) / Secondary
(All that apply)
Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business environment (including for small and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private sector development strategies, access to finance, addressing urban congestion and energy intensity. / √ / Enhancing Economic Governance. This could include areas such as transparency, anti-corruption and accountability policies, asset recovery, public financial management and oversight, public sector audit and evaluation, integrity, procurement reform, regulatory quality and administrative simplification, investor and consumer protection, access to economic data and information, management of environmental and social impacts, capacity building for local government and decentralization, support for the Open Government Partnership, creation of new and innovative government agencies related to new transitional reforms, reform of public service delivery in the social and infrastructure sectors, and sound banking systems. / √
Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labor market policies, increasing youth employability, enhancing female labor force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform. / √ / Competitiveness and Integration. This could include such topics as logistics, behind-the-border regulatory convergence, trade strategy and negotiations, planning and facilitation of cross-border infrastructure, and promoting and facilitating infrastructure projects, particularly in the areas of urban infrastructure, transport, trade facilitation and private sector development. / √
B. STRATEGIC CONTEXT
10. Country and Sector Issues
Country OverviewMorocco has been on a steady path of economic recovery since the stagnation of the 1990s, with sound macroeconomic management and sustained growth in non-agricultural sectors. The economy proved relatively resilient in the face of the recent global economic slowdown. However, in 2012, the fragility of the Moroccan economy was exposed under the pressures from sluggish external demand, high prices of imported commodities, and lower agricultural output, combined with significant domestic economic rigidities. The situation of public finances also worsened in 2011 and 2012 as the government increased spending and borrowing both for social programs and subsidies following the Arab Spring and also to mitigate the impact of the global crisis. Consequently, the budget deficit widened to 7.6 percent of GDP in 2012, compared to an already high deficit of 6.9 percent of GDP in 2011. This higher overall investment has improved the employment rate, with the number of jobless shrinking to 9 percent in 2012.
In the current political and economic environment, inclusive growth and job creation by the private sector dominate the policy debates. With the government increasingly financially constrained, there are high expectations that SMEs and micro-enterprises can contribute more via 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 and income levels underserved by conventional banks, such as the informal sector.
Mobile financial services in support of financial inclusion
BAM is highly aware of the importance of solving the problem of the lack of access to financial services in Morocco. The relationship between development in the finance sector and a country’s economic development has been empirically proven in a number of studies that show a high correlation and causality between increases in the rate of financial deepening and increases in GDP per capita. Poor access to finance may be a factor contributing to the slow growth of per capita incomes and the limited supply of employment and housing for Morocco’s young and growing populations.
The ‘Mobile financial services in Mediterranean Partner Countries’ study published by the EIB[2] in 2012 shows that mobile financial services – in particular, business models based on prepaid electronic payments systems and cellular technology – can help improve access to financial services by addressing the questions of high costs of financial services, the scarce banking density, as well as the inappropriate risk methodologies and the inadequate regulatory framework of the existing system. In 2011, only 39% of Morocco’s population older than 15 had an account at a formal financial institution, while penetration of mobile telephone services stood at 114% (figures from World Bank and Morocco’s telecom regulator, ANRT). This combination of high mobile penetration and low access to financial services means that there is a clear opportunity for transformational mobile financial services in Morocco.
Both the Central Bank and the Moroccan Ministry of the Economy and Finance have identified financial inclusion as one of their primary policy goals, setting the objective of access to banking at 66% of the population of Morocco by 2014. In order to achieve this ambitious financial inclusion goal, the authorities have made significant efforts both to adapt the regulatory environment and to promote banking initiatives.
Physical access to financial services in Morocco is low not only compared to developed nations but also in regional terms. To solve the problem of low physical access to financial services in Morocco, banking law enables banks to outsource financial services through partnerships with commercial institutions (Intermediaire en Opérations de Banques (IOB)). However, agent regulation hampers the use of mobile network operators’ (MNOs) networks as agents, since agents need to be either an S.A. or S.A.R.L. and have a direct contract with the bank, whereas not all individual stores in the network have the appropriate status and even those which do are faced with the burden of signing two contracts, one with the operator and one with the bank. Meanwhile, the very dense existing network of remittances services could be used for the deployment of mobile financial services.
In terms of credit information infrastructure, the Central Bank of Morocco is pioneering an effective information sharing model. Morocco’s system, if the competition issue is resolved by promoting new competitors to offer these services, would allow existing and potential actors in mobile financial services to access relevant information. Information, coming from both financial and non-financial operators, should include both banked and non-banked customers. This is an important aspect of financial inclusion, as by including all categories of consumer and types of operator, individuals have a greater chance of developing a credit history to be used for future financial activities.
Some of the country's leading banks, including Banque Centrale Populaire (BCP), Attijariwafa Bank and Al Barid Bank, have already launched initiatives and service offerings using prepaid platforms to offer low cost financial service offerings targeted to low income customers. BAM has also authorized a new player, leading payment services provider M2M, to create an acceptance network as an alternative to the existing bank-owned network run by CMI in order to increase competition and card usage among the unbanked.
Remittances services are a key component of the service offering that leading retail banks have designed for low income customers and these can also benefit from innovation via mobile services. Remittances received in Morocco are very important in macroeconomic terms due to their balance of payments impact, economic impact for low income population and funding importance for the Moroccan Banking system. Remittances operators have the electronic platform and the network for cash in/cash out purposes, both of which are key elements for mobile financial services operators. All three of the most important players in the remittances market in Morocco are banks, with approximately 30% market share each, each having a large network serving remittances receivers: BCP (including BCP’s network of almost 1000 branches and, since January 2012, also FBPMC’s network of ~300 branches); AttijariWafa (mostly through Wafa Cash with 1550 outlets); and Al Barid Bank (through La Poste Network with 2000 branches).
Overall, in Morocco, it seems that bank-centric business models for deployment of mobile financial services are more likely to succeed than operator led business models. This is because banks and the post office (Al Barid Bank) are seen as the most legitimate actors to offer mobile banking services, while mobile operators have less credibility. On the other hand, in the context of the changes in the banking law regarding e-money issuance (assistance was given by the EIB, the WB and AFI to develop this new law based on international best practices), microfinance organizations could become relevant players in the mobile financial services market in Morocco by partnering with operators holding e-money licenses in order to enhance their value proposition and credibility. Indeed, Morocco is the regional leader in terms of the development of its micro-credit industry. However, due to the crisis that microcredit associations faced in 2008, they are currently focused on increasing efficiency and decreasing delinquency ratios. The use of mobile financial payments could assist them in this dual aim by improving the efficiency of disbursements and reimbursements of micro-loans, while decreasing delinquency ratios due to the enhanced credit controls which are inherent to the use of electronic means of payment (such as credit and behavioral scorings).
11. Alignment with Transition Fund Objective
The objective of the Transition Fund as provided in the Operations Manual is, “to improve the lives of citizens in transition countries, and to support the transformation currently underway in several countries in the region (the “Transition Countries”) by providing grants for technical cooperation to strengthen governance and public institutions, and foster sustainable and inclusive economic growth by advancing country-led policy and institutional reforms.” Access to quality financial services - including means of payments, savings, credit, insurance and money transfer systems - is crucial for low-income households to smooth consumption, manage risks, invest productively, and respond to financial shocks. Morocco has made important strides in promoting access to finance. Supporting the Central Bank of Morocco (BAM) in its effort to expand financial inclusion by developing regulations based on best practices to allow new payment service providers to offer innovative retail payment services such as mobile money is clearly in line with this overall objective of the Transition Fund (as well as specifically with the pillar on improved governance).In addition to this alignment with the general objective of the Transition Fund, this project is aligned with each of its pillars. First, it is aligned with investing in sustainable growth since innovative retail payment solutions such as mobile money directly relate to topics such as innovation and technology policy, enhancing the business environment, competition policy, private sector development strategies, and in particular access to finance. Second, the promotion of innovative retail payment solutions such as mobile money promotes inclusive development and job creation by increasing financial inclusion. Third, this project enhances economic governance by improving public financial management and the oversight capacity of the Central Bank, and creating a sound and reinforced banking system. Fourth and last, the promotion of innovative retail payment solutions such as mobile money enhances competitiveness and integration since it facilitates trade and private sector development for the informal economy by supporting the provision of reliable payment and financial services.
12. Alignment with Country’s National Strategy