Catalyzing Job Creationand Growth Through MSME

Development in the Deauville Partnership Countries

Volume 2: Good Practices in Entrepreneurship Development and MSME Support

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i

Unemployment was a key factor fueling the

popular discontent leading to the 2011

revolutions in Egypt and Tunisia, and the

transformational processes in Jordan, Libya,

Morocco, and Yemen. The transitions that these

countries have been going through since 2011

have compounded the problem, and they

are now in need, more than ever, of support

to create employment opportunities for all.

They need to foster home-grown sources

of employment and income generation,

particularly by promoting entrepreneurship and

the development of micro, small and medium

enterprises (MSMEs), a sector that comprises

the majority of enterprises in the Middle East

and North Africa region, in addition to being a

major source of private sector employment.

At their Summit in Deauville, France, in May

2011, the G8 countries made a commitment to

provide support for the political and economic

transformation of the Arab Countries in

Transition – Egypt, Jordan, Libya, Morocco,

Tunisia, and Yemen – through the launch of the

Deauville Partnership. Gulf countries Kuwait,

Qatar, Saudi Arabia, and the United Arab

Emirates, as well as Turkey, joined the Deauville

Partnership subsequently.

A group of 10 international financial institutions

(IFIs) supporting the Deauville Partnership

countries agreed in September 2011 to

establish an operational platform, with a flexible

non-bureaucratic structure, to coordinate

responses to the countries’ urgent needs. The

coordination platform is supported by a

secretariat, which was hosted by the North

Africa Department of the African Development

Bank (AfDB) during its inception phase from

September 2011 to September 2012. Against

this backdrop and on behalf of its IFI partners,

the Bank has prepared this report to lay

the ground for better provision and more

coordinated and strategic MSME support in

Deauville Partnership countries, with a

particular focus on MSMEs with the highest

employment-creation potential. The first volume

of the report addresses several knowledge

gaps on MSME development in the region. To

inform policy and project interventions, it

provides a detailed analysis of current

knowledge concerning the link between MSME

development and job creation.

The second volume of the report focuses on

identification of good practices and success

stories in MSME support instruments and

programs in the region, profiling a selection of

these as examples for replication or adaption

in other Deauville Partnership countries. It

builds on the findings and recommendations

of Volume I and aims to provide concrete

examples of policy responses and how

interventions by IFIs and other donors could

be implemented. The objective is to share the

“how-to” of innovative and high-performing

Foreword

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ii

entrepreneurship and MSME support

programs with a view to transferring lessons

learned to other Deauville Partnership

countries. It is intended to function as a

vehicle to facilitate an exchange between

Deauville Partnership countries/ partners and

the “good practice” proponents on possible

replication or adaption in the different country

contexts.

AfDB has always looked for multifaceted,

innovative, and efficient ways of supporting

SMEs. Recent initiatives have included the

African Guarantee Fund, which provides

partial guarantees, and other important risk-

sharing initiatives, such as the growth-oriented

women enterprises facilities. Others initiatives

include the provision of dedicated lines of

credit to financial intermediaries for lending to

SMEs, to improve their access to finance,

credit enhancement schemes, and capacity-

building activities. The Bank will continue to

collaborate with development partners to

ensure that, as we provide support to the

region, we integrate the latest thinking on

support to MSMEs in our activities, especially

in terms of creating a meaningful environment

for employment generation.

Jacob Kolster,

Director, North Africa Regional Department

(ORNA)

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iii

This report was prepared by Lois Stevenson,

Senior Consultant, North Africa Department

(ORNA), African Development Bank (AfDB),

under the lead and supervision of Florian Theus

(Economist, ORNA). Overall guidance was

provided by Jacob Kolster (Director, ORNA).

Petra Menander Ahman (former Head, IFI

Secretariat, ORNA) and Yasser Ahmad (Chief

Country Portfolio Officer, ORNA) played an

instrumental role for the project during the initial

coordination efforts with other international

financial institutions (IFIs). The report

benefited from valuable comments on the

analytical framework and the executive

summary by Thouraya Triki (Chief Country

Economist, ORNA) and Vincent Castel (Chief

Country Economist, Morocco, ORNA). Philippe

Trape (Principal Country Economist, Tunisia,

ORNA) and Mickaëlle Chauvin, (Consultant,

ORNA) reviewed the report and provided

technical inputs as well as preliminary editing

and quality control. The final editing of the report

was done by Diana Saltarelli.

The project has also been served by the

collaboration with other IFIs and the Organisation

for Economic Co-operation and Development

(OECD). For initial coordination in the design

phase, the Deauville Partnership’s Small and

Medium Enterprise (SME) Working Group played

an important role. AfDB is also thankful to IFI

partners for the sharing of information, studies

and projects related to micro, small and medium

enterprise (MSME) development in the MENA

region, in particular Laurent Gonnet (Financial

Sector Specialist, MENA, World Bank), Hermann

Bender (Program Manager, West MENA, IFC),

Eman Omran (Small and Medium Enterprises

Team Leader, Canadian International

Development Agency, Egypt), Reem ElSaady

(Manager, Business Advisory Services Program

Egypt, European Bank for Reconstruction and

Development) and Monica Carco (Head,

Investment and Technology Unit, United Nations

Industrial Development Organization). The report

also benefited from the review of the draft by

Jorge Galvez Mendez (Policy Analyst, Private

Sector Development, OECD).

The report furthermore relied on the inputs

received from representatives of the Egyptian,

Jordanian, Moroccan and Tunisian governments,

namely Alaya Bettaieb (former Secretary of

State, Ministry of Development International

Cooperation) and Sadok Bejja (General Director

for SME Development, Ministry of Industry and

Technology) from Tunisia; Aicha Bouanani

(Ministry of Economy and Finance), as well as

Abdelkrim Belkadi (National Agency for the

Promotion of Employment and Skills - ANAPEC)

and Houria Nadifi (National Agency for the

Promotion of Small and Medium Enterprises –

ANPME) from Morocco; Hana Uraidi (Director

of Cross Cutting Support Directorate, Jordan

Enterprise Development Corporation) from

Jordan; and Ghada Waly (former Managing

Acknowledgements

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iv

Director), Mohamed Abdel Aziz (Policy and

Coordination Specialist), Dr. Hatem Zaki (Head

of Non-Financial Services, Small Enterprises

Development Group), Marwan Abdel Razek

(Head of Franchise Development Department),

Dr. Raafat Abbas Shehata (Head of the

Technical Office) Hanaa El Hilaly (Director

General, Planning and International

Cooperation Group), all from the Social Fund for

Development in Egypt.

AfDB would also like to thank all individuals

and corporations that were available for

meetings, interviews and information sharing,

without whom the good practice profiles could

not have been completed. Gratitude goes

especially to Deema Bibi (Chief Executive

Officer, INJAZ, Jordan) and Shadin Hamaideh

(Head of Development Unit, INJAZ, Jordan),

Hassan Charraf (Manager of Development,

Fondation Création d’Entreprises, Morocco),

Abdelhamid Rouini (Conseiller Réseau and

Partenaires Investissement, Fondation Création

d’Entreprises, Morocco), Mohamed Zakaria

(Chief Director of Training, Egyptian Banking

Institute, Egypt), Dr. Khattar (Chairperson of the

Board and General Manager, Kafalat SAL,

Lebanon), Ralph Stephan (Officer - Energy and

Technology Department, Kafalat SAL,

Lebanon), Hicham Zanati Serghini (Secretary

General, Caisse Centrale de Garantie,

Morocco), Djamila Laaroussi (Chef du

Département de la Communication et du

Marketing, Caisse Centrale de Garantie,

Morocco), Kamel Krimi (Directeur des

Engagements, Tunisie Leasing, Tunisia), Ayman

Mahmoud (Executive Director, El Mobadara,

Egypt), Pierre Lucante (Project Manager,

German Agency for International Cooperation –

GIZ, Morocco), and Houria Nadifi (Chef de

Division, Cooperation Etudes, ANPME,

Morocco).

This report was made possible by the

generous financial support of the Department

of International Development, United Kingdom.

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v

Table of Contents

i Foreword

iii Acknowledgements

v Table of Contents

vi Abbreviations

viii Executive summary

1 1. INTRODUCTION

5 2. FOSTERING ENTREPRENEURSHIP AND BUSINESS CREATION

6 2.1 Strengthening the Culture of Entrepreneurship through the Education System

8 INJAZ, Jordan

22 2.2 Supporting Business Creation

23 Fondation Création d’Entreprises, Morocco

31 Souk At-Tanmia Entrepreneurship Development Initiative, Tunisia

46 3. ACCESS TO FINANCING FOR MSMEs

48 3.1 Loan Guarantee Schemes

48 Caisse Centrale de Garantie, Morocco

60 Kafalat SAL, Lebanon

71 3.2 Lease Financing

72 Tunisie Leasing, Tunisia

82 3.3 Capacity Building to Facilitate Bank Lending to SMEs

83 Egyptian Banking Institute, Egypt

93 4. BUSINESS DEVELOPMENT SUPPORT SERVICES FOR SMEs

95 El Mobadara Community Development and Small Enterprises Association, Egypt

108 5. DEVELOPMENT OF WOMEN ENTREPRENEURS/ WOMEN-OWNED MSMEs

111 Entre Elles en Régions Program, Morocco

122 6. CONCLUDING REMARKS

124 References

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Abbreviations

African Development Bank

Association of Women Entrepreneurs of Morocco/ Association des

Femmes Entrepreneurs du Maroc

National Agency for the Promotion of Employment and Skills/ Agence

Nationale de Promotion de l’Emploi et des Compétences

National Agency for the Promotion of Small and Medium Enterprises/

Agence Nationale pour la Promotion de la Petite et Moyenne Entreprise

Business development support

Business Development Services Support Project

Banque de Financement des petites et moyennes entreprises/ Bank

for Financing Small and Medium Enterprises

Banque Tunisienne de Solidarité

Central Guarantee Fund/ Caisse Centrale de Garantie

Canadian International Development Agency

Center for Young Business Leaders/ Centre des jeunes dirigeants

d’entreprise

National Center for Scientific and Technical Research/ Centre National

pour la Recherche Scientifique et Technique

Confederation of Tunisian Citizen Enterprises/ Confédération des

Entreprises Citoyennes de Tunisie

Regional Committees for Business Creation / Comités Régionaux pour

la Création d’Entreprises

Regional investment centers/ Centres régionaux des investissements

Civil society organization

Department for International Development, United Kingdom

Deloitte Touche Tohmatsu

Egyptian Banking Institute

European Bank for Reconstruction and Development

Egypt Enterprise Development Project

Espace Point de Départ: Association pour la Promotion de l’Entreprise

Féminine

Fondation Création d’Entreprises du Groupe Banque Populaire

German Agency for International Cooperation/ Deutsche Gesellschaft

für Internationale Zusammenarbeit

International Bank for Reconstruction and Development

Information and communications technologies

AfDBAFEM

ANAPEC

ANPME

BDSBDSSPBFPME

BTSCCGCIDACJD

CNRST

CONECT

CRPCE

CRICSODFIDDTTEBIEBRDEEDPESPOD

FCEGIZ

IBRDICT

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IFCIFIILOKAFDMDMMENAMFIMISMSEsMSMEsNIGDNPLOECDOFPPT

QMSREDECSAPSFDSMEsSMEDUPTLGUNDPUNIDOUNRWA

USAIDVSEWEF

Currencies

CADEGPEURGBPLBPMADTNDUS$

International Finance Corporation

International financial institution

International Labour Organization

King Abdullah II Fund for Development

Marocains du Monde

Middle East and North Africa

Microfinance institution

Management information system

Micro and small enterprises

Micro, small and medium enterprises

National Institute for the Guarantee of Deposits

Non-performing loan

Organisation for Economic Co-operation and Development

Office of Vocational Training and Employment Promotion/ Office

de la Formation Professionnelle et de la Promotion du Travail

Quality Management System

Regional Enterprise Development Center

School Adoption Program

Social Fund for Development

Small and medium enterprises

Small and Micro Enterprise Development in Upper Egypt Project

Tunisie Leasing Group

United Nations Development Programme

United Nations Industrial Development Organization

United Nations Relief and Works Agency for Palestine Refugees

in the Near East

United States Agency for International Development

Very small enterprise

World Economic Forum

Canadian dollar

Egyptian pound

Euro

British pound sterling

Lebanese pound

Moroccan dirham

Tunisian dinar

United States dollar

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viii

The African Development Bank (AfDB),

on behalf of the international financial

institutions (IFIs) participating in the

Deauville Partnership with Arab Countries

in Transition, launched a two-volume study

aimed at enhancing knowledge exchange

and coordination among all Deauville

Partners and improving interventions

supporting the development of micro,

small and medium enterprises (MSMEs).

The study also seeks to lay the foundation

for further joint operations and research,

including actions by the Deauville

Partnership countries1 themselves. As it

covers activities by governments and

bilateral donors, it will help to streamline

the different initiatives around MSMEs in

the region, as well as across the various

pillars of the Deauville Partnership.

Volume I of this study, Catalyzing Job

Creation and Growth through MSME

Development in Deauville Partnership

Countries: A Gap Analysis of Policy

and Program Support in Morocco and

Tunisia, discusses the latest research on

the links between MSME development and

job creation, delineates policy implications

for MSME development in the two focus

countries, and makes recommendations

for future initiatives to address identified

gaps in MSME development support.

Building on the findings and

recommendations of Volume I, this

companion volume highlights nine good

practice initiatives from within the Middle

East and North Africa (MENA) region

geared to supporting entrepreneurship

and MSME development. This in itself

makes the publication unusual because

traditionally MENA countries have sought

to emulate good practices from outside

the region.

Good Practices in MSME SupportAreas

The good practices highlighted in Volume II

are found in initiatives focused on four

critical MSME support areas in the Deauville

Partnership countries, as outlined below:

(i) Fostering entrepreneurship and

business creation

• INJAZ, Jordan. A leading youth

economic education organization in

Executive Summary

1 Countries covered by the Deauville Partnership are Egypt, Libya, Jordan, Morocco, Tunisia, and Yemen.

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Jordan and across the Arab world,

INJAZ offers entrepreneurship courses

and programs in secondary schools

and youth centers, and provides

capacity building to university and

college students in business and social

entrepreneurship through practical

training and independent projects. It

has achieved impressive results in

terms of reaching students and

vulnerable youth nationwide, and

engaging corporate sponsors and

volunteers to support its activities.

• Fondation Création d’Entreprises

(FCE), Morocco. The FCE, part of

Morocco’s Groupe Banque Populaire,

has the principal mission of promoting

an entrepreneurial culture and supporting

enterprise creation in Morocco. It

provides advice, counseling, coaching,

mentoring and training support to

Moroccan youth to encourage the

creation of new enterprises. Its

success in terms of start-ups, jobs

created, investments, and facilitating

access to financing for its supported

entrepreneurs derives, in part, from its

ability to expand its reach through a

network of regional offices.

• Souk At-Tanmia (“market for

development”) Entrepreneurship

Development Initiative, Tunisia. The

Initiative is an innovative pilot partnership

between AfDB and 20 other donors,

public and private stakeholders, and

Tunisian civil society to provide an

effective response to the post-Arab

Spring unemployment challenges in

Tunisia, particularly for youth. It uses

a competitive process to identify

entrepreneurial projects, and provides

entrepreneurial training, start-up grants

to help defray initial costs and/ or

enable entrepreneurs to meet the

equity requirements to qualify for

additional bank financing, and one year

of post-creation coaching support.

It can be considered an “emerging

good practice” to address the low

entrepreneurial culture and level of

activity in the underdeveloped regions

of Tunisia.

(ii) Access to financing for MSMEs

• Caisse Centrale de Garantie (CCG),

Morocco. The CCG is a public institution

that provides credit guarantees to

banks of between 50% and 80% to

help mitigate the risk of lending to

MSMEs. Through more than a dozen

guarantee products, it extends

financing coverage to larger numbers

of start-ups and MSMEs and extra

classes of MSME borrowers than

previously, while extending the scope

of the formal financial system to

enterprises, including very small

enterprises, that would otherwise not

be able to meet the collateral

requirements for bank loans. It is a

good example of how continuous

improvement of a guarantee program

leads to performance gains in terms of

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x

attracting both MSMEs and banks to

participate, such as innovating with

new guarantee products, streamlining

the approval processes with the banks,

and reducing approval turnaround times

to 2–10 days on most guarantee files.

• Kafalat SAL, Lebanon. Kafalat is a

private for-profit financial company with

the broad development objective of

assisting SMEs in accessing commercial

bank funding by providing loan

guarantees based on business plans/

feasibility studies that demonstrate the

viability of the proposed business

activity. The company constantly

innovates with new guarantee products

to respond to the identified needs of

SMEs at different stages of development.

It currently offers six guarantee

products targeting SMEs in five

sectors: agriculture, high tech, industry,

tourism, and traditional crafts.

• Tunisie Leasing, Tunisia. The foremost

leasing company in the country, Tunisie

Leasing, entered the leasing market in

1984 in the belief that leasing was a

key source of finance to SMEs. With no

requirement for loan collateral, and a

generally lower risk burden to lenders,

leasing has essentially substituted for

bank credit for a number of SMEs. The

company has maintained its position

as market leader even while the leasing

industry has expanded and competitors

have established themselves in the

market. Its success is in part due to the

systematic approach it has developed

to assessing the leasing risk for SMEs

in the absence of complete financial

information.

• Egyptian Banking Institute (EBI),

Egypt. EBI is the official training arm of

the Central Bank of Egypt, serving the

professional development needs of all

banks in the country. Its mission is to

enhance the capabilities of the banking

sector and other financial stakeholders

through interactive educational programs,

training, up-to-date knowledge, and

consultancy. It is unique in the Deauville

Partnership countries (and in fact in the

MENA region) for having established an

SME Department and implemented a

complete range of training courses,

certification programs, and technical

assistance to increase the capacity of

banks for SME banking, while also

strengthening SME capacity to deal

with banks and develop bankable

proposals.

(iii) Business development support

(BDS) services for SMEs

• El Mobadara Community Development

and Small Enterprises Association,

Egypt. The Association has evolved

from a donor-funded project in the late

1990s into a self-sustaining non-profit

organization to support micro and

small enterprises (MSEs) through the

design and delivery of microcredit,

training, BDS services, technical

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xi

assistance, and facilitation of access to

markets, financing and technology. The

case study illustrates good practice in

the provision of market-driven and fee-

based BDS services to MSEs. It also

underscores that effective BDS

provision is attained by experimenting

with different approaches, building the

capacity of BDS providers, ensuring

the quality of services, and being

sensitive to the specific BDS needs of

women-owned MSEs.

(iv) Development of women entrepreneurs/

women-owned MSMEs

• EntreElles en Régions, Morocco.

The program is implemented by the

government’s National Agency for the

Promotion of Small and Medium

Enterprises (ANPME), in partnership

with the German Agency for

International Cooperation (GIZ). Its

objectives are to build the capacity of

women entrepreneurs and their very

small and early-stage enterprises

through coaching, mentoring and the

formation of networks. The program is

an example of how dedicated efforts to

target improvements in the management

capacity of women can lead to

demonstrable results in terms of

enterprise development.

Concluding remarks

MSME development is increasingly

becoming a high priority for policymakers

in the Deauville Partnership transition

countries, given that the MSME sector

constitutes the backbone of the

economies and is the major source of

employment in these countries. Structural

deficiencies, both on the supply and

demand side, need to be resolved in order

to create both the quantity and quality

of jobs needed, and put the countries

on a pathway to an innovation-driven

knowledge economy. Learning from and

adapting good practices of institutions and

projects with a track record from within the

region, such as those profiled in this

publication, is of increased interest for

policymakers and affiliated agencies.

With transition countries making MSME

development a priority area since 2011,

a number of other new initiatives have

emerged, some supported by IFIs/ donors

and others by Deauville Partnership

governments and the private sector. These

include projects to address the equity gap

faced by promising new and growth-

oriented enterprises by increasing the

availability of early-stage venture capital

and angel investment; strengthen the

capacity of BDS providers; foster

entrepreneurship and business creation

among young people and women; promote

equality of economic opportunity in

disparate regions; and assist governments

in improving the business environment

for private sector growth.

At the present time, a great deal of

experimentation is taking place to determine

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xii

the most effective approaches to stimulating

and strengthening entrepreneurial capacity

in Deauville Partnership countries. Efforts

should be made to monitor these

developments in order to identify the good

practice models from which all Deauville

Partnership countries and partners can

benefit. To advance learning about what

works best, more focus in the future

should be placed on performing impact

evaluations and sharing the results broadly

among Deauville Partnership partners.

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1

The African Development Bank (AfDB),

on behalf of the international financial

institutions (IFIs) participating in the

Deauville Partnership, launched a two-

volume study to lay the ground for more

coordinated and strategic support for

the development of micro, small and

medium enterprises (MSMEs) in Deauville

Partnership countries, especially those with

a strong employment-creation potential.

The objectives of the study are to enhance

knowledge exchange and coordination

among Deauville Partners and to improve

MSME development support interventions.

The study also lays the foundation for

further joint operations and research,

including actions by the Deauville

Partnership countries themselves. As it

covers activities by governments and

bilateral donors, it will help to streamline

the different current and emerging

initiatives around MSMEs in the region, as

well as across the various Deauville

Partnership pillars.

The study has four components:

i. A review of the recent literature on the

job-creating impacts of MSMEs.

ii. An analysis of the MSME landscapes

in Morocco and Tunisia, which

particularly requested this analysis,

including identification of the major

constraints to MSME development.

About the Deauville Partnership: The Deauville Partnership with Arab Countries in

Transition is an international effort launched in 2011 by the G8 at the Leaders Meeting in

Deauville, France, to support countries in the Arab world engaged in transitions toward

“free, democratic and tolerant societies.” During the G8 Finance Ministers’ meeting in

Marseille, France, in September 2011, ten international financial institutions agreed to set

up a coordination platform to facilitate joint operations and maximize synergies among

institutions in the region. The objectives of the platform, known as the Deauville

Partnership platform, are: (i) information sharing and coordination of activities among IFIs;

(ii) proactive identification of joint projects, policy and analytical work; (iii) regular

development of knowledge products; and (iv) monitoring and reporting on joint operations

in the region. The six transition countries targeted by the Deauville Partnership are: Egypt,

Jordan, Libya, Morocco, Tunisia and Yemen.

1. Introduction

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iii. Mapping and analysis of current and

pipeline MSME support initiatives of

governments and IFIs/ donors in

Morocco and Tunisia to identify gaps in

addressing MSMEs’ constraints.

iv. Identification of good practices and

success stories in MSME support

instruments and programs (financial

and non-financial) in the region, and

profiling of a selection of these as

examples for replication or adaption in

other Deauville Partnership countries.

Results of the first three components are

published in Volume 1 of the study, Catalyzing

Job Creation and Growth through MSME

Development in Deauville Partnership

Countries: A Gap Analysis of Policy

and Program Support in Morocco and

Tunisia (AfDB, 2014a). This companion

volume, focusing on good practices in

entrepreneurship development and MSME

support, builds on the findings and

recommendations of Volume I, and aims to

provide concrete examples of policy

responses and how interventions by IFIs

and other donors could be implemented.

The objective is to share the “how-to”

of innovative and high-performing

entrepreneurship and MSME support

programs with a view to transferring

lessons learned to other Deauville

Partnership countries.

The sharing of good practices can

produce much value in helping countries

learn from each other’s effective approaches

in fostering start-ups and the growth of

MSMEs and alleviating constraints. Good

practices can be used to demonstrate

what works as well as supply knowledge

about how and why they work in different

situations and contexts. The exchange of

good practices can be a key instrument for

shaping policy and program actions, either

through the replication or adaptation of the

good practices or stimulation of policy

improvements in existing programs and

measures.

Hence, Volume II discusses nine good

practice initiatives from within the Middle

East and North Africa (MENA) region

geared to supporting entrepreneurship

and MSME development. This makes

the publication unusual because, more

traditionally, the region seeks traditionally

MENA countries have sought to emulate

good practices from outside the region.

There are a number of merits in selecting

good practices from within the region: (i)

there are few knowledge exchanges

between the countries, so awareness of

regional good practices is limited; (ii)

good practices from within the region

may be easier to adapt due

to the existence of contexts and histories

in MSME development support that

share similarities; (iii) good practices in

the region are not well documented,

but of increasing interest to MENA

countries; and (iv) it may be easier to

promote the role-modeling effect (i.e. if

Morocco can do it, then we, in another

MENA country, ought to be able to do it

as well).

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For the purposes of this study a good

practice is broadly defined as one that

is well-documented, able to provide

evidence of success/ impact, and has the

potential to be scaled-up or serve as a

model for adaptation and transfer. The

good practices profiled were selected

using the following general criteria:

• Is it a policy, project, instrument or

other measure introduced by public

authorities or non-governmental MSME

support organizations at the national,

regional or local level with the aim of

supporting entrepreneurship and

MSME development?

• Is it particularly targeted at MSMEs (to

include new business creation) and

taking the needs of new entrepreneurs

and/ or MSMEs into account?

• Has it delivered tangible results (e.g.

created jobs, fostered entrepreneurship,

stimulated the creation of new businesses,

improved access to financing, improved

the operating performance and capacity

of MSMEs)?

• Is it a model or approach with useful

lessons for other Deauville Partnership

countries and potential for replication

or transfer?

Against the backdrop of the most

critical areas to be addressed in MSME

development in the Deauville Partnership

countries, examples of good practice were

identified in two ways. First, the Deauville

Partnership Secretariat sent a request to

the Partner countries, asking: (i) what types

of good practices they would like to know

more about from the other Deauville

Partnership countries, i.e. priority areas

where knowledge about what works well

would be of benefit to them; and (ii) for

nominations of good practice initiatives

from within their own country, according

to the set of criteria, with their reasons

for considering this as a good practice.

Second, AfDB conducted study missions

in Egypt, Morocco and Tunisia to validate

the list of nominated good practices. This

involved meetings with stakeholders to

gather more information on each of the

organizations/ practices put forward for

nomination.

The profiles cover some of the critical

MSME support areas in the Deauville

Partnership countries: stimulating an

entrepreneurial culture by promoting

entrepreneurship in the education system;

support for the creation of new enterprises;

improving access to MSME financing; the

offer of business development support to

existing micro and small enterprises; and

fostering the development of women’s

entrepreneurship (Table 1). The profiled

good practices have been particularly

beneficial in a national context and could

be of interest to other Deauville Partnership

countries.

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Theme Good practices

Fostering entrepreneurship andbusiness creation

INJAZ, JordanFondation Création d’Entreprises (FCE), MoroccoSouk At-Tanmia, Tunisia

Access to financing forMSMEs

Egyptian Banking Institute (EBI), EgyptKafalat SAL (credit guarantee company), LebanonCaisse Centrale de Garantie (CCG), MoroccoTunisie Leasing, Tunisia

Business developmentsupport (BDS) servicesfor SMEs

El Mobadara Community Development and Small Enterprises Association, Egypt

Development ofwomen entrepreneurs/women-owned MSMEs

EntreElles en Régions, National Agency for the Promotion of SMEs (ANPME), Morocco

Table 1: Matrix of good practice case profiles

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2. Fostering Entrepreneurship and Business Creation

Stakeholders in all the Deauville

Partnership countries suggest that

the culture of entrepreneurship is weak.

Although governments have implemented

initiatives to bolster the role of micro, small

and medium enterprises (MSMEs) in

private sector development, none of

the countries has an approved national

policy in place for entrepreneurship and

MSME development to specifically guide

comprehensive, integrated actions in the

field.

As noted in Volume 1 of this study,

research carried out in a number of

countries reveals that start-ups and young

enterprises (less than five years old) are

responsible for the majority of gross and

net new jobs. Although failure rates among

new start-ups are higher than among

established MSMEs, the jobs created by

the new enterprises that survive more than

compensate for the total job loss resulting

from the downsizing and death of

enterprises of all sizes and ages. There is

also evidence that the survival rate of new

start-ups can be improved by offering skills

development, training, advisory and

coaching support to entrepreneurs during

the pre-start-up, start-up and post-start-

up stages. To grow the economy, new

start-ups are needed to replace exiting

firms of all ages and sizes, generate

economic renewal, and introduce

innovativeness in products and services to

enhance overall productivity.

Increasing the start-up rates in an

economy should therefore be a policy

priority of governments. This is even more

important in countries with a low density of

MSMEs, such as the case in Deauville

Partnership countries where, even though

MSMEs make up over 99% of all private

enterprises, the private sector is not

growing fast enough to absorb surplus

labor. This calls for interventions geared to

altering the trajectory of start-up rates,

which unattended are unlikely to change

substantially. Experience in other countries

indicates that effective actions include

promoting a stronger culture of

entrepreneurship and putting in place

specific support systems to inspire future

entrepreneurs and equip them with the

knowledge, skills, and competencies to

identify high-potential business ideas,

develop these into viable business models,

and mobilize the necessary resources to

launch them into the marketplace.

One of the key mechanisms for building a

stronger entrepreneurship culture is

integrating entrepreneurship in the

education system. This introduces a large

number of young people to the issue of

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entrepreneurship and plants the seed

of “creating your own job” and becoming

an employer rather than an employee

working for someone else. In the Deauville

Partnership countries, where youth

unemployment rates are exceedingly high

and there are limited opportunities for

new labor market entrants to secure paid

jobs in the formal sector of the economy

(especially graduates), increasing the

level of entrepreneurship-related knowledge

and skills should be a policy imperative.

In addition, it is critical to implement

support programs to build the level of

entrepreneurial capacity, and specifically to

assist young people in the business

creation process. This can be achieved by

offering entrepreneurship training programs

that are combined with coaching,

mentoring and other forms of technical

and financial assistance to assist the new

entrepreneurs through all parts of the start-

up process, including the post-creation

phase.

The good practice profiles in this section

focus on initiatives to integrate business

and entrepreneurship in the educational

system and to foster the business creation

process.

2.1 Strengthening the Culture ofEntrepreneurship through the EducationSystem

In the Deauville Partnership countries and

across the Middle East and North Africa

(MENA) region, a common challenge to

MSME development is the lack of

entrepreneurial and management capacity.

Considerable public resources are often

invested in programs to upgrade the

management quality and productive

capacity of MSMEs so they are able to

compete and survive in the globalization

era, such as training, counseling and

consultancy services. However, relatively

few businesses are reached by these

support mechanisms.

Over the past two decades, international

organizations and governments have come

to recognize that cultural aspects need to be

taken into account as one of the important

factors influencing the development of

entrepreneurship and enterprise creation.

The major policy question was about

how to create a more favorable societal

climate for entrepreneurship to unleash

the entrepreneurial potential of young

people. This led to an examination of the role

of the education system in developing

entrepreneurial mind-sets and key areas of

competence. Entrepreneurship education is

now widely considered as one of the

determinants of the level of entrepreneurship

in a country and an indicator of its

entrepreneurship performance (OECD,

2009b). By introducing entrepreneurship in

the educational curriculum, countries can

build their entrepreneurial capacity and

ability.

The goals of entrepreneurship education

policies are to promote an entrepreneurial

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mind-set from an early age, adopt

entrepreneurship as a key competency in

curriculum outcomes and expose students

to the principles and practices of

entrepreneurship and starting a business.

Education for entrepreneurship is expected

to enhance the supply of entrepreneurs

through three mechanisms (Levie and

Autio, 2008):

• A cultural effect on students’ attitudes

and behavioral dispositions (mind-set

aspects);

• Enhanced cognitive ability to recognize

and assess opportunities; and

• Provision of the required skills to start

and grow a business.

The World Economic Forum (WEF) argues

convincingly that entrepreneurship education

is essential for developing the human

capital necessary for the society of

the future, and that by making

entrepreneurship education available to

young people (and adults), countries are

preparing the next wave of entrepreneurs

“to enable them to shape our institutions,

businesses and local communities”

(WEF, 2009). In addition to evidence that

students who take entrepreneurship

courses are more likely to become future

entrepreneurs, the skills and knowledge

learned in these courses can provide

better preparation for all forms of work

(European Commission, 2012).

Governments in a number of developed

(and developing) countries have made

entrepreneurship education a priority of

their entrepreneurship policy efforts. These

include implementing national strategies

on entrepreneurship education to integrate

entrepreneurship into the curriculum at

all levels of the educational system

from kindergarten through to university.

However, there is limited evidence of

entrepreneurship education policies in

the Deauville Partnership countries. The

WEF (2011) has recommended that

entrepreneurship be brought into

classrooms throughout the Arab world

with the aim of teaching every student in

high school and university the principles of

entrepreneurship.

In the meantime, there are some bottom-

up and often donor-led initiatives to bring

entrepreneurship content into schools and

college classrooms in some of the Deauville

Partnership countries. The International

Labour Organization (ILO), for example, has

made inroads into the educational system in

Egypt and Jordan, to offer its Know About

Business curriculum. In addition, a few

universities are now offering credit courses

in entrepreneurship and encouraging

students to start their own businesses.

The most comprehensive attempt to bring

economic, financial literacy, business,

and entrepreneurship education into

classrooms across Deauville Partnership

countries is the INJAZ program. INJAZ is

the Arab affiliate of Junior Achievement, a

US-based non-profit entity started in 1919

with a mission to foster work readiness,

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entrepreneurship and financial literacy skills

to students from kindergarten to the final

year of high school, through the volunteer-

delivery of experiential learning programs

to inspire students to dream big and reach

their potential. Currently, INJAZ programs

have been launched in Jordan (1999),

Egypt (2003), Morocco (2007), Tunisia

(2010) and Yemen (2011). These programs

provide education and training to Arab

youth in work readiness, financial literacy

and entrepreneurship, working closely with

ministries of education and the corporate

community. A national board of directors

leads each INJAZ country operation, with

the INJAZ Al-Arab regional board

responsible for directing overall strategy

and organizational governance.

INJAZ Jordan was nominated and

selected as a good practice for this

study because, first of all, it is the oldest

and most established INJAZ operation in

the Deauville Partnership countries;

second, it has made impressive efforts in

expanding the reach of its programs to

students and vulnerable youth in all

regions of the country, engaging corporate

sponsors and volunteers, and partnering

with the Ministry of Education, as well as

the Ministry of Planning and International

Cooperation; and finally, because it is

recognized as a leading youth economic

education organization in Jordan and

across the Arab world.

INJAZ, Jordan

Overview: INJAZ is a non-profit organization

with the mission to “inspire and prepare

young Jordanians to become productive

members of society and accelerate the

development of the national economy”2.

It aims to unite Jordanians and key

stakeholders around “the common goals

of creating jobs, building a stable economy,

and providing a higher standard of living”.

INJAZ delivers a range of experiential

learning programs through three main

program units that develop students’ soft

skills, professional ambitions, and passion

for achievement: (i) the Skills Building

Program, targeting students in grades

7-11 in public and military schools, and in

schools run by the United Nations Relief

and Works Agency for Palestine Refugees

in the Near East (UNRWA); (ii) the Work

Readiness Program, reaching out to youth

in vocational training centers and youth

centers; and (iii) the Entrepreneurship and

Employment Program, for university and

college students. INJAZ works in full

cooperation with the Ministry of Education,

the Ministry of Higher Education, and the

King Abdullah II Fund for Development

(KAFD).

2 INJAZ website at: http://www.injaz.org.jo/

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A. Background and institutional history

INJAZ was introduced in Jordan in 1999

as a Save the Children project funded by

the United States Agency for International

Development (USAID). In 2001, it was

re-launched as an independent, non-profit

Jordanian organization under the patronage

of Her Majesty Queen Rania Al Abdullah.

Through cooperation with its partners in

government, the private sector, civil

society, and the formal educational

system, INJAZ seeks to empower youth

with the skills and knowledge needed to

successfully transition from the education

system to the workplace, both as

professionals and entrepreneurs.

One of INJAZ’s most important

achievements was to secure the decision

Quick facts

Start date 1999

Number of employees 63

Number of volunteersIn total, 22,000 qualified volunteers have been recruited to deliver programs;3,636 volunteers were involved in the programs during the 2012/13 academicyear

Beneficiaries

School students at public, military, and UNRWA schools, and in centers foryouth with disabilitiesStudents at public and private universities and collegesYouth at vocational training centers and youth centers

Total number of students reachedthrough INJAZ programs sinceinception

900,000

Number of schools and universities offering INJAZ programs (2012/13)

More than 200 schools; 36 universities and community colleges

Number of students/ youth participating in INJAZ programs(2012/13)

127,452 students in schools, universities and colleges; 6,103 youth in youthcenters

Number of strategic partnerships (2012/13)

More than 300 with the private and public sector

Number of universities and community colleges participatingin entrepreneurship-related programs (2012/13)

36

Number of university and community college students participating in entrepreneurship-related programs

8,221

Number of students in Entrepreneurial Master Class/ My Entrepreneurial Project (2012/13)

12,165 in 120 public schools; 2,501 in 26 youth centers (total 14,766)

Number of students participatingin the Business EntrepreneurshipCompany Program (2012/13)

309 school students running 10 ventures (Company Program)1,815 university and college students running 77 ventures (Company Start-upProgram)1,574 students with 66 ventures (“We Are Social Leaders” Program)

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of the Ministry of Education in 2003 to

mainstream INJAZ programs in the public

school system. Prior to this, INJAZ had to

offer its programs to students as an

extracurricular activity. With the Ministry’s

approval, INJAZ was allowed to deliver one

class a week in schools, now more than

200 schools, to students in grades 7-12.

INJAZ programs focus mostly on skills

development (work readiness, financial

literacy, soft skills, leadership, and

entrepreneurship), and include several

business and social entrepreneurship-

related programs and projects, such as the

Social Leaders Program, the Entrepreneurial

Master Class, and the Company Start-up

Program (where students start and run

a company for an academic year). The

Ministry has requested INJAZ to expand

into more schools and to train teachers on

the use of participative teaching-learning

approaches. Since 2006, INJAZ has been

a member of the Curricula and Training

Unit within the Ministry’s Committee for

Curricula Development.

Also critical in the development of INJAZ is

its partnership with the KAFD, which dates

back to 2004. Through this partnership

the two organizations have coordinated

their efforts to help youth at Jordanian

universities and colleges develop their life

skills and prepare to enter the job market.

Its partnership with the KAFD has also

greatly facilitated INJAZ’s access to

students in 36 universities and community

colleges across Jordan.

Through its various growth phases, INJAZ

has adjusted its organizational structure,

added new courses and programs, and

expanded it services to include job and

career fairs, social and business

entrepreneurship competitions, start-up

support, and opportunities for students to

dialogue with and learn from social and

business leaders in the community. For

example, in the 2005/06 academic year, it

introduced job shadowing and work

placements for students. In 2006/07, it

reviewed its curriculum, overhauled key

components, introduced new courses, and

entered Jordanian colleges for the first time,

primarily through the Company Start-up

Program. It began with four colleges, where

INJAZ programs provided the first

opportunities for these students to benefit

from economic/ entrepreneurial education

of any kind. In May 2006, it introduced the

School Adoption Program that became an

important part of its sustainability strategy.

With this approach, corporate sponsors

could align their financial contribution to

specific schools in specific regions, which

strengthened their commitment to their

local communities and to INJAZ’s programs.

During the 2009/10 year, INJAZ realized that

it needed to restructure its organization to

achieve its growth and expansion targets.

This involved hiring additional staff,

outsourcing human resources to improve

management of human resource affairs, and

expanding into a new office. INJAZ also

developed a Quality Management Plan,

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to monitor, evaluate, and improve its

operations, programs, and impact more

systematically. Key performance indicators

were also defined for INJAZ’s operations,

programs, and activities to foster

improvements in staff productivity, work

quality, teamwork, and problem solving.

INJAZ has received certification from the

International Organization for Standardization

(ISO). Its approach to ISO certification and

the regular external and internal audits of its

organization and operations provide a

systematic mechanism for assessing the

strengths and weaknesses of its governance,

management, and systems, and for working

towards continuous improvement.

Objectives: INJAZ defines its objectives in

the form of intermediate outcomes:

• Secondary school students (ages 11-

18) have developed their financial,

ethical leadership and business skills to

become more competent and aware of

their career choices.

• Students in vocational training centers

have enhanced their work-readiness

skills and career-planning abilities, and

have better access to employment

opportunities.

• University and college students

have access to better job opportunities,

including self-employment, by developing

their business entrepreneurship, social

leadership and employment skills.

• Jordanian society is more appreciative

and enthusiastic about volunteerism,

rooting it deeply in traditional beliefs

and community practices.

• The Jordanian private sector is

increasingly engaged in youth

development, realizes the value of

investing in youth, and is more socially

responsible.

• INJAZ’s impact and outreach is scaled

up to address national needs through

partnership with the government,

making it a key player in youth

advancement and volunteerism.

• INJAZ’s sustainability and growth is

attained by enhancing the quality of

its operations, institutional capacity,

governance, financial position, and

brand equity.

Beneficiaries: INJAZ programs are

implemented for students in secondary

schools, colleges/ universities and

vocational training centers. In recent years,

INJAZ has also focused on more inclusive

outreach, adapting many programs for

implementation in various social institutions

and youth centers (including centers for

orphans and for youth with disabilities),

and targeting youth who have exited the

education system early or otherwise find

themselves at the cusp of adulthood and

entry into the job market. While many

programs are designed for a particular

age set, some programs such as Job

Placement under the Work Readiness

Main Program have a broader beneficiary

pool and target all unemployed persons

between 16 and 30, regardless of their

educational background.

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B. Organizational model

INJAZ management is led by its Chief

Executive Officer and its Board of Trustees.

The organization is structured in eight

major units including three program

implementation units – Skills Building

Program, Work Readiness Program, the

Entrepreneurship and Employment Program

– and three support units Communications

and Partnership Unit, Business Development

Unit (responsible for the quality management

system, monitoring, evaluation and impact

assessment, and developing the growth

and sustainability plan), and Finance and

Administration Unit.

The Board of Trustees consists of 48

members who represent leading local and

international organizations and private

companies. Its functions are to provide

insight into the local business and political

environment, guide the design of INJAZ

programs, and establish the direction of

future growth. Having such a large Board

of Trustees is an effective strategy both for

engaging the corporate community in the

vision of INJAZ and its activities, and for

garnering sponsorship for its various

programs and initiatives. The 11-member

Board of Directors is elected from among

members of the Board of Trustees and

works closely with management to achieve

INJAZ’s mission and goals.

INJAZ prepares an annual action plan,

assigning responsibilities and setting

strategies and targets for each

implementation and support unit, as well

as targets for the delivery of each INJAZ

program (including the number of

educational institutions to be served, the

number of students to be reached with

each course/ program, and the number of

volunteers to be recruited). At the end of

each program year, INJAZ prepares an

annual report measuring its actual

achievements against these planned targets.

Staffing: INJAZ has 63 employees,

located in eight offices and working in 12

governorates across Jordan. The team

ensures proper implementation of the

programs and prepares INJAZ volunteers

to reach out to INJAZ students. Supervision

and direction of the staff is provided by the

Chief Executive Officer under the guidance

and support of the Board of Directors.

Responsibilities include recruiting and

training volunteers to teach the INJAZ

programs; organizing extracurricular

events and activities to inspire and

motivate students to strive for success

(e.g. job fairs, seminars, exchanges);

recruiting business leaders to mentor

students in INJAZ’s entrepreneurial, career

development, and inspirational programs;

attracting corporate sponsors; liaising

with the Ministry of Education, the KAFD,

universities/ colleges and schools; and

developing all necessary partnerships to

realize expansion of the programs to more

schools and students.

INJAZ is committed to building the

knowledge and skills of its staff by supporting

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their participation in training and capacity-

building workshops (e.g. time management,

presentation skills, mentoring, quality

management systems, client service),

internal review and assessment workshops,

and visits to similar programs outside

Jordan in order to learn from their

experiences. It has also developed

personnel manuals and implemented a

performance evaluation system.

C. Operational model

Products and services: INJAZ has

adopted a number of successful programs

from several international organizations.

It examines the list of offerings and

determines which particular courses to

introduce in Jordan. Course materials are

then translated into Arabic and adapted

to the Jordanian context. Many INJAZ

programs have also been developed by

the INJAZ Program Development team

to ensure that they serve the needs of a

wide range of youth of different ages,

educational backgrounds, and abilities.

INJAZ Jordan programs (see Table 2) are

clustered in three streams: Skills Building,

Work Readiness and Entrepreneurship and

Employment.

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Main Program Unit Tracks Programs Target Group

Skills Building Program

Schools andspecial education centers

Financial and socialeducation

More Than MoneyMy Well Being

Grade 7

Economics for Success Social ResponsibilityArtlink

Grade 8

My Money Business Leadership Course

Grade 9

Exploring Economics Creative Problem SolvingDebate

Grade 10

My Financial Career OptionsYoung Volunteers Day

Grade 7-11

Business and entrepreneurship

It’s My Business Grade 7

Be Entrepreneurial Grade 8Enterprise Business Challenge and Competition

Grade 9

Presentation Skills and CompetitionCompany Program and Trade Fair/Competition

Grade 10

Entrepreneurial Master ClassMy Entrepreneurial Project

Grade 11

TEAM Program and Competition Youth with disabilities

Career guidance

Personal Life Planning Grade 7

My Career Options Grade 8

Career Month Grade 9

Job ShadowBusiness Leaders Campaign

Grades 10–11Grades 10–11

INJAZ teacher awards

Work Readiness

Vocational trainingcenters and youthcenters

Soft skills

Professionalism at Work

Youth ages 15–25 in vocational training centers and youth centers

Business Ethics

Work Skills

Career development

Ask the Expert

Job for a Day

Career Wellness

Job placementJob Matching

Internship Program

Entrepreneurshipand Employment

Universities andcolleges

Business andentrepreneurship

Company Start-Up Program and TradeFair/ Competition

Youth ages 18–25 in universities and colleges

Enterprise Development Program

Socialentrepreneurship

We Are Social Leaders and Competition

Social Leaders Program and Competition

Employment

My Path to Employment

Communication Skills

Ethical Business

7iwar Al Ajyal

Link2Job

Source: INJAZ officials

Table 2: INJAZ Jordan programs by topic and age group or level of education

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Every university in every governorate offers

INJAZ courses and the majority offers the

Company Start-up Program. However,

only the German Jordanian University has

institutionalized the INJAZ courses for

credit. In 2013, Mu’tah University piloted a

model that embeds INJAZ soft skills

workshops/ courses within accredited

university courses. Mu’tah University is

now considering accrediting INJAZ soft

skills courses in the coming years.

In 2012/13, INJAZ established a new

Enterprise Development Program to

support the successful development of

enterprises arising from the Company

Start-up Program and INJAZ’s other social

and business entrepreneurship programs,

through an array of business support

services and resources coordinated by the

Business Development Unit. This takes

INJAZ into a new role beyond awareness-

raising and skills training.

Based on surveys of the evolving needs

and requirements of beneficiaries and

stakeholders, INJAZ is constantly reviewing

its menu of programs, adding new options,

and adapting approaches. For example, in

2011/12, it launched the Enterprise

Business Challenge Program, which aims

to inspire young people from deprived

communities to realize their talents and

potential. The program uses innovative

computer simulation training that allows

students to create and manage their own

virtual companies and perform virtual

financial transactions and trading. The

eight-school pilot in 2011/12 is being

expanded to 40 classes across Jordan.

Another program introduced in 2011/12 is

the Intel Youth Enterprise Challenge, which

helps students gain knowledge in

identifying key social issues and how they

could be addressed by innovative solutions

using technology.

Approach: Courses are taught by qualified

volunteers, so one of the major INJAZ

activities is recruiting and training the

volunteers who deliver all the courses in

schools and participate in some of the

extracurricular programs. The volunteers

spend one hour a week in school,

university or college classrooms to teach

the courses, assisted by the normal

classroom teachers. Training sessions

are held on an annual basis to prepare

as many as 750 new volunteers. The

performance of volunteers in the classroom

also has to be monitored, as well as efforts

made to retain them on an ongoing basis.

In 2006/07, only 40% of volunteers came

from the corporate sponsors; by 2011/12,

this had increased to 80%, reflecting

growth in the number of corporate

sponsors and their greater engagement in

the program.

INJAZ staff also provide training and

orientation to regular classroom teachers

who assist or aid the volunteers.

INJAZ organizes a number of annual

competitions for students participating in

programs that result in projects. In these

competitions, student teams compete with

each other for various awards associated

with project performance and outcomes.

These competitions can be motivating for

the students and contribute to developing

their confidence and presentation skills, as

well as exposing them to networks and

contacts that can be of value to them in

the future.

In promoting its programs, INJAZ makes

extensive use of social media (Facebook,

Twitter) to ensure that all its campaigns,

activities, programs, events and success

stories are broadly covered.

D. Financial model

INJAZ’s annual income comes from its

patrons (Board of Trustee members), the

government, corporate sponsors and

donor organizations. Its ability to offer (and

expand) programs depends on the amount

of funding it is able to raise, and so

financial sustainability is a major concern.

INJAZ has been innovative in its approach

to attracting funds. For example, increasing

the number of members on the Board of

Trustees is part of the sustainability plan.

Each member not only brings expertise

into the organization, but also pays an

annual fee of US$10,000 to the INJAZ

endowment fund, which builds the capital

of the organization. Aggressive recruiting is

done to sign on more corporate sponsors.

INJAZ develops a fundraising menu which

is presented to the public and private

sectors to help them in identifying various

funding opportunities. Thus sponsorship

can be tied to specific programs, to specific

governorates, or to specific schools.

In 2007, Credit Suisse support enabled

INJAZ to deliver the My Money Business

course to Grade 9 students; in 2009/10,

HSBC Bank granted INJAZ the funds to

adapt the More than Money curriculum for

delivery to about 1,000 students in 28

classes at ten schools; and the 2011/12

Enterprise Business Challenge Program

was funded by the British Embassy in

Amman. The School Adoption approach,

introduced in 2006 and supported with a

national media campaign (newspaper ads,

billboards), has been successful in attracting

corporate sponsors. In its first year, 37

schools were adopted, rising to more than

200 in 2013. In addition, the KAFD sponsors

INJAZ programs in over 36 universities and

community colleges throughout Jordan.

Donors are also involved in financially

supporting INJAZ. Save the Children and

USAID are two of the long-standing

supporters. USAID has provided a series

of five-year grants, the most recent one of

US$10 million to cover the 2009–2014

period.

E. Results and impact

Since its inception, INJAZ Jordan has

reached 900,000 beneficiaries across the

country and recruited a total of more than

22,000 qualified volunteers to deliver

its various courses and programs3. It is

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growing rapidly with significant annual

increases in the number of students

and youth participating in its courses

and programs (Table 3). Since 2005,

corporations have adopted a total of 220

schools. By 2013/14, the Board of

Trustees had grown to 48 members, up

from 26 in 2006, and INJAZ had built

partnerships with more than 300 private

and private sector organizations.

In 2012/13, INJAZ reached 127,452

students from schools, universities,

colleges, and social institutions.

Table 3: Growth of INJAZ from 2006/07 to 2012/13

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Total number of students participating

57,921 81,796 110,227 75,689 112,529 128,811 127,452

Students–schools

42,335(courses

only) (63% girls)

57,749(68% girls)

67,936(courses

only)

66,940(courses

only)

77,952(courses

only)

88,414(courses

only)81,985

Students–universitiesand colleges

6,196 8,1229,559

(coursesonly)

8,749(courses

only)

9,704(courses

only)12,316 12,619

Youth in youth centers/ social institutions

- - - - 522 3,863 6,103

Number of schools participating

161 158 178 199 Over 200

Number of universitiesparticipating

18 18 17 20 21 24 23

Number of colleges participating

4 8 10 12 13 12 13

Number of youth centers/ social institutionsparticipating

- - - - 1566 (including26 new youth

centers)47

Total number of volunteers

1,497 1,445 1,600 2,444 3,358 3,585 3,636

Number of new volunteers trained

710 541 675 586 761 752 998

Number of schoolsadopted

3751 newschools

35 newschools

58 newschools

31 newschools

20 newschools

5 newschools

(total of 220)

Number of companies inSchool Adoption Program

1416 new

companies17 new

companies15 new

companies10 new

companies7 new

companies2 new

companies

Source: INJAZ Annual Reports for various years

3 “Key Highlights and Achievements 2012–2013”, supplied by the CEO of INJAZ.

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Of particular interest is the reach of the

entrepreneurial courses. In 2012/13,

12,265 secondary school students (in

120 public schools), 8,221 higher

education students, and 2,501 students

in youth centers took entrepreneurship-

related courses. Some 309 secondary

school students ran ten ventures as part

of the Company Program and 1,815

university and college students ran 77

ventures. In addition, 1,574 students in

the We Are Social Leaders Program ran

66 ventures. This is an impressive

number of students learning practical

knowledge and skills in the area of

entrepreneurship.

Regular surveys of students, teachers, and

volunteers indicate that INJAZ is effective

in meeting its objectives. In general, each

year it has exceeded its targets and

objectives, both for reaching students and

youth, and for retaining and recruiting

qualified volunteers. Overall, of the

approximately 50,000 students graduating

from Jordan’s universities each year, only

50% are reported to find jobs, whereas

87% of INJAZ graduates find jobs

within the first year. This indicates that

INJAZ programs considerably improve

employability skills.

INJAZ has consulted with impact evaluation

experts to build on their knowledge in

undertaking evaluation activities and is being

assisted with developing impact evaluation

plans. One important measure of INJAZ’s

long-term impact is the number of Company

Start-up Program graduates who go on to

start a business on a full-time basis. Such

an evaluation requires a longitudinal study,

since there may be a time lag between

finishing the Company Start-up Program

and actually becoming an entrepreneur.

INJAZ has conducted an impact

assessment study of the Program by

comparing treatment and control groups

(INJAZ, 2012: 38). This study revealed that

Company Start-up Program graduates

scored much higher on the following

variables than control group students:

• Knowledge of economic and

administrative aspects and of the ways

that entrepreneurs secure capital for

their projects (26 percentage points

higher than control group students);

• Confidence in their knowledge of

functional and practical aspects of

companies and how to start a

business (44 percentage points higher);

• Ability to solve problems, creative

thinking, and ability to successfully

create and manage their own business

(16 percentage points higher);

• Preference for owning their own

business rather than being employed

(10 percentage points higher);

• Trust in the support provided to youth

by the public and private sectors (25

percentage points higher).

INJAZ has also implemented systems to

improve its operational efficiency. It follows

a quality management system and routinely

subjects itself to internal and external

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audits to measure its compliance

performance. Staff receive regular training

and assistance in developing a strong

action plan with SMART (Specific,

Measurable, Achievable, Relevant,

Timebound) targets and measurable

performance indicators. The implementation

of the quality management system has

contributed significantly to improving the

efficiency of the organization.

Additionally, INJAZ has implemented an IT-

based platform to streamline and automate

its operational transactions. This includes

contact management, questionnaires

and surveys, report templates, donation

management, automation of marketing

management, web-based self-service

access functions for volunteers and

donors, plus other capabilities to improve

performance in managing records and

daily work output.

F. Success factors

A focus on strategic public-private sector

partnerships. Successful lobbying and

awareness raising to gain the cooperation

and support of the government, particularly

the Ministry of Education, was essential

because Ministry approval is needed to

introduce courses in school classrooms. In

addition, the partnership with the KAFD

offices across Jordanian public university

campuses has facilitated and deepened

INJAZ’s work in Jordanian universities and

colleges. Growing partnerships with the

Vocational Training Center and the Higher

Council for Youth since 2006/07 have

enabled INJAZ to reach students in non-

academic streams and to develop new

products to meet their needs, such as

trades-based career booklets.

Partnerships with the corporate sector.

INJAZ invests time and resources to

nurture these relationships. It holds events

to recognize the top sponsors in

supporting programs and activities. It also

holds events to show appreciation for the

volunteer teachers, trainers, and mentors,

and to present awards in a number of

categories. The launch of the Proud to be

an INJAZ Volunteer campaign in 2008/09

was geared to attracting new volunteers

and retaining existing ones by promoting

itself as the volunteer opportunity of choice

in Jordan. The message of volunteering

also plays a major role in promoting the

corporate social responsibility culture in

the country.

A good relationship with volunteers.

INJAZ has the largest volunteer network

in Jordan and the Arab region. It regularly

updates its volunteer database, offers

orientation and training, regular outreach

and support, and annual recognition and

appreciation events and activities.

Promotional activities. INJAZ has developed

strong relations with the media to improve

coverage of the INJAZ story and improve

its visibility and branding. It has developed

several agreements with newspapers,

radio stations and TV networks to profile

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success stories and cover its activities.

National marketing campaigns increase its

ability to attract individual and corporate

partners and volunteer trainers and

mentors. This media relationship is also

used to aggressively promote and profile

corporate and School Adoption Program

sponsors.

ISO certification. The certification process

enables INJAZ to continuously improve its

governance, management and systems,

and also enhances the credibility of INJAZ

with the business community and the

Ministry of Education. ISO procedures for

monitoring and evaluation are regularly

updated. INJAZ conducts surveys in

schools to measure the impact of courses,

and uses staff visits to schools to monitor

volunteer attendance, strengthen the

relationship with teachers and school

administrations, collect student feedback,

and observe volunteer sessions and report

on progress.

G. Lessons learned

INJAZ has had to overcome a number of

challenges from which it has learned

valuable lessons:

Recruiting and retaining volunteers to

cover its programs. Over time, INJAZ has

focused on recruiting volunteers from

within corporations rather than through

mass recruitment campaigns, which it

used initially. About 80% of INJAZ

volunteers now come from the corporate

sponsoring organizations, which commit in

formal partnership agreements to

providing volunteers from among their

employees. However, there is considerable

turnover, and as programs grow, so too

does the need for volunteers.

The challenge is therefore to develop a

pipeline of new qualified volunteers and

retain a higher percentage of existing

volunteers. INJAZ has implemented an ISO

system to enhance the retention rates of

volunteers. This is based on providing a

strong orientation and training program for

new volunteers, providing regular outreach

and support for their activities, and

recognizing their contributions through an

annual volunteers’ appreciation event.

Maintaining the high quality of operations

and programs to keep pace with fast

growth. To respond to growing demand

and opportunities, INJAZ increases its

targets annually. The difficult balance to

achieve is to have rapid growth while still

maintaining high quality. Addressing this

challenge was one of the reasons INJAZ

introduced and implemented its quality

management system.

Competition from other NGOs for

sponsorship. Over time, there is more

competition from other Jordanian

organizations for sponsorship support.

This means more organizations approaching

a limited number of private companies. In

response, INJAZ has needed to intensify

its promotional activity to maintain its

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branding and image in the marketplace,

and to pay attention to publicly recognizing

and acknowledging its sponsors and

partners.

Gender imbalance among INJAZ

participants. The growth in INJAZ

participation has been higher in girls’

schools than in boys’ schools. In 2006/07,

almost two-thirds of participants were girls.

By 2008/09, the percentage of boys’

schools participating had dropped to 30%.

One way INJAZ addressed the gender

imbalance was to stop expansion in girls’

schools and direct its efforts to boys’

schools. In addition, by introducing INJAZ

programs in youth centers and orphanages,

the program increased the likelihood of

reaching more male beneficiaries.

Mainstreaming INJAZ at universities

and colleges. One of INJAZ’s challenges

is to strengthen its presence and outreach

to higher education students. Accrediting

INJAZ courses offered on campuses

would significantly increase registration in

the courses, but as yet only one university

does this. More efforts are being made to

build and strengthen partnerships with

universities and colleges.

Sustainability. INJAZ’s goal is to build its

endowment fund to the point where it

could sustain its operations independently

of external donors, but the amount

required is substantial. Fundraising,

Trustees’ annual contributions, the School

Adoption Program, and introducing new

fundable courses and other sponsored

programs are the vehicles for increasing

revenue to cover expenses and build up

the endowment. One of the challenges is

the constant pressure to sign on new

corporate sponsors in order to expand the

program and ensure sustainability.

Overcrowded mainstream media.

Marketing and public relations are important

to INJAZ. It needs to continuously promote

its brand and message in the public

domain. In the past, it has made effective

use of media tools, such as press releases,

media lunches, and mass media

campaigns, but over time, the media has

become overcrowded and it has become

more difficult to attract attention. One

response to this challenge has been to

divert more promotional activity to social

media channels.

Overall lessons learned

• Infusing entrepreneurship across

educational systems is the most efficient

way to develop a pipeline of future

entrepreneurs with the basic knowledge

and capacity to grow the private

sector.

• Credible organizations such as INJAZ,

with proven curriculum modules, are

important bottom-up initiatives to

expose students in schools, colleges,

and universities to an entrepreneurial

mind-set and entrepreneurship

concepts, principles, processes, and

the necessary aptitudes and skills.

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• Developing partnerships with ministries

of education and higher education is

critical to integrating entrepreneurship-

related curricula in schools and

classrooms. Evidence indicates that

they are willing to open the doors to

organizations with bona fide academic

courses and approaches. This is the

first step in eventually incorporating

entrepreneurship as a core curriculum

component and including

entrepreneurship modules and courses

across the educational system and at

different grade levels.

• Introducing entrepreneurship education

involves a large number actors,

including teachers; school, college

and university administrators; and

the private sector. Collectively, they

constitute important players in building

an entrepreneurship ecosystem.

• Promotional activity is important for

creating awareness of entrepreneurship

and building demand for the take-up of

entrepreneurship courses, programs,

and curricula offerings.

• Entrepreneurship education programs

should include experiential components

to give students the opportunity to

learn by doing.

• To meet the needs of an increasing

number of aspiring young entrepreneurs,

governments and support agencies

will have to help these young people

access the non-financial and financial

resources they need to launch and

grow their businesses.

2.2 Supporting Business Creation

Not enough attention is paid in Deauville

Partnership countries to supporting the

business creation process through

coaching and advisory services. Besides a

lack of knowledge, skills, and networks,

young entrepreneurs also face serious

difficulties in accessing bank financing. The

concept of business angels is not well

developed in the region, hence seed

capital for start-ups is hard to find. The two

good practice profiles presented in this

section are examples of models seeking to

address these challenges.

The Fondation Création d’Entreprises

(FCE) in Morocco was selected because

of its established presence as a credible

entrepreneurship support organization

targeting youth, its confirmed expertise,

its reach through a network of regional

offices, and its innovative approaches and

documented results.

The Souk At-Tanmia Entrepreneurship

Initiative in Tunisia was selected because

of its innovative partnership approach to

mobilizing the resources, expertise, and

networks of a large number of donor

organizations and local actors across

Tunisia; animating entrepreneurial energy

in underdeveloped regions; and supporting

innovative start-ups that would create jobs

and contribute to economic prosperity.

Although in a pilot phase, and thus strictly

an emerging good practice, the mid-term

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evaluation of the project’s performance to

date indicates a positive impact on job

creation and the entrepreneurial ecosystem,

and has identified a number of lessons

learned that may hold value for other

Deauville Partnership partners and

countries.

Fondation Création d’Entreprises,Morocco

Overview: The FCE, part of Morocco’s

Groupe Banque Populaire, has the

principal mission of promoting an

entrepreneurial culture and supporting

enterprise creation throughout the country4.

It helps young Moroccans develop their

entrepreneurial spirit and capacity, and

provides advice, counseling, coaching,

mentoring, and training to support the

creation of new enterprises. Its mission

is a reflection of the commitment of the

Groupe Banque Populaire to foster the

development of micro, small and medium

enterprises (MSMEs) and promote the

survival of new businesses. The FCE

operates through branch offices in 15

regions of the country. Its goal is to be a

center of excellence for entrepreneurship

and a model for others to follow.

Quick facts

Year started Incorporated as a non-profit charity in 2001

Number of employees and offices

27 employees; 15 regional offices

Beneficiaries Potential young entrepreneurs 20–45 years of age; Moroccans living abroad

Number of business start-ups supported(from 01/01/2005 to 13/10/2013)

1,717

Number of jobs created 8,535 (average of five per enterprise)

Total project investment stimulated

MAD 1.1 billion; average of MAD 630,000 per enterprise

Total amount of credit obtainedby the start-ups

MAD 490 million

4 http://www.fondationinvest.ma/

Note: MAD = Moroccan dirham

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A. Background and institutional history

The FCE was created by the Groupe

Banque Populaire in 1991 and registered as

a non-profit charity in 2001. Its first activities

were in partnership with the National

Council on Youth and the Future, whose

mission was to promote an entrepreneurial

spirit among young Moroccans and provide

assistance and support to unemployed

university or technical school graduates to

help them create their own jobs by starting

a business. The main objective at the time

was to put into place a national system of

support to deal with unemployed youth.

Prior to 2000, the FCE was one of the

few institutions in Morocco supporting

entrepreneurship development.

Subsequent political changes (entry of

Morocco into the World Trade Organization,

signing of several free trade agreements,

strategic focus on legislative and regulatory

reform to liberalize the economy, publication

of the 2002 Charter for Small and Medium

Enterprises) resulted in the emergence

of new organizations in the field of

entrepreneurship. The National Agency for

the Promotion of Small and Medium

Enterprises (ANPME) was created; regional

investment centers (CRIs) were launched

to act as one-stop shops for investors and

to assist new business creation; and

entrepreneur associations began to spring

up, such as the Association of Women

Entrepreneurs of Morocco (AFEM) and the

Center for Young Business Leaders (CJD).

As a result of this evolving infrastructure

and support for MSME development, in

2004, the FCE’s Board of Directors

commissioned an operational diagnosis for

a strategic reorientation of the activities of

the Foundation.

Based on the new business plan approved

by the Board in 2005, the FCE extended

the scope of its operations by signing

partnership agreements with the Banques

Populaires Régionales to establish a

network of regional offices that would be

in closer proximity to potential clients. It

also signed agreements with the CRIs to

establish regional committees for business

creation (CRPCEs) in the 15 new branch

office locations. The CRPCEs bring

together key regional partners representing

the Banques Populaires Régionales, the

Chambers of Commerce and Industry,

universities, regional directorates of the

Office of Vocational Training and

Employment Promotion (OFPPT), the

National Agency for the Promotion of

Employment and Skills (ANAPEC), and

national and regional NGOs involved in the

promotion of entrepreneurship, such as

AFEM and the CJD, with a view to creating

synergies in promoting entrepreneurship

at the regional level. The main tasks of

the regional committees are to promote

entrepreneurship, explore viable business

projects, and support the creation of

sustainable enterprises.

Objectives: The objective of the FCE is to

foster business creation among young

entrepreneurs and improve the survival

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rates of new enterprises by providing

support that is critical to developing

appropriate skills, preparing business

plans, accessing financing, and establishing

a sustainable venture.

Beneficiaries: The primary target of the

FCE is Moroccans aged 20 to 45 years,

with a university degree or a vocational

training diploma, who have an idea for

a new business, are ready to start a

business, or have a newly formed

enterprise in need of advice, counseling,

and mentoring. A secondary target is

Moroccans living abroad who can be

encouraged to facilitate new business

activity in Morocco, either by setting up a

branch office, starting a new business, or

investing in a partnered start-up. However,

the FCE offices are open to any Moroccan

who needs help in starting a business (e.g.

training, advice, counseling).

B. Organizational model

The FCE is a foundation of the Groupe

Banque Populaire. It is governed by its

Board of Directors, which provides

strategic direction and policy guidance,

and reviews and approves annual

workplans. The head office is located in

Casablanca; a network of 15 regional

offices, established in partnership with the

Banques Populaires Régionales, are

located throughout Morocco. Through the

formation of the CRPCEs, the FCE has

built a network of institutional members in

each of its regions to ensure that each of

its projects can benefit from support from

the definition of the project, through the

start-up launch, and up to two years post-

creation.

Staffing: In mid-2013, the FCE had 27

employees, one in each of the 15 regional

offices and the remainder performing

leadership, administrative, development,

and communications roles in the head

office. Seventeen of the employees (12%

women) are directly involved in providing

information and support services to the

young entrepreneurs.

C. Operational model

Products and services: Products and

services: The package of entrepreneurship

development services provided by the FCE

includes information, entrepreneurship

training, and counseling/ advice. Basically,

it supports young people in exploring

opportunities for a new enterprise,

developing their business ideas, formulating

business plans, securing financing, dealing

with business registration formalities,

starting the business, and gaining

entrepreneurial and management skills to

improve their business’s chances of survival

and success. These services are accessible

from the FCE regional offices to any young

entrepreneur with a business idea who

needs information and advice. In addition,

the FCE has two flagship programs: an

annual call for innovative project proposals

from young Moroccans living inside

the country, and the Marocains du

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Monde program targeting the Moroccan

diaspora.

The annual call for innovative project

proposals from potential young entrepreneurs

has been ongoing since 2006. Its objective

is to select up to 30 projects in each of

the 15 regions, depending on the number

and quality of submissions. The selected

projects benefit from the expertise of the

FCE and members of the CRPCE through

a program of pre-start-up, start-up, and

post-start-up services.

In the first phase, which lasts six months,

the potential entrepreneurs participate as

a group in a week of entrepreneurship

training (seminars on the business plan,

financing tools, the start-up process, etc.),

a week of managerial training (how to

prepare a bank financing proposal,

marketing, project management, etc.),

followed by individual coaching from the

FCE and CRPCE members in preparation

for the start-up phase. By the end of this

phase, entrepreneurs are expected to

have finalized their business plans and

strengthened their managerial skills.

In the start-up phase, the entrepreneurs

receive support from the regional FCE

offices and the CRIs in dealing with the

formalities inherent in registering a

business, preparing bank files, choosing

suppliers, and recruiting the best workers.

The entrepreneurs are also coached in the

processes of negotiating land purchases

or leases for business premises, contracting

with equipment suppliers, and other

necessary actions.

After creating their businesses, these new

entrepreneurs enter into the two-year post-

creation phase of the program. This entails

on-site visits by FCE advisors to each

business every three months to monitor

developments and help with solving

any problems, facilitate networking, and

provide coaching and mentoring support

to ensure the sustainability of their

businesses. Entrepreneurs also benefit

from thematic entrepreneurial and

management training (e.g. seminars on

taxation issues, financial management,

planning). All advisors in the program are

FCE employees, complemented by staff of

the CRPCE members, and all services are

provided free of charge.

From the 600 applications received in

response to the 2013 call for proposals,

381 were selected in the initial screening

and 196 projects finally approved, involving

215 young entrepreneurs spread across

the 15 regions. However, a unique feature

of this initiative is that non-selected

candidates who are eager to proceed with

their project ideas can still receive advisory

support on an individual basis from the

FCE regional offices, which are open to

anyone seeking support while trying to

start a business.

To help the young entrepreneurs obtain

financing for their projects, the FCE

provides assistance with preparing a

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financing file and facilitating linkages with

all of the banks in Morocco (although 80%

of FCE start-up clients are financed by the

Banque Populaire). Because of the difficulty

young entrepreneurs in Morocco have in

obtaining financing from banks, the FCE

encourages their clients to apply to several

institutions for financing. It also advises

them to take advantage of the rapid

turnaround of Damane Express, a Caisse

Centrale de Garantie (CCG) program

started in 2012 to guarantee banks loans

of up to MAD1 million for start-ups and

very small enterprises (VSEs).

FCE’s second flagship program is the

innovative Marocains du Monde program

through which it reaches out to the

Moroccan diaspora. Started in 2009, the

program creates awareness among the

diaspora of opportunities for starting new

businesses in Morocco and supports

implementation of the government’s

strategy for mobilization of Moroccans who

live abroad. The FCE provides information

about supply chain opportunities around

sector clusters (e.g. automotive, electronics,

etc.) and opportunities in the trade sector

(e.g. artisans, construction) that would

require investments of less than MAD5

million. For this program, the FCE targets

Moroccan professionals living abroad (e.g.

engineers, PhDs, university graduates,

experts) who have the experience and

skills to launch new businesses in

Morocco, set up branch operations in the

country, or become investors in Moroccan

enterprises run by others. FCE organizes

meetings abroad to attract investors by

offering its package of supports to setting

up a business in Morocco.

Approach: More broadly, the FCE targets

secondary school and university students

with promotional activity geared to

fostering an entrepreneurial mind-set,

improving their knowledge of how to

explore business ideas and develop

business plans, and inspiring potential

entrepreneurs to start a business. The

objective is to build awareness among

young people of the possibilities of creating

their own jobs through entrepreneurship.

Planting this entrepreneurship seed is

critically important in a country where the

unemployment rate among new graduates

is high because of the short supply

of paid job opportunities. To implement

these activities, the FCE has developed

partnerships with all of the Moroccan

universities, and commercial secondary

schools. FCE experts routinely make

presentations, conduct workshops at

national entrepreneurship conferences,

serve on juries of university business plan

competitions, and deliver business plan

elaboration training courses.

D. Financial model

For its core activities, the FCE operates

on an annual budget of MAD7 million

provided by the Banque Populaire

Foundation. This grant is used to cover

salaries of experts and trainers, pre- and

post-creation coaching support, sponsoring

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of events to promote entrepreneurship

among youth, and other entrepreneurship

promotion activities.

During the past three years, the FCE has

also attracted project funding from IFIs and

donor organizations. The Marocains du

Monde project also receives funding from

the African Development Bank (AfDB)

Migration and Development Fund.

Further, the FCE is partnering with Silatech,

a Qatar-based organization, to develop

new initiatives for the 18-35 age group,

which will enable it to reach out to more

young entrepreneurs.

The FCE occasionally enters into

contractual agreements to provide its

services to other organizations. For

example, through a contract with Royal

Air Maroc, the FCE has agreed to provide

entrepreneurship training, business planning

and advisory support to officers who

voluntarily leave the service, with the

aim of helping them make a successful

transition into economically viable business

projects in the industrial, commercial, and

services sectors.

E. Results and impact

FCE’s offices provide support services to

up to 3,000 persons annually. From

January 2005 to December 2012, they

received 17,731 approaches for support

and provided 48,026 services/ actions

(e.g. training, advice, etc.). These numbers

attest to the relevance of the FCE and its

offerings. In fact, it has become one of the

best-known entrepreneurship support

entities and champions of entrepreneurship

and new enterprise creation in Morocco.

From January 2005 to June 2013, the

FCE’s facilitation support directly contributed

to the creation of 1,717 new enterprises,

generating a total of 8,585 jobs (average

of five jobs per enterprise) (FCE, 2013).

However, the FCE’s impact goes beyond

its contribution to job creation. The FCE

approach also results in favorable survival

rates of the new enterprises. Follow-up

studies show that 77% of their assisted

start-ups are still active beyond the two

years of post-creation monitoring and

coaching support.

The total amount of investment generated

by the new enterprises exceeds MAD1

billion, averaging MAD 630,000 per

enterprise. The projects have been able to

obtain MAD 490 million in bank credit,

representing 45% of the total project

investments. A full 53% of the new

entrepreneurs were able to secure

financing either from the Banque Populaire

or other banks, while the remainder self-

financed their start-ups. By comparison,

only 19% of the young entrepreneurs

from the 2012 ANAPEC Moukalawati

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program5 were able to obtain bank

financing for their start-ups, even with

the special CCG guarantee; and of the

201 enterprises created by the Fondation

du Jeune Entrepreneur between 2011

and 2013, about 33% obtained bank

financing6.

Concerning the Marocains du Monde

program, from its launch in 2009 to the

end of 2012, it supported the creation of

197 enterprises in Morocco, averaging

about 50 a year, and producing 912 jobs.

Although Marocains du Monde projects

start with same average number of

employees as the other FCE start-up

programs, these enterprises have potential

for higher future growth. They have been

responsible for MAD 228 million of

investment, of which MAD 63 million was

raised from bank financing (about 28% of

the total investment). About two-thirds of

the Marocains du Monde enterprises are

in the services sector and 10% are

women-led. It is also important to note that

the majority of projects are in the regions

outside of Rabat and Casablanca,

indicating that they are benefiting local

economic development. Almost three-

quarters of the projects are led by the

Moroccan diaspora from France, Spain,

and Italy.

F. Success factors

There are five key factors in FCE’s success.

Its status as a subsidiary of the Banque

Populaire and the resulting stability of

its governing bodies and administration.

This has enabled the FCE to optimize its

efficiency, adopt a management-by-

objectives approach, develop financial

transparency (statutory accounts and

annual financial audit), and establish a

proper governance structure with

workplans approved by the Board of

Directors and General Assembly, and

monitoring and supervision by the

President. By establishing a network of

regional offices, it has made its services

more accessible to young entrepreneurs in

the different regions of Morocco.

Its partnership approach. The FCE has

formed the CRPCEs, and participates in a

network of networks that includes the

CRIs, the CJD, AFEM, the National Center

for Scientific and Technical Research

(CNRST), the Morocco Entrepreneurship

Network, and other key entrepreneurship

support entities at the regional level. It has

also established privileged relations with

ministries and public institutions. This has

helped build up a more integrated support

5 The Moukalawati Programme targets unemployed diploma graduates.6 http://fjemaroc.ma/page-4-Creationdentreprises-40-fr-1-fondationentrepreneur.html

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system for new start-ups and has also

broadened the scope of its assistance

package.

Its support approach to clients. This

approach, based on an integrated

package covering all aspects of the

entrepreneurs’ needs during the pre-start-

up, start-up and post-creation phases, has

been fundamental to FCE’s success. The

annual call for innovative project ideas is

also an efficient way of identifying potential

young entrepreneurs for group-based

approaches to start-up training and fostering

a mutually supportive network.

Its link with the Banques Populaires

Régionales. Not only do these banks

provide premises for the FCE regional

offices, but the relationship is important

in terms of facilitating access to financing

for the new businesses being created

with FCE support. Approval of financing

requests is in no way guaranteed, but this

bank network is also committed to

fostering entrepreneurship in Morocco and

open to considering start-up loans.

The quality of its staff. The FCE seeks to

hire advisors with business and financial

experience and with strong communications

skills, and it provides annual training

programs to upgrade their knowledge

and advisory skills. Over the years, it has

gained increasing respect for its expertise

in the entrepreneurship development

sector.

G. Lessons learned

In general, the thorniest start-up problems

in Morocco are related to the lack of

accompaniment support for entrepreneurs

and a poor relationship with financiers.

Thus, the FCE focuses strongly on building

a good relationship with the banks and

helping young entrepreneurs prepare their

financing proposals. The FCE will often

send the clients’ dossiers to all the banks

for review. Seminars are also offered to

young entrepreneurs on negotiating with

banks. Another lesson learned by the

FCE is that start-ups can have strong

business plans, but have many technical

weaknesses in their implementation.

Therefore, an important factor in success is

having experts/ coaches to help new

entrepreneurs identify these weaknesses

and overcome them in the post-start-up

stage.

Apart from lessons learned by the FCE in

designing support programs for young

entrepreneurs, such as the beneficial

impact of coaching and mentoring through

the three phases of entrepreneurial

development and using invitation calls to

discover latent young entrepreneurs with

innovative business ideas, the FCE sees

many gaps in addressing the support

needs of start-ups and VSEs in Morocco.

To provide a stronger ecosystem for

the FCE’s efforts, there needs to be a

more favorable environment for young

entrepreneurs. This could be achieved by

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providing more fiscal incentives for young

enterprises/ entrepreneurs, such as

tax exemptions to young entrepreneurs

who start businesses and other fiscal

advantages. In addition, more needs to be

done to promote entrepreneurship through

the media, such as online business plan

competitions, and projects to motivate and

inspire young people and provide them

with knowledge about the entrepreneurial

process. To address the problems that

young entrepreneurs have in accessing

bank financing, the FCE would like to see

a system of certification, whereby banks

would agree to finance start-up enterprises

when the FCE certifies that the young

entrepreneurs’ start-ups are bankable.

Furthermore, more emphasis should be

placed on promoting start-ups, particularly

in the IT sectors, and ensuring that bankers

have the knowledge to support enterprises

in knowledge-based sectors.

Overall lessons learned

• Demand for entrepreneurship among

young people can be stimulated

through calls for innovative project

proposals, but must be supported by

efforts to promote entrepreneurship as

a viable and attractive career and

employment alternative, strengthen the

culture of entrepreneurship, and inspire

young people about the possibilities of

starting a business.

• Start-up support to young entrepreneurs

must include a component to facilitate

their access to financing.

• Survival rates of new enterprises can

be positively influenced through better

preparation of entrepreneurs during the

pre-start-up phase and the provision of

post-creation coaching and monitoring

during the first two years of operation,

when enterprises are most

vulnerable.

• It is important to develop a regional

presence to make support services

available and accessible to aspiring

young entrepreneurs at the local level.

This can be achieved by establishing

regional offices and developing

partnerships with complementary

organizations with a regional/ local

presence. Forming partnerships with

other entrepreneurship-related entities

also helps to build a supportive

ecosystem for youth entrepreneurship

development.

• Positive results can be achieved by

targeting the diaspora living abroad

and linking them to business

opportunities in the home country, to

stimulate the return of talent, business

creation, investment and jobs.

Souk At-Tanmia EntrepreneurshipDevelopment Initiative, Tunisia

Overview: The Souk At-Tanmia (“market

for development”) Entrepreneurship

Development Initiative is an innovative pilot

partnership between AfDB, other donors,

public and private stakeholders, and

Tunisian civil society that seeks to provide

an effective response to the post-Arab

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Spring unemployment challenges in Tunisia,

particularly for youth7. Its objective is

to contribute to building momentum for

hope by generating jobs and income in all

regions of Tunisia. The Initiative invites

project proposals through a competitive

process and then provides entrepreneurial

training, one year of coaching support

through the implementation phase, and

start-up grants of between TND 10,000

and TND 30,000 to help defray initial

costs and/ or enable the entrepreneurs to

meet the equity requirements to qualify for

additional bank financing. The competition

is open to individual entrepreneurs, micro

and small enterprises, cooperatives and

NGOs. It gives preference to project

proposals from young people, women,

and the unemployed; and to proposals

for projects in disadvantaged regions

or projects that benefit disadvantaged

groups, especially in terms of job creation.

Above all, Souk At-Tanmia is distinguished

by being a broad partnership, in terms of

the number and diversity of its members,

and its budgetary scope. In fact, it has

been described as “the most important

mobilization of public-private development

partners, associations, civil society

and academia to promote employment

and entrepreneurship in Tunisia” (MDG

Achievement Fund, 2013:13).

7 http://www.soukattanmia.org/

Quick facts

Year started 2012

Primary goal To promote job creation and inclusive growth through entrepreneurship

Number of program partners20 organizations (international development organizations, private sector,civil society organizations, business associations, and public financial institutions)

Number of staff in Secretariat 5

BeneficiariesInnovative business creation projects that benefit youth, women and disadvantaged segments of society in marginalized regions of Tunisia

Number of business projects supported

61

Number of jobs created/ supported437 actual jobs in 2013 (245 direct jobs and 192 indirect jobs) and 641projected jobs for 2014 (330 direct jobs and 311 indirect jobs)

Total costs for pilot programTND 2,125,429 fundraised through partners’ donations for grant financing ofprojects. TND 1,787,502 disbursed for 61 grantees. Another TND 1 millionprovided via in-kind contributions of partners

Note: TND = Tunisian dinar

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A. Background and institutional history

The January 2011 popular uprising in

Tunisia highlighted a number of

socioeconomic problems facing a broad

segment of the population. Despite robust

growth and the significant progress

achieved in recent years in terms of human

development, major obstacles still impeded

the fair distribution of growth across

Tunisia’s regions. Youth unemployment

was, and still is, a serious issue. In 2011,

the unemployment rate in the 15-24 age

group was almost 44%, dramatically up

from an already high level of almost 30%

in 2010 (ONEQ, 2012). Unemployment is

even more serious for youth with a higher

level of education, especially for those

living in the interior regions of the country.

The private sector is not large enough

or growing fast enough to absorb the

growing number of new graduates into

the labor market due to low private

investment.

In addition, rigid labor regulations that

restrict the hiring and firing of workers

and high social security costs for employees,

are impediments to job growth (AfDB

et al., 2013).

The revolution also brought to light the

extent of regional disparities across

Tunisia, with the interior regions suffering

from much higher unemployment rates,

much lower private and public sector

investment, and significant gaps in the

density of private MSMEs and levels of

entrepreneurial activity compared with

the coastal regions. According to the

2010 and 2012 results of the Global

Entrepreneurship Monitor, few Tunisians

are engaged in trying to start a new

business – fewer than 2% of adults (18-64)

compared with an average of 6.7% of the

adult population (2010) in other countries

at a similar level of economic development

(Kelley et al., 2011; Roland Xavier et

al., 2013). The low level of nascent

entrepreneurship is also the result of the

comparatively low percentage of the

population who see good opportunities to

start a business, coupled with the weak

entrepreneurial culture in Tunisia.

Another obstacle to private sector

development is difficult access to the

financial system, particularly for vulnerable

groups who either lack funds to start

enterprises or cannot provide the personal

contribution or guarantees required by

banks to raise the necessary funds for

mounting a productive project. A survey

conducted in May 2012 by the survey

organization GeoPoll in 24 governorates

revealed that, for 66% of respondents,

the two main obstacles to developing

entrepreneurship in Tunisia are the inability

to provide the personal equity contribution

required (41%), and difficult access to bank

loans (25%).

In considering an appropriate and

immediate response to the dual challenges

of stimulating entrepreneurial opportunities

in Tunisia’s regions and improving access

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to financing, as well as offering an

alternative approach to addressing the

unemployment crisis in Tunisia, AfDB

examined lessons learned from model

donor projects in other regions of the world

and also the initiatives and ecosystem in

Tunisia. The Souk At-Tanmia Initiative was

designed in a way that would stimulate

Tunisians to develop innovative ideas

for new businesses to start in their

communities. It selects projects with the

greatest potential for creating jobs and

benefiting young people, women and other

underprivileged groups, and then provides

basic entrepreneurial and management

training, start-up financing and coaching

and mentoring to bring the projects to

fruition with a higher probability of

sustainability. By supporting the creation

of micro and small enterprises nationwide,

the Initiative is contributing to building

the momentum for growth and generating

productive employment, while helping

to reduce social and regional

disparities.

Another important element of the Initiative

is that it has brought together 20 major

partners to provide support to entrepreneurs.

In addition to AfDB, these include (i) three

bilateral donors (the United Kingdom’s

Department for International Development

– DFID, the Danish government, and the

United States Department of State); (ii) five

United Nations agencies (the Food and

Agriculture Organization of the United

Nations – FAO, the International Labour

Organization – ILO, the United Nations

Industrial Development Organization –

UNIDO, the International Organization for

Migration – IOM, and the United Nations

Development Programme – UNDP); (iii)

four private companies (Microsoft, Talan,

Total Tunisie, and Tunisiana); (iv) three civil

society organizations – CSOs/ professional

associations (the Centre des jeunes dirigeants

d’entreprise – CJD, the Confederation of

Tunisian Citizen Enterprises (CONECT),

and Touensa; (v) two academic institutions:

the British Council and the Mediterranean

School of Business; and (vi) two Tunisian

public MSME finance institutions (the

Banque de Financement des Petites et

Moyennes Entreprises – BFPME, and the

Banque Tunisienne de Solidarité – BTS).

Each partner has signed the Framework

Agreement, which outlines the modalities

of the partnership and the partners’

responsibilities.

Objectives: The primary goal of the Souk

At-Tanmia Partnership is to support job

creation and inclusive growth in Tunisia

by helping entrepreneurs transform their

ideas into viable businesses, or early-

stage micro and small enterprises with

potential to grow. The partnership has a

particular focus on disadvantaged groups

such as women, youth, and economically

disadvantaged regions. It aims to address

barriers – both financial and non-financial

– that are currently hindering the

development of entrepreneurship and

an inclusive private sector in Tunisia.

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In particular, it helps to:

• Identify and support innovative

activities while mobilizing and allocating

seed funding for sustainable projects;

• Guarantee the quality at entry of

projects by setting up a selection

committee to ensure that supported

projects offer a potentially high positive

impact on social and human

development in Tunisia;

• Foster job creation while supporting

sustainable projects designed to

bridge social and regional disparities;

• Promote visibility of potential projects

to enable them to further benefit from

the support of existing and potential

partners; and

• Take advantage of the mix and

complementarity of partners’ specific

areas of expertise and make this

available to beneficiaries (AfDB, 2012).

Beneficiaries: The intended beneficiaries

of the Initiative are young entrepreneurs

(defined as less than 35 years of age),

women, and underprivileged groups, with

priority placed on underserved regions of

Tunisia. The competition is open to individual

entrepreneurs, NGOs, cooperatives, and

existing micro and small enterprises.

B. Organizational model

The Initiative is a new model for mobilizing

financial and technical resources to

promote entrepreneurship nationally. Such

a large group of partners requires a

systematic organizational structure (see

Figure 1).

• Steering Committee: The decision-

making and governing body for the

Initiative, the Steering Committee, is

chaired by AfDB and comprises one

representative from each of the

partners. It meets at least once every

three months. The Tunisian Ministry

of Investment and International

Cooperation is an observer on the

committee. The committee determines

the Initiative’s strategy, procedural

guidelines, and work program;

designates members of subcommittees;

approves all selected projects; and

coordinates the production of project

mentoring and monitoring reports;

• Secretariat: AfDB hosts the Secretariat,

whose role is to coordinate the

preparation of partnership strategies,

policies, and directives for approval by

the Steering Committee; prepare

operating manuals for project

implementation; monitor execution of

project components; manage and

monitor the implementation of

partnership activities; and consolidate

the production of all monitoring and

financial reports. The Secretariat is also

responsible for all aspects relating to

communication and branding. The

initial operational costs for the

Secretariat were covered by DFID

through a special trust fund at AfDB;

constant financial and in-kind support

from AfDB was also required.

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• Financial Agent: The BFPME receives

the financial contributions of partners

and manages the execution of grant

agreements and disbursements of

grant funds to project recipients. The

BFPME was chosen for this role

because of its solid experience in micro

and small enterprise (MSE) lending and

also because it would mark the

Tunisian government’s presence in the

Initiative, making its future replication

more likely to be sustainable.

• Selection Committee: This committee,

whose members are chosen from

project partners, is responsible for

launching the call for proposals,

reviewing and rating all submissions,

and recommending selections for

approval by the Steering Committee.

• Jury: Consisting of a group of

prominent Tunisian entrepreneurs and

public figures, this panel is tasked

with selecting the final set of “best

projects”.

Three working groups of the Steering

Committee are responsible, respectively,

for (i) ensuring that a complete program

of coaching and mentoring is available

to assist and guide the beneficiaries

in implementing and developing

their projects; (ii) coordinating all

communications activities during the

various phases of the project with a

view to maximizing the impact of the

partnership on the development of Tunisia;

and (iii) evaluating the pilot phase of the

Figure 1: Souk At-Tanmia Initiative Organizational Structure

Framework AgreementAnnex: Participation letter

(highlight respective contributions)

Beneficiaries/entrepreneurs

• Strategy • Coordination • Work program• Approval of selected projects

Steering Committee

Jury Secetariat Selection CommitteeFinancial Agent

Source: Souk At-Tanmia concept note.

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Initiative, including the performance of

partners in their respective roles, although

a final evaluation is undertaken by

an external and independent evaluation

team.

Staffing: The Secretariat in AfDB is staffed

by a project coordinator, a project manager,

and a small technical team consisting of a

disbursement and accounting expert, a

communications and partnership expert,

and a monitoring and evaluation expert.

Their work is assisted by the three working

groups and in-kind contributions of many

of the project’s partners for matters such

as developing the website, hosting the

help-line or organizing the dissemination

campaign with CSOs.

C. Operational model

Products and services: The Initiative

consists of the following five components:

a) Communications and promotion. The

Initiative was launched in July 2012

with a strong communications strategy.

Some 30,000 brochures were distributed

across Tunisia. The promotional road

show included 30 regional meetings to

present the project and encourage

participation in all of the governorates.

More than five million SMSs were sent

out via mobile phones thanks to the

partner Tunisiana. Extensive use was

made of media channels, including

social media (Facebook, Twitter,

YouTube), as well as local organizations,

in promoting the Initiative. Interested

parties were directed to the Souk

At-Tanmia website where they could

access the proposal application

form. All completed forms were then

submitted online. Fifty CSOs were

mobilized by Touensa to promote

the Initiative and help candidates

complete the proposal application

form. This intensive and comprehensive

communications effort resulted in

more than 2,000 applications and a

considerable amount of coverage in

the media. In January 2013, at the

end of the first competition, a press

conference was held to announce the

winners and to allow them to publicly

present their projects.

b) Selection of candidates. Two sets of

criteria are used by the Selection

Committee. The fundamental set

includes consideration of: (i) potential

for job creation; (ii) feasibility of the

project; and (iii) financial viability and

potential for sustainability. Extra points

are given for projects: (i) where the

applicant is young, unemployed, and/

or a woman, or that would bring strong

benefits to these groups; (ii) located in

an underserved region; (iii) demonstrating

innovativeness of the intended product,

its production or marketing process;

and (iv) that have the possibility of being

developed, transferred, or replicated

elsewhere in the country.

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c) Basic entrepreneurship training. Up

to 300 entrepreneurs are shortlisted in the

first selection stage and they are given a

month to develop their business ideas

further, including detailed financial

projections, and resubmit the revised

proposal on a new form. Early during

that month, the candidates are able to

participate in a three-day capacity-building

training course offered by British Council

trainers in collaboration with Tunisia

Gwent College, covering entrepreneurship,

business planning, basic accountancy, and

management topics. The workshops,

conducted in 15 regions, also provide

one-on-one assistance to those who need

help in completing the second submission

form. In the second stage, the Selection

Committee reviews the enhanced proposals

and selects the final list of up to 100

highest-quality projects for funding and

mentorship (British Council, 2013).

d) Project financing. One of the main

objectives of the Initiative is to address the

lack of access to bank financing for start-

ups and young enterprises. Thus, a major

benefit to the supported projects is its

grant component. In the pilot program,

each of the 71 projects was awarded a

grant of from TND10,000 to TND30,000,

which was to be used to cover start-up

costs or as the equity contribution to meet

the requirements for a bank loan from the

BFPME, the BTS, or another bank. The

cost of eligible projects was allowed

to range between TND10,000 and

TND180,000, based on evidence that

projects in this size range face the greatest

challenges in accessing funding in Tunisia.

Given the rules used by banks, equity (in

the form of the grant) of TND30,000,

would give entrepreneurs the possibility to

raise up to TND150,000 in debt funding

from partner financial institutions. Grants

were disbursed in tranches linked to

reaching certain milestones. The first

tranche, corresponding to the cost of

starting the business (registration cost,

equipment and input costs, etc.), was paid

once the coach approved the amount and

communicated the approval decision to

the Secretariat. Additional tranches were

disbursed based on estimates of additional

expenses (e.g. marketing, communication,

legal, etc.) following the same procedure.

e) Coaching and mentoring. Once

selected, the finalists are provided with

one year of comprehensive coaching and

mentoring support from the Souk partners.

This support is considered important to

ensure a higher probability of survival of the

enterprises during their first year of

implementation. Coaches and mentors

(volunteers) are drawn from UNIDO, UNDP,

CONECT, Microsoft, and others, and

assigned to projects that could benefit

from their sector expertise. For instance,

Microsoft was assigned information and

communications technology projects while

FAO was assigned agricultural projects.

Coaches are encouraged to have

frequent exchanges and interactions with

beneficiaries to guide them and transfer

knowledge and technical know-how;

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however, no specific frequency for

meetings was set for the coaches, which

led to significant variations in the time

spent by coaches with beneficiaries.

D. Financial model

Funding for the pilot program of

TND2,125,429 was covered by the United

States government, the Danish government,

and DFID, together with international donor

organizations. Part of the pooled fund

was used to disburse grants 61 of the

71 selected projects, for a total of

TND1,787,502.

The operating costs of the AfDB

Secretariat were covered by a contribution

of GBP 100,000 from DFID through an

existing technical cooperation agreement.

Nonetheless, without a proper institutional

set-up and ad hoc procedures, AfDB

struggled to deliver fully on its role without

breaking its own rules, which are generally

not adapted to the Bank playing the role

of project implementation unit. AfDB itself

thus had to contribute through in-kind

and financial contributions, for a total

of around US$100,000. In addition, the

in-kind contributions of partners for

accompanying activities are estimated at

more than TND1 million.

This financial model worked well for the

pilot program, but continuing the program

will require a longer-term commitment of

partnering IFIs/ donors. To make the model

more sustainable in the future, two

strategies are foreseen: (i) adding an equity

vehicle for early-stage companies, which

will generate profit and could cross-

subsidize the grant component for

start-ups; or (ii) reducing the grant amount

and offering instead a hybrid where one

part will be a grant, and the other a zero-

interest loan with a longer grace period of

repayment.

E. Results and impact

The pilot program reached – and, indeed,

slightly exceeded – its target of US$1.3

million for financing entrepreneurs. A total

of 71 projects were selected from over

2,000 submitted proposals and 300 short-

listed projects. This fell short of the target

of supporting 100 projects, primarily due

to the low quality of many of the proposals.

By the end of the pilot phase, officially

closed in December 2013, ten of the

projects had dropped out of the program,

leaving 61 operational after one year of

coaching support. More than 72% of the

projects were start-ups, with the remaining

27.3% consisting of existing enterprises

that were able to expand their operations.

The average grant per recipient enterprise

was TND 29,289, since almost all applicants

requested the maximum grant of TND

30,000. By December 2013, all the grants

had been fully disbursed, although some

disbursement delays were experienced

because the enterprises needed to do

more work on their financial projections

and business plans after being selected

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for the program. Beneficiaries’ lack of

familiarity with the administrative processes

for establishing a business was also a

delaying factor. Equally important were the

difficulties that some beneficiaries faced in

raising debt financing.

Data gathered through surveys and

interviews with the supported entrepreneurs,

together with the mid-term evaluation,

indicate that the pilot edition reached the

intended beneficiaries (vulnerable people,

youth and underserved regions) and

was highly relevant to their needs. Women

entrepreneurs initiated 32% of the

projects; unemployed persons, 31%; and

entrepreneurs under the age of 35, 50%.

About 63% of the projects are located in

underserved regions, such as Sidi Bouzid,

Gafsa, Kasserine, and Le Kef. Two-thirds

of the entrepreneurs valued both the

financial support and the coaching

program (AfDB, 2014b). In terms of visibility

and encouraging entrepreneurship, the

pilot edition was successful. The high

number of project applicants (2,000

proposals submitted) and Facebook fans

(3,200), and the amount of press coverage

all exceeded expectations.

The mid-term evaluation found early signs

that the partnership was effective, although

achievements at that point were mostly in

the form of outputs rather than development

outcomes. The 71 project proposals were

projecting to create up to 1,000 jobs,

anywhere from four to 70 depending on

the enterprise. Data from the 61 beneficiaries

drawn for the mid-term evaluation and

continued monitoring revealed that they

had created at least 437 jobs for 2013:

245 direct and 192 indirect jobs. Another

641 additional jobs are foreseen for 2014,

based on projections of the entrepreneurs

and coaches: 330 direct and 311 indirect

jobs. This means that the pilot program will

have surpassed the 1,000 job creation

target by the end of 2014, which in itself is

a good result.

The mid-term evaluation concluded that,

despite the large number of partners, the

set-up of the Initiative’s governance

structure resulted in an efficient management

approach. Coordination of the partners

was substantially enhanced with the

establishment of various task forces and

implementation of an operating manual

setting out cost-effective procedures for

following up on projects. The management

of information flow during the pilot phase

was applauded by project beneficiaries

who appreciated the Initiative and trusted

the partners driving it.

F. Success factors

A good partnership strategy and effective

division of labor between partners was

critical to the success of the pilot program.

It succeeded in gathering a broad set of

partners with focused sector expertise to

provide all-encompassing financial and

non-financial support to entrepreneurs.

AfDB was able to leverage the competitive

advantages of partners by assigning them

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specific leading roles, particularly for

financing needs, website management,

and the coaching and mentoring program.

Starting with a core set of committed

partners was important and helped create

a snowball effect that enabled the

partnership, over time, to increase in

both mass and momentum.

Engagement with stakeholders in Tunisia

was another key to success. AfDB

leveraged its network of contacts from its

regional department and the Tunisia desk,

taking full advantage of their knowledge

of the specific geographic and market

challenges, and building on their contacts

and expert network to leverage needed

resources and field expertise. However,

there is a limit to the number of partners

that can feasibly be involved in the program.

It is therefore advisable to commit to a few,

high-level partners who can guarantee

their participation in terms of financial,

organizational, and human resources

throughout all program phases.

A well-designed and executed communication

strategy and promotion approach were

important factors in (i) building trust and

ensuring transparency, (ii) creating broad-

based awareness of the program, and (iii)

stimulating a large number of initial project

proposals. This communication strategy

used tools ranging from grassroots

communication events via CSOs, road

shows by the Secretariat with a focus on

the disadvantaged regions, to web and

social media such as the sending out of five

million SMSs via its partner Tunisiana and

the creation of a Facebook page.

The capacity to offer coaching and

mentoring support to the projects was

essential. Some coaches and mentors

were paid while others were volunteers,

depending on the partner organization.

The mid-term evaluation found evidence

suggesting that the quality of the coach

and level of interaction with beneficiaries

significantly affected project business

success or failure. This was especially true

for the start-up projects initiated by

inexperienced entrepreneurs, for whom

external help was decisive for the future

of their businesses. Beneficiaries being

supported in an expansion phase of their

business also indicated that they were able

to improve their performance as a result of

the targeted and frequent intervention of

the coach.

The offer of grants played a leading role in

the pilot program’s success, providing a

major incentive for individuals and groups

to submit project proposals. However,

the combination of the financial incentive

and the training, coaching and mentoring

support added more value to the offer,

increased the likelihood of the entrepreneurs

accessing financing, and reduced the

risk of early failure.

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G. Lessons learned

Although the Souk At-Tanmia pilot

program has achieved early successes, its

implementation has encountered a

number of challenges, which can be

translated into useful lessons learned

for program modifications in subsequent

tranches.

First, the poor quality of many of the

submissions to the initial call for proposals

indicates that more work is needed to build

entrepreneurial capacity and know-how in

the regions. There may not be a lack of

ideas, but there is a lack of ability to flesh

out these ideas and develop them into

viable project proposals. This suggests

that more effort is needed to provide

some basic orientation to entrepreneurship

immediately following the public launch of

project proposals. This could take the form

of public seminars offered for interested

persons on the basics of entrepreneurship,

how to identify business opportunities,

how to assess the viability of a business

idea/ opportunity, elements to consider

when developing a project proposal, and

some basic financial skills.

Although the 300 shortlisted candidates

had the opportunity to participate in

a three-day entrepreneurship training

program, the selection committee was not

able to approve the target number of 100

finalists because not enough of the revised

proposals were strong enough. This

suggests that more intensive interventions

are required to help shortlisted candidates

work on refining their business plans. This

will be addressed in the next edition by

providing a five-week training course that

includes writing a business plan with the

help of a coach.

The main impetus for many applicants was

the grant component, providing start-up or

expansion financing that would be difficult

to obtain from formal financial institutions.

Many applicants were wary of commercial

financial institutions and deterred by

conventional banks’ complex bureaucratic

and administrative processes. Nonetheless,

a number did obtain the necessary

endorsement and the funds to start up

their business primarily thanks to the

Secretariat’s interventions. On the other

hand, several other beneficiaries

experienced delays in obtaining financing

approvals, which in turn delayed project

implementation; and some had their

applications rejected and had to abandon

or scale down their projects. This

suggests that future editions of the

program need to seek enhanced

coordination and cooperation with banks.

The second edition therefore foresees

involving banks early in the selection

process as well as in the training

component.

The program did not require beneficiaries

to make a personal equity contribution to

their project, although in many of the

projects, the financing model did include

some personal equity beyond the Souk

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grant. The mid-term evaluation found

that this partly explained differences in the

level of commitment and motivation of

beneficiaries. Entrepreneurs who had a

personal stake in the project (both in

absolute and relative terms) were more

motivated to make progress on their

projects (AfDB, 2014b). The future Souk

editions therefore will require a small equity

contribution as a condition of the grant –

large demands are to be avoided so as not

to unduly burden youth, women, and

lower-income applicants.

According to the mid-term evaluation,

beneficiaries found the coaching services

to be of good quality, with the majority

either fully or partially satisfied with them.

However, some beneficiaries complained

about the lack of availability of the

coaches. Many coaches were not paid for

their services, which might have affected

the level of priority they placed on their

coaching responsibilities. Although it is

difficult to draw any definitive conclusions

on the merits of paying coaches, it seems

important to structure the coaching

program in a way that ensures frequent

interaction with beneficiaries, such as by

setting a schedule of weekly meeting times

(AfDB, 2014b). Difficulties created by the

distance between the project location and

the coach can be overcome by using

phone or Skype meetings as an alternative

to face-to-face sessions, or through better

matching of coaches with beneficiaries.

Beneficiaries commented that the quality

of the coaching program could be

improved by using coaches with practical,

hands-on business experience and

more ability to expose them to marketing

opportunities and other stakeholder

networks. Future program editions will also

include an orientation program for the

coaches and more specific guidelines on

the scope of the coaching mandate and

relationship.

The pilot experience showed that

management of the Souk partnership

is time-consuming and requires a larger

number of staff. The use of working

groups and outsourcing of certain activities

achieved some operational efficiency, but

the multiplicity of requests, needs, and

partners put significant pressure on the

Secretariat, which on occasions caused

delays in delivery. To tackle this challenge,

AfDB staff were regularly solicited to lend

support to the Secretariat. Future program

editions will need to establish an

appropriate budget for the Secretariat to

ensure that adequate human and financial

resources are available to deliver on its

mandate.

Monitoring and evaluation is another key

component but was not as efficient as it

could have been in the pilot program.

More comprehensive data should have

been collected on applicants and finalists,

particularly baseline data on existing

enterprises being supported (e.g. current

number of employees and level of sales). It

would also have been useful to conduct a

control group study on a sample of the 229

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proposals that were shortlisted but not

selected as finalists, to find out whether

any of these were able to move forward

with their projects. Results of such a

study would substantiate more fully the

incremental impact of the Souk support.

Lastly, it is necessary to develop a

financially sustainable model for continuing

the operation in Tunisia. The pilot

model shows great promise as an

approach to stimulating entrepreneurship

in underdeveloped regions, contributing to

job creation, and helping to address some

of the financial constraints faced by start-

ups and undercapitalized micro and small

enterprises, but it cannot function without

funding from IFIs/ donor organizations.

The current challenge for the Initiative is to

formulate a strategy for the way forward,

including the ownership and resourcing

of the Secretariat. The strategy being

explored includes building a local structure,

and establishing an equity fund that would

generate reflows from investments in early-

stage enterprises and thus contribute to

overhead costs and part of the grant

financing. Another option under discussion

is lowering the grant portion and

supplementing it with a zero-interest loan.

Overall lessons learned

• Although large and broad-based

project partnerships can be difficult to

manage, the Souk At-Tanmia pilot has

demonstrated that this model can

work to achieve a bold vision for

building entrepreneurial momentum in

a country through collaboration and

sharing of resources, roles, and

responsibilities.

• A broad-based communication and

promotional campaign, which includes

different channels and the collaboration

of civil society and major institutions in

the ecosystem, is decisive in attracting

proposals especially from disadvantaged

strata of society.

• The offer of grant funding provides an

attractive incentive for the development

of project proposals from entrepreneurs

and groups.

• Considerable value is added to project

beneficiaries when the grant funding is

complemented with entrepreneurship

training and with coaching and

mentoring support. The program

works best when tailored around the

entrepreneur’s needs and should be

structured to support beneficiaries

throughout the implementation process.

• The quality of project proposals could

be improved with the provision of more

intensive orientation and training of

potential applicants during the process

of identifying, developing, and presenting

business ideas and proposals. This is

especially important in countries/

regions with a weak entrepreneurial

culture and low entrepreneurial

capacity. In the selection process,

more emphasis should be placed on

assessing the commitment and

motivation of the entrepreneur.

• Requiring some personal financial

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commitment from the applicant may

be an important factor.

• Stronger coordination with banking

institutions is often necessary to enable

assisted entrepreneurs to leverage the

funding support from entrepreneurship

development projects. Engaging

banks as project partners can be an

important asset.

• People matter: the quality, expertise,

and dedication of the team

implementing a program are the most

important predictors of success. The

principal factors are (i) the team culture

and team members’ understanding

of and belief in the program’s vision,

(ii) their approach and the right

combination of skills to tackle program

challenges systematically, and (iii) the

energy and drive they communicate to

each other to keep moving towards

realization of the collective vision of

the program. An important strategy to

keep partners motivated in the

Souk pilot was their involvement in

communication events with media and

their participation in regular steering

committee meetings.

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3. Access to Financing for MSMEs

Lack of access to financing is one of the

major challenges for micro, small and

medium enterprises (MSMEs). Deficiencies

in the Middle East and North Africa

(MENA) region include a general

reluctance of banks to lend to MSMEs,

underdeveloped equity markets, and few

alternative financial instruments, such as

leasing, available to MSMEs. An angel

investor community has been slow to

develop; venture capital funds tend to

favor more established and larger firms

over start-ups and early-stage ventures;

and secondary stock markets for growth-

oriented enterprises, where they exist, are

rudimentary with limited listing activity.

Microfinance is well developed in some of

the Deauville Partnership countries (such

as in Morocco), but often programs have

low lending limits and tend to cater more to

micro and small enterprises than to start-

ups. The vast majority of MSMEs in the

Deauville Partnership countries are self-

financed, either through the entrepreneurs’

savings or money provided by family and

friends. The lack of availability of external

sources of financing affects the scale of

start-ups and the expansion potential of

existing MSMEs, thus posing a barrier to

the creation of jobs.

MSMEs in the MENA countries are

particularly constrained by lack of access

to bank financing and considerably more

so than large firms (Rocha et al., 2011).

Only 20% of small and medium enterprises

(SMEs) have a loan or line of credit, lower

than in any other region of the world, and

only 10% of their investment expenditures

are financed by a bank loan (Rocha et al.,

2011). The International Finance Corporation

(IFC) estimates the credit gap for formal

SMEs in MENA to be in the range of

US$260 billion to US$320 billion: the

difference between the outstanding credit

amount to formal SMEs of US$80 billion to

US$100 billion and the estimated demand

of US$300 billion to US$360 billion (based

on 2011 data) (IFC, 2013). In 2010, loans

to SMEs accounted for only 13% of total

commercial lending in the developing

MENA countries. In the Deauville

Partnership countries, this ranged from

below 10% in Egypt and Jordan, and

15% in Tunisia, to 20% in Yemen and 24%

in Morocco (IFC, 2013).

There are many reasons for the low level of

bank financing to SMEs. First, there are

information asymmetries exacerbated by

the general absence of private credit

bureau data in MENA countries, which

means that banks lack access to reliable

credit information on SMEs and

entrepreneurs. Second, banks are

reluctant to lend to SMEs because of the

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higher transaction costs in processing

small loans and the perceived higher risk

of loan defaults. Third, banks cite as a

deterrent the lack of SME transparency

and SMEs’ inability to provide adequate

financial statements and bankable loan

proposals. In addition, since banks in the

MENA countries have traditionally lent to

governments and large corporations, they

lack knowledge in how to assess the risk

of dealing with SMEs, particularly start-ups

and small enterprises.

On the demand side, SMEs in the MENA

region cite many challenges in accessing

bank financing. Paramount among these

are high collateral requirements and

interest rates. Start-ups and emerging

small enterprises often cannot provide the

collateral required to secure a bank loan,

and even if they could, the lack of property

and collateral registries can be a barrier to

the bank accepting the collateral because

of the legal difficulties in recovering the

collateral in the case of default. There is

also evidence that a proportion of SME

owners do not seek to borrow money from

a bank either because interest rates are

too high or paying interest in not compliant

with Sharia law. In other words, more

SMEs would be encouraged to seek

external financing if Islamic products

were more available. It is also well known

that young entrepreneurs, women

entrepreneurs, and start-ups face even

more serious barriers to accessing

financing because they lack credibility,

experience, credit histories, track records,

and collateral.

One option to improve the capacity to

access bank credit is to offer loan

guarantee programs, which substitute for

the SMEs’ inability to meet banks’

collateral requirements. Alternatives to

bank credit are also needed. For example,

leasing provides an attractive option

for asset financing because it does not

require an equity contribution or additional

collateral beyond the leased asset itself.

In an effort to address the SME financing

gaps, governments and donors have

established development banks, credit

guarantee systems, government loan

programs, microfinance institutions (MFIs),

and alternative forms of SME financing,

such as leasing and Islamic financing.

Several MENA governments have

improved the regulatory environment for

SME financing, for example, by developing

laws to enable the establishment and

operation of private credit bureaus,

regulating MFIs and leasing operations,

putting into place property and collateral

registry systems, and reforming the legal

system to further protect creditors’ rights.

The central banks of some countries also

require (or encourage) private commercial

banks to establish SME windows.

Four good practice profiles have been

prepared for consideration by Deauville

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Partnership countries. Two deal with SME

loan guarantee programs: the Caisse

Centrale de Garantie (CCG) in Morocco;

and Kafalat SAL in Lebanon. One deals

with SME leasing: Tunisie Leasing in

Tunisia. The fourth deals with capacity

building of both banks and SMEs with

respect to SME lending and borrowing:

the Egyptian Banking Institute (EBI) in Egypt.

3.1 Loan Guarantee Schemes

The objective of loan guarantee programs

is to compensate for the lack of collateral

that SMEs can offer to secure a loan and

reduce the risk the bank incurs in lending

to undercollateralized enterprises. Studies

on such programs around the world

suggest that they can have a positive

impact on lending to SMEs especially to

riskier, but creditworthy SMEs (Saadani et

al., 2010; Riding et al., 2007). First, loan

guarantee programs increase the

probability of financing to SMEs that would

otherwise remain credit-constrained,

which means that, if appropriately

designed, they produce a high level of

additionality. Second, through a leveraging

(multiplier) effect, more bank financing is

made available to SMEs than otherwise

would be case. By covering a major part

of banks’ risk in supporting small firms,

public guarantees also reduce the cost of

finance to MSMEs. In the medium and

longer term, the existence of a loan

guarantee program should also increase

the experience of banks in lending to

SMEs and assist them in developing better

relations with the MSME population as a

whole, which over time will theoretically

result in a reduced need for loan guarantee

programs. Loan guarantee schemes are

considered highly market-friendly and

relatively unlikely to introduce distortions to

the financial markets (Aziz, 2013).

However, studies also reveal that the

success of a loan guarantee program

depends heavily on its design, institutional

arrangements, and operational efficiency.

Important to success are well-designed

eligibility criteria, proper coverage ratio and

fees, sound risk management, and efficient

operational procedures (European

Commission, 2006). The World Bank

review of credit guarantee schemes in the

MENA region noted that Lebanon and

Morocco have the top-performing

programs on many dimensions (Saadani et

al., 2010). Within these two countries,

Morocco’s CCG, a government program,

and Lebanon’s Kafalat, a private company,

have been particularly successful in

reaching the SME market. They also stand

out for their continuous innovation with

new guarantee products to respond to the

needs of SMEs at different stages of

development. Thus, these two programs

were selected to illustrate best practices in

access to financing for MSMEs.

Caisse Centrale de Garantie,Morocco

Overview: The CCG is a policy instrument

of the Moroccan government to provide

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credit guarantees to banks of between

50% and 80% to help mitigate the risk of

lending to MSMEs. By reducing the risks

to lending institutions, the provision of

guarantees increases financing coverage

to larger numbers and extra classes of

MSME borrowers, and extends the scope

of the formal financial system to

enterprises that would not otherwise be

able to meet the collateral requirements for

bank loans. At the end of 2013, the CCG’s

outstanding portfolio consisted of more

than 7,000 guaranteed loans (totaling a

commitment of MAD 6 billion).

A. Background and institutional history

The CCG was founded in 1949 as a

publicly funded financial organization with

a mission to boost private initiatives

encouraging the creation, development,

and modernization of enterprises. The

CGC also supports social development,

notably through social housing and

student loan guarantees.

In 2007, the Ministry of Economy and

Finance designed a new strategy for the

National Guarantee System in which the

state plays a key role through the CCG.

The implication for the CCG was a

complete overhaul of its operations and

product lines. As a result, it introduced new

guarantee products designed to meet the

financial needs of MSMEs at different

phases of their business development life

Quick facts

Start date 1949

Number of employees 90

BeneficiariesVery small enterprises (VSEs); SMEs in operation for less than three years;start-ups by young entrepreneurs; start-ups by women entrepreneurs; exporting SMEs

Active guarantee files at the end of2013

About 7,000, with guaranteed loan value of MAD6 billion, leveraging MAD9.5 billion in bank loans

Number of guaranteed loans peryear

Average around 1,800

Average number of jobs createdper assisted MSME

9.2

Penetration of CCG guarantees(2013)

62 loan guarantees per million population

Profitability of operations Generally operating at a loss; may be reaching break-even point

Default rate 6.3%

Notes: Data as of December 2013. MAD = Moroccan dirham

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cycle; and reengineered its processes to

remove unnecessary procedures and

simplify those that remained. It also revised

the guarantee parameters to reflect

international best practices (e.g. capital

allowances, commissions, simplification

and harmonization of eligibility criteria).

These actions helped to streamline and

strengthen the overly complex and

fragmented national credit guarantee

mechanism. The CCG has grown in scale

and scope since 2000, developing a

greater regional presence to enhance its

proximity with local commercial banks and

potential clients. These changes in the

structure, safeguards regime, operating

efficiency, and product lines have had a

significant impact on the volume of

guarantees, which almost doubled

between 2008 and 2009 (fueled mainly by

an increase in working capital loan

guarantees).

Objectives: The primary objective of the

CCG is to facilitate access to finance for

MSMEs with viable start-up or

development plans, or with potential for

restructuring their finances, but with

insufficient collateral security of the kind

required by the banks. By providing

guarantees for bank loans, the CCG

shares lending risk with the banks, which

in the medium and longer term is intended

to orient banks to the practice of lending

to MSMEs. A secondary objective is to

cofinance with banks investment programs

initiated by SMEs operating in key sectors

for the development of the country.

A third objective is to build, through the

guarantee system and investment fund, a

public-private partnership approach to

encourage more private sector investment

in SMEs by reducing the risk taken by

equity investors.

Beneficiaries: The primary beneficiaries

are MSMEs at different stages of

development. These include young

entrepreneurs, women, VSEs, small

enterprises within the first three years of

operation, and more established SMEs

requiring working capital and longer-term

loans for expansion. All sectors of activity

are eligible except property development,

deep-sea fishing and financial sectors. The

secondary beneficiaries are banks, which

through risk-sharing can reach out to new

market segments and grow a customer

base within the MSME sector. A third

beneficiary group is private investors who

can be encouraged to make investments

in SMEs by securing a partial guarantee

from the CCG.

B. Organizational model

The CCG is a public financial institution. It

is managed by its Board of Administration

chaired by the Minister of Economy and

Finance and comprises representatives

from the government, the private sector

and banks. As a financial institution, it is

supervised by the Central Bank of

Morocco. It operates out of its head office

in Rabat and has regional offices in major

cities of the country.

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Staffing: The staff totals about 90,

including a cadre of qualified executives.

Half of the staff are dedicated to operations

management.

C. Operational model

Products and services: The CCG

strategic plan for 2009–2012 introduced

new products designed to ensure more

focus on smaller firms, rebalance

guarantees towards the lower end of the

distribution of loan guarantees, and match

MSMEs’ operational requirements more

closely through the business life cycle with

guarantees on loans for investment,

working capital, financial restructuring, and

private equity.

Including the suite of new products

introduced in 2009, the CCG now offers at

least a dozen guarantee products targeting

different MSME groups (see Table 4).

Generally, these guarantees may not

exceed MAD 10 million and the combined

guarantees of a single borrower may not

exceed MAD 20 million, which ensures

that the guarantees are used by MSMEs.

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Table 4: Characteristics of CCG loan guarantee products for MSMEs

TargetedMSMEgroup

Product Type of loan guaranteed

Risk coverage

Guaranteeceiling

Guaranteeduration

Guaranteefee

CCG processingtime

Very smallenterprises

Damane Express

Short, medium- andlong-term bankloan not more thanMAD 1 million

70% ofloan value

MAD 1 million

Equal toloan duration

0.5% onshort-termloans; 1.5%on long-term loans

48 hours

Women-owned start-ups

ILAYKI Medium- andlong-term bankloan not more thanMAD 1 million

80% ofloan value

MAD 1 million

Equal toloan duration

1.5% flatfee onamount ofcredit

48 hours

Start-upsand enterprisesin operationfor less than3 years

DamaneCréa

Medium- andlong-term bankloans of more thanMAD 1 million. Forprojects includingfixed assets andworking capital.

70% ofloan value

MAD 10million(with nomore thanMAD 20million tothe sameenterpriseover time)

Equal toloan duration

2% flat feeon amountof credit

10 workingdays

SMEs inoperation formore than 3years

DamaneExploita-tion

Working capitalloans

60% ofloan value

MAD 10million(with nomore thanMAD 20million tothe sameenterpriseover time)

18 months 0.5% of thecreditamount pertransaction

10 workingdays

SMEs inoperation formore than 3years

DamaneDév

Long-term bankloans for expansion andmodernization

60% ofloan value

MAD 10million(with nomore thanMAD 20million tothe sameenterpriseover time)

Equal toloan duration

2% flat feeon amountof credit

10 workingdays

SMEs inoperation formore than 3years thatare undergoing a financial restructuring

DamaneIstimrar

Bank investment/working capitalloans to consolidate loansfor investment anddevelopment

50% ofconsolida-ted credit

MAD 10million(with nomore thanMAD 20million tothe sameenterpriseover time)

Equal toloan duration

2% flat feeon amountof credit

5 workingdays forloans of≤MAD 1million; 10workingdays forloans of>MAD 1million

SMEs realizing atleast 20% oftheir salesfrom exports

DamaneExport

Working capital 70% ofloan principal

MAD 10million(with nomore thanMAD 20million tothe sameenterpriseover time)

18 months 0.5% flatfee onamount ofequity

10 workingdays

SMEs tendering torealize projectsabroad

Caution-nementdes Marchésà l’Expor-tation

Bid bonds, advance payment,completion, holdback, etc. required for doingbusiness with foreign customers

70% of the bond

MAD 20million percompany

Equal toloan duration

0.5% of theamount ofbondspayable annuallyuntil releaseof the commitment

10 workingdays

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The product specifically guaranteeing

loans to women-owned start-ups (ILAYKI),

launched in March 2013, offers a

guarantee of 80% of a bank loan with a

value of less than MAD1 million to start-

ups wholly owned by one or more women

(normally the CCG guarantees no more

than 70% of a loan). This provides a

particularly valuable service to women

business owners by addressing their lower

capacity to meet collateral needs for bank

loans.

Another innovative CCG product, Damane

Capital Risque, offers a partial guarantee

to qualified private equity investors for

equity or quasi-equity investments made

in SMEs up to a maximum of MAD5

million. In this case, the CCG also shares

in the rewards of the investment by

applying a commission of from 7% to 10%

based on the capital gain realized on the

investment over the term of the guarantee

period. The scheme is meant to encourage

scaling-down of private equity/ venture

capital investment by guaranteeing a

share of the investment.

Approach: To ensure that the CCG serves

its intended constituency of MSMEs, low

ceilings are set on maximum guarantee

values: up to MAD 10 million per application

for SMEs, and MAD1 million for VSEs.

Previously, guarantees could be applied to

much higher loan values (on average,

approximately three times the new ceiling),

TargetedMSMEgroup

Product Type of loan guaranteed

Risk coverage

Guaranteeceiling

Guaranteeduration

Guaranteefee

CCG processingtime

SMEs inneed ofequity capital

DamaneCapitalRisque

Guarantee forequity or quasi-equity investments provided to eligibleinvestment companies

50% of theequity/quasi-equity investment(60% forinnovativeprojects)

MAD5 million perenterprise(with nomore thanMAD20 million tothe sameenterpriseor group ofenterprisesover time)

N/A 1.5% flatfee onamount ofequity/ quasi-equity covered bythe guarantee,plus commissioncalculatedon capitalgains realized during theguaranteeperiod,upon thesale ofshares

5 workingdays for investmentsof <MAD1million; 10workingdays for investmentsof >MAD1million

Companiesbenefitingfrom theSupportAgreementin the textilessector

IntegraTextile

Short-term loansto finance workingcapital in textile industry; medium-and long-termloans to financeinventory in textileindustry

70% ofloan value

MAD40 million: splitbetweenMAD20 million forshort-termcredit andMAD20 million forlong-termcredit

Equal to theduration ofthe loan

1% flat feeon amountof short-term credit;2% flat feeon amountof medium-to long-term loanvalue

15 workingdays

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which meant that larger firms were more

likely to benefit.

The CCG provides the guarantee to the

bank providing the credit, and works

with all banks operating in Morocco.

The MSME submits a credit application

to a participating bank, and the bank

processes the file and sends it to the CCG

for a guarantee. The CCG applies financial

techniques in assessing the risk of the

client and responds to the bank with its

guarantee decision, depending on the

type and size of the loan. Processing

times for applications range from 48

hours, to 5-10 days with 15 days for the

most complex loans. Costs of the loan

guarantees are low and transparent: a flat

fee based on the credit amount ranging

from 0.5% to 2%. This remains one of the

lowest levels benchmarked against

international practices (Saadani et al.,

2010).

The CCG does not directly engage

with entrepreneurs at either the loan or

debt reimbursement stage. However, it

provides a public information and advisory

service in order to explain its services

to the business community. Outreach

services are being rolled out across

the country to spread awareness of all

CCG products beyond the core Rabat-

Casablanca commercial/ industrial axis.

Presentations are made at business

fairs and other events. The presence of

regional offices plays an important role in

reaching out to local MSMEs (and banks),

with more regional offices planned.

D. Financial model

The endowments of the CCG’s guarantee

funds come from the government Treasury

through an allocation approved by the

Ministry of Economy and Finance. Funding

can also be mobilized from international

financial institutions (IFIs), and agencies

such as the European Union, KfW, the

International Bank for Reconstruction and

Development, and the French Agency

for Development. The amount of the

endowments is determined in advance by

using statistical techniques to calculate

the production trend and statistically

evaluated risk behavior. The goal is to

cover the projected default losses induced

by the additionality generated through

increased loans to SMEs.

The CCG has also set up a strong

partnership framework with international

institutions to back up its development

process. For example, the African

Development Bank (AfDB) provided

technical assistance to the CCG to

upgrade its information technology and

risk systems.

E. Results and impact

Improvements to the system as part of the

renewed focus on MSMEs in the 2009–

2012 strategic plan began to bear fruit in

2012, a pivotal year for the national

guarantee system. Overall, between 2009

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and 2012, about 4,000 projects benefited

from the scheme, representing a total

volume of MAD10 billion in bank loans,

covered by guarantee commitments of

MAD 5.5 billion (Ministère de l’Economie

et des Finances, 2012). These funds were

used to finance investment projects with

a total budget of MAD 11.7 billion and

are expected to create more than 18,000

jobs.

One of the significant ways in which the

CCG has demonstrated good practice in

the MENA region is by commissioning an

external impact evaluation of its loan

guarantee program, which was carried

out by Deloitte Touche Tohmatsu (DTT)

in 2011.

The evaluation, the first of its kind in both

Morocco and the MENA region, assessed

the scale and scope of CCG’s MSME

guarantee activity from 2000 through

2009, and provided a more detailed

analysis for the 2005–2010 period. The

study clearly demonstrates that the

institutional guarantee produces positive

benefits far outweighing its costs (DTT,

2012).

From 2000 through 2009, the CCG

provided a total of 4,362 loan guarantees

with commitments of MAD 4.133 billion.

Projects in favor of enterprise creation

represented most of the loan guarantee

activity (79% of loan guarantee recipients

and 57% of guarantee commitments),

followed by development/ modernization

projects (15% of the recipients and 26%

of the commitments) (DTT, 2012: 28).

A sharp increase in the number of loan

guarantees for development/ modernization

projects was noted in 2009, attributed to

improvements to the guarantee offer. The

great majority of the loans of all types were

for investments in productive equipment.

The average guaranteed loan value was

MAD1.05 million, with these guarantees

covering an average of 72% of the risk

of the banks’ loans to the beneficiary

enterprises.

The more detailed impact analysis reveals

that CCG guarantees support bank loans

with an average value of MAD1.62 million

and leverage total average project

investments of MAD2.52 million (being

the sum of the total bank credit and

investments from other sources). The

portfolio consists largely of credit to

MSMEs with small amounts of paid-up

capital; almost one quarter are sole

proprietorships/ family businesses in

which the business assets are inseparable

from those of the owner. The remainder

(77%) are limited liability companies,

mostly incorporated as sociétés à

responsabilités limitées (SARLs), but

nevertheless with limited capital resources.

Most (63%) of the loans are for industrial

enterprises, compared with 37% in

low-value services. High-value service

enterprises (information and communications

technologies – ICT, research, consulting

and design, etc.) are conspicuous by

their absence; however, this may reflect

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their relatively low proportion among the

general population of MSMEs in Morocco

(DTT, 2012: 53).

The leverage of CCG guarantees is

impressive, as are a number of other

performance measures (see Table 5).

These results indicate a significant impact

on the level of credit, investment, jobs,

and return to the public treasury per MAD

of guarantee commitment. An important

consideration in measuring the effectiveness

of a loan guarantee program is the level of

additionality. The CCG performs well on

this indicator – 81% of the supported loan

files would not have been able to qualify

for the bank loan without the guarantee.

CCG guarantees have also been effective

in supporting the creation of jobs by

improving access to financing for MSMEs.

Indicator Result

Multiplier effect on amountof bank credit

Every MAD1 of CCG guarantee generates MAD1.77 of credit.

Leverage factor on total project investment

Every MAD1 of CCG guarantee generates MAD4.16 of investment.

Leverage on direct and indirect tax revenues

Every MAD1 of guaranteed loan value generates an estimated MAD2.8 in direct and indirect tax revenues from banking activities.

Additionality*

Some 81% of the guarantee files and 63% of the value of bank credits wouldnot have been approved/ issued by banks without the intervention of the CCG in compensating for deficiencies in the level of collateral demanded by the banks, indicating a high degree of additionality.

Growth in investment loansapproved by banks

Credits approved by the CCG in 2010 represented 14.6% of investmentbank loans, compared with 7.5% in 2009, showing an upward trend in itsimpact on MSME access to bank financing.

Job creation

An average of 9.43 new jobs were created per guaranteed loan (rangingfrom 0 to 500), totaling a collective estimate of 18,400 net jobs (over the2005–2010 period), with 90% of jobs accruing from the business creationprojects.

Return on investment to thepublic treasury

The resource cost of CCG commitments to the public treasury is low sinceonly default cases are ever mobilized for payment to the banks. CCG guarantees were called on to the extent of MAD423 million from 2003–2010(consistent with the estimated default rate of 10% within the portfolio, givencommitments of MAD4.133 billion from 2000–2009). The guarantee-sup-ported enterprises generated revenue of MAD1.74 billion for the Treasury(against total CCG and Treasury costs of MAD707 million). An estimate of the direct and indirect benefits of the loan guarantee to the public treasury suggests that as an investment, funding of the CCG generated a return of 23% (DTT, 2012: 57). These figures together amount to a persuasive business case for the loan guarantee program in Morocco vis-à-vis otherpossible types of public expenditure.

Table 5: Assessment of the impact of the CCG guarantees over the 2005–2010 period

Source: Deloitte Touche Tohmatsu (DTT, 2012)Note: *In the DTT study, additionality is defined as the share of credit flowing to businesses that could not offer100% business-linked collateral. Firms often offered non-business-linked collateral as well, but this was ignored forthe purposes of the analysis

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The DTT evaluation concludes that the

relationship with the CCG is highly valued

by the banks, which have been submitting

increasing numbers of viable business

credit applications to the CCG each year.

Moreover, CCG-supported credits lead

almost automatically to further business for

the banks, which therefore perceive a loan

dossier opened with a CCG guarantee

attached as certain to lead to a good

return. In addition, if a business creditor

defaults, the bank receives speedy

payment from public funds, since CCG

commitments are a sovereign guarantee.

In terms of the efficiency of CCG

operations, the DTT evaluation finds that

the volume of business handled from 2009

onwards has attained the critical level,

demonstrating full recovery of its salary

and equipment depreciation costs from fee

revenues. On a cost-benefit basis, every

Moroccan dirham of guaranteed loan

value leverages 2.8 times its value in direct

and indirect tax revenues from banking

activities and guaranteed MSMEs. It also

concludes that the CCG guarantee

mechanism produces a much greater

effect than measures such as grants/

subsidies and interest rate rebates, which

are often cited as alternatives in the

international financial literature. Even with

the lower interest rates (coinciding with

liberalization of the banking sector in

Morocco), MSMEs still face problems of

access to finance due to insufficient

collateral, which is the major obstacle the

CCG seeks to address. The use of grants,

for example, which only produce a

multiplier effect of 1, is a much more

expensive alternative for governments to

use in addressing the MSME financing

issue, requiring a much larger initial outlay

of resources, while producing a smaller

impact because the collateral security

problem is not solved.

F. Success factors

The DTT evaluation concludes that

the CCG has an efficient management

structure and conforms to best management

practices for guarantee systems in terms

of coverage of operating expenses and

investment by income from guarantee

fees. One factor contributing to its success

is its flexibility in responding to the evolving

financing needs of different groups of

MSMEs at various stages of the business

cycle. The strategic planning process,

together with careful evaluations of

program performance based on detailed

record keeping and data underlies CCG’s

current level of success. Other success

factors are its efforts to simplify the

guarantee process for the banks, provide

speedy response times on guarantee

approvals, and reach out to both banks

and MSMEs to promote the system and its

benefits. Commercial benefits to banks of

collaborating with the CCG explain why

banks are forwarding increasing numbers

of case files to the CCG for consideration.

Gender mainstreaming also seems to

have been quite a successful approach,

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although there is no objective assessment

of CCG’s performance in this regard and

no apparent attempt to set targets or

quotas on support for women-owned

businesses. However, as women

entrepreneurs are an underserved part of

the business community, loan guarantees

appear to be a particularly appropriate

mechanism for improving their credit

access. Indications are that the CCG has

had a corrective function in this regard. The

recent collaboration with the Association of

Women Entrepreneurs of Morocco (AFEM)

seems an appropriate mechanism for

greater outreach to women business

owners, although performance targets

should be set and monitored.

Finally, CCG’s success is also due to its

ability to attract incremental funding from

IFIs to increase its capacity to provide

more guarantees to under-collateralized

start-ups and MSMEs.

G. Lessons learned

One obstacle to the CCG’s development

was the complexity of its operations. This

was overcome by improvements in its

effectiveness and efficiency that led to a

greater simplification of systems and

processes. A second obstacle was its focus

on guaranteeing larger loans, thus meeting

the financing needs of larger rather than

smaller enterprises (AfDB, 2011). Starting in

2005, it reversed this trend, refocusing its

product range and setting guarantee

ceilings well below previously realized

values (DTT, 2012). Before 2005, the

number of applications was low, and

applications were jointly scrutinized on an ad

hoc basis by the CCG and the banks. With

a higher case load, the CCG in 2005

delegated to the banks the front-line tasks

of assessing credit requests, scrutinizing

business plans, and evaluating the

securities offered. Thereafter, the CCG only

stepped in at a second stage, at the banks’

request, in cases where claimants with

viable business plans lacked the requisite

level and type of collateral. Further

simplification of the procedures for

processing loans with a ceiling of MAD1

million has filled a previous gap in the

provision of smaller guarantee amounts,

made it more attractive for banks to offer

loan products to VSEs, and increased the

amount of short- and medium-term bank

credit available to VSEs and start-ups. In the

first six months of the launch of Damane

Express, the CCG processed 300 files for

these guarantees. This initiative is in line with

one of the policy objectives of the National

Strategy for Promotion of Very Small

Enterprises, developed in 2011 to

encourage banks to scale down their

lending practices and to make guarantees

more available to VSEs.

An ongoing challenge for the CCG is its own

capitalization, which may prevent it from

expanding its guarantee business. On the

face of it, around 1,800 guaranteed loans a

year appears rather modest, given the size

of the Moroccan population and its MSME

sector. For example, in Canada, with a

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population only slightly larger than

Morocco’s and a SME population upwards

of two million, the government SME loan

guarantee program backs approximately

7,500 loans a year8. Based on data in a

2009 World Bank report, the benchmark

indicator for Canada was 300 guarantees

issued per million population, compared

with only 33 per million in Morocco (Saadani

et al., 2010: 26-27), although this had

increased to 62 per million in 2013.

With an efficient guarantee system and

adequate reserves, there is potential for

substantial increases in the number of

guaranteed loans, leveraging growth in

bank lending to MSMEs in Morocco.

Results of the DTT evaluation demonstrate

the need to generate a minimum critical

volume of guarantee commitments to

cover expenses through guarantee fees. In

the case of the CCG, this would be at

least MAD 30 million in commissions each

year to cover expenses associated with

anticipated steady growth. This would

represent the break-even amount and

correspond to 1,440 guarantee files,

averaging MAD1 million, with an average

guarantee of 60%, a flat fee equivalent to

1.25% of the guaranteed credit amount,

and a guarantee commitment of MAD1.44

billion on total loan volume of MAD2.4

billion. This balanced level was reached

in 2011.

A potential future obstacle to the MSME

guarantee arm of the CCG is the

diversification of the product range and

resources away from MSME loan guarantees

into guarantees for other lending activity,

such as mortgages and student loans,

which the CCG also provides and which

significantly outweigh the volume of

guarantees for MSME lending activity.

This is something that will need careful

monitoring.

Overall lessons learned

• It is important to diversify guarantee

products to target different classes

of MSMEs (e.g. start-ups, young

entrepreneurs, women entrepreneurs)

and needs (e.g. working capital,

equipment, equity).

• Ceilings on loan guarantee products

should be set at appropriate thresholds

to ensure that guarantees are used to

back loans to MSMEs.

• Ongoing market analysis should be

undertaken to identify gaps in the

market that can be usefully addressed

by the guarantee mechanism.

• Guarantee programs need to pursue

continuous improvements to make the

guarantee mechanism more attractive

to MSMEs and to banks (e.g.

developing new products, streamlining

application and review processes,

8 http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/la03032.html

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increasing efficiency in turnaround and

approval times).

• The volume of guarantee business

needs to achieve a critical mass in

order for guarantee operations to be

sustainable.

• Periodic independent evaluations of

the impact of the guarantees will

determine whether they are supporting

MSMEs otherwise not able to access

bank loans (additionality) and

producing value to MSMEs, banks,

and the economy.

Kafalat SAL, Lebanon

Overview: Kafalat is a Lebanese private

for-profit financial company with a broad

development objective of assisting SMEs

in accessing commercial bank funding by

providing loan guarantees based on

business plans/ feasibility studies that show

the viability of the proposed business

activity. It offers six guarantee products

targeting newly founded and established

enterprises with no more than 40 permanent

workers, and operating in one of five

sectors: agriculture, industry, tourism,

traditional crafts, and high tech. The

Lebanese private sector is dominated by

SMEs that face difficulties in accessing

classical commercial bank funding. Kafalat

loan guarantees bridge that gap by making

possible otherwise inaccessible commercial

bank financing. This allows SMEs to

increase financing for their business

activities, which leads to increased domestic

investment, output, and employment.

A. Background and institutional history

Between 1976 and the late 1990s,

Lebanon experienced a period of social

disturbance and civil war. Although the

banking sector coped relatively well

through this time, bank lending policies

suffered. Commercial banks were forced

to deal primarily with known enterprises in

the Beirut/ Mount Lebanon region and,

because of the uncertain cash flow

possibilities of private enterprises in the

medium term, to focus more on short-

terms loans. These policies had a

deleterious effect on the SME sector,

cutting SMEs off from their main access to

financing outside of the family and leaving

many underinvested, particularly in the

agriculture, tourism and high-tech sectors,

and in rural areas.

The Kafalat guarantee program was

created to address this gap. The premise

was that if Lebanon had a central

guarantee system, more bank financing

could be directed to start-ups, high-tech

enterprises, SMEs in the agricultural,

tourism and handicraft sectors, and SMEs

in the northern and southern fringes of the

country.

Kafalat SAL was established in 2000,

following the passage of special legislation

(in 1999) allowing the National Institute for

the Guarantee of Deposits (NIGD) to set up

a private guarantee organization. It was

incorporated with 75% ownership by the

NIGD and 25% by some 50 Lebanese

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banks. By law, Kafalat is restricted to

guaranteeing no more than 75% of a loan

amount (plus accruing interest during the

grace period), with the loan value not to

exceed LBP 300 million. If Kafalat wishes

to offer guarantee products covering more

than 75% of the loan amount or loans

exceeding the maximum set by the law

governing Kafalat activity, it must secure

external funds.

Since its launch, Kafalat has introduced

several guarantee products to meet SMEs’

financing needs, each one developed

in response to identified economic

inefficiencies affecting the country’s

development.

These have evolved from a basic product

for qualifying SMEs in certain sectors (even

if the SME was operating as an informal

enterprise), to a product addressing the

financing needs of formal SMEs (and

encouraging the formalization of informal

enterprises), to products specifically

targeting the needs of technology-oriented

SMEs and start-ups, and guarantees to

support the longer-term financing needs of

SMEs in agricultural development and

those implementing energy efficiency and

renewable energy projects.

Objectives: In bridging the financing gap

for SMEs, Kafalat has two main objectives:

• To make bank financing possible for

SMEs that otherwise would have

difficulty qualifying for loans because of

insufficient collateral and perceived

risk; and

• To reduce the lending risk of banks in

dealing with SMEs by providing a

partial guarantee.

Beneficiaries: Kafalat targets start-ups

and SMEs with 40 or fewer permanent

employees in five defined sectors:

agriculture, industry, tourism, traditional

crafts, and high tech. These criteria

(employment and sector) apply to all

Kafalat guarantee products. The sectors

were identified as those in which SMEs

had the greatest difficulty in accessing

bank financing and are also in line

with Lebanon’s economic development

priorities.

B. Organizational model

Kafalat is governed by a six-member

Board of Directors consisting of

representatives from the NIGD and banks.

The Board is chaired by the General

Manager of Kafalat, who represents the

NIGD in the capacity as Board Chair. It

operates from a single office based in

Beirut. A close relationship with the banks

is ensured by the fact that some 50 banks

participate in the share ownership of

Kafalat SAL.

Staffing: At the end of 2013, Kafalat had a

small staff of 28, of whom 12 were credit

analysts. It can draw on additional

resources and expertise from the NIGD,

when necessary.

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C. Operational model

Products and services: The guarantee

program started with Kafalat Basic, a

product targeting SMEs with 40 or fewer

permanent employees in the five defined

sectors. Basic guarantees loans between

US$2,500 and US$200,000, with a

maximum loan term of up to seven years, a

one-year grace period, and an interest rate

calculated as 40% of the one-year

Lebanese Treasury Bill yield plus 3%

(compared with market rates of up to 10%,

which are variable by year depending on

the economic situation in Lebanon). This

encourages banks to make medium- to

long-term loans with monthly loan

repayments. Another important feature of

the product is that the recipient enterprise

does not have to be formal, which, for

example, enabled farmers to obtain a loan

if they owned land or operated as part of a

cooperative. Kafalat Basic allows banks

to require SMEs to provide additional

collateral of up to 50% of the loan.

Subsequently, Kafalat identified a need for

new products with a higher guarantee and

loan ceiling than those allowed by its law.

To acquire the incremental funding to enable

it to exceed these limits, it received support

from the European Union. On this basis,

it introduced Kafalat Plus, a product

guaranteeing 85% of a loan up to the

equivalent of US$400,000, and removing

the banks’ option to take any additional

collateral from the borrowing SME. However,

to qualify for this guarantee, the SME has to

contribute 30% of the loan value in equity,

be able to produce clear financial statements,

and be operating within a formal corporate

structure (i.e. joint-stock company, limited

liability company, or cooperative).

Kafalat also saw the need for a guarantee

product supporting innovative high-tech

enterprises, which banks perceive as being

high risk. It therefore launched Kafalat

Innovative, a guarantee product available

only to start-ups (less than two years in

operation) with an innovative product or

process (e.g. intellectual property or

materials, invention, new technique, or

new marketing approach). The guarantee

is up to 90% of the loan value, not to

exceed US$200,000. In the case of Kafalat

Basic, the borrowing SMEs are required

first to approach the bank, which assesses

the file and then sends it to Kafalat

for review. Because banks are largely

unfamiliar with the high-tech field, Kafalat

Innovative allows this group of SMEs

to approach Kafalat directly for the

assessment. If approved, Kafalat provides

the start-up with an irrevocable promise of

guarantee that the entrepreneur can take

to the bank; however, the final lending

decision rests with the bank.

In 2013, Kafalat introduced three new

guarantee products: (i) Kafalat Start-ups

and Innovation; (ii) Kafalat Agriculture, with

two guarantee programs applying to small

farms for agricultural production or for tree

plantation (to address the need to encourage

the replacement and reinvigoration of the

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tree stock in Lebanon); and (iii) Kafalat

Energy, a guarantee product to address

energy constraints faced by SMEs by

providing eligible SMEs with loan guarantees

for investments in energy efficiency and

renewable energy projects (guaranteed for

up to 15 years and intended to free up

cash flow to encourage “green business”)

(see Table 6 for a description of all Kafalat

guarantee products offered as at the end

of 2013).

Kafalat applies an annual fee to the

borrower of 2.5% of the outstanding

value of the guarantee, plus a 0.3% fiscal

stamp fee. This fee is reduced to 2% for

the Kafalat Energy program. In addition,

the lending bank can apply a one-time

fee of LBP 400,000. Guarantee recipients

also benefit from an interest rate subsidy

that is financed by the Lebanese Treasury

and administered by the Central Bank of

Lebanon.

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Table 6: Kafalat guarantee products

Guaranteeproducts

Beneficiary criteria andloan use

Risk coverage(% loan principal)

Minimum-maximumloan value

Guaranteeterm (loanduration)

Graceperiod

KafalatBasic

Start-ups and existing SMEs (with fewer than 40 employees) – individuals, partnerships, limited liability company, etc. Sectors: industry, agriculture, tourism, high-tech, and crafts.For fixed assets and working capital.

75%Bank cannot require additionalcollateral from theborrower of morethan 50% of theloan value.

LBP 4 millionto LBP 300million

Up to 7years

6-12months

Kafalat Plus

Conventional start-ups and existing SMEs – only incorporatedenterprises/ cooperatives. Sectors: industry, agriculture, tourism, high-tech, and crafts.For fixed assets and working capital to finance newproduction capacity or sustaincurrent production and employment.(Borrower must commit at least20% equity towards the project. The final debt/equity ratioshould be at most 70/30).

85%Bank not allowedto take additionalcollateral from theborrower.

LBP 4 millionto LBP 600million

Up to 7years

6-12months

KafalatInnovative

Start-up businesses of less thantwo years – limited liability or jointstock companies or cooperatives.Sectors: industry, agriculture, tourism, high-tech, and crafts.For fixed assets and working capital needs to developthe business idea of activity. (Borrower must make a minimumcontribution of 10% equity towards the project.)

90%Bank not allowedto take additionalcollateral from theborrower.

LBP 4 millionto LBP 300million

Up to 5years

6-12months

KafalatStart-upsand Innovation

Innovative enterprises and start-ups – only those registeredas joint stock companies. Sectors: industry, agriculture, tourism, high-tech, and crafts.(The borrower must commit tomaking a minimum contributionof 50% in equity towards the project.)

85% for start-ups90% for innovationBank not allowedto take additionalcollateral from theborrower.

LBP 4 millionto LBP 650million

Up to 7years

6-12months

KafalatAgriculture

Small Agriculture:SMEs in small-scale agriculture,newly founded or established – alltypes of legal economic entities.For financing of fixed assets andworking capital needs. Must befirst and only Kafalat guaranteedloan.

85%Bank not allowedto take additionalcollateral from theborrower.

LBP 4 millionto LBP 65million

Up to 7years

6-12months

Tree Plantation: For financing of arboriculture activities.

75%Bank IS allowed totake additional collateral from theborrower.

LBP 4 millionto LBP 480million

Up to 10years

6-36months

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At the start of 2010, Kafalat also

developed a new guarantee product more

geared to smaller businesses, Kafalat

Delegation. This product has a quick

turnaround. The guarantee is approved

automatically once the bank approves the

credit, as long as the application reaches

Kafalat within three days from its approval

by the bank.

The newest product, which Kafalat still has

under development, is a guarantee to

encourage seed capital and equity

investments in innovative SMEs and start-

ups. Although Kafalat has a guarantee

product for loans to innovative enterprises,

small businesses can be constrained in

reserving cash flow to repay the loans. At

the same time, innovative entrepreneurs

have difficulty attracting seed capital

because their enterprises are not as

transparent as they need to be to enable

proper assessment by equity investors.

This situation is further exacerbated by the

current lack of availability of seed capital

due to the instability in Lebanon as a result

of the spillovers from the Syria conflict.

Kafalat considered these factors when

deciding to design its new product. The

aim is to guarantee up to 70% of the seed

capital investment, with the expectation

that the failure rate for equity guarantees

could be quite high. If the market becomes

more efficient in providing seed capital,

Kafalat could later convert the equity

Guaranteeproducts

Beneficiary criteria andloan use

Risk coverage(% loan principal)

Minimum-maximumloan value

Guaranteeterm (loanduration)

Graceperiod

KafalatEnergy

SMEs with fewer than 40 employees – all types of legal economic entities, newly foundedor established. For investments inenergy efficiency and renewableenergy. Three types of guarantees:

Bank is allowed torequire additionalcollateral from theborrower, but notexceeding 50% ofthe loan value.

Energy EfficiencyFor adoption of or conversion tosustainable energy consumption

75% LBP 4 millionto LBP 600million

Up to 10years

6-12months

Renewable EnergyTo install a renewable power generation system and consumethe produced electricity for internal use; to replace fossil fuel-based electricity.

75% LBP 4 millionto LBP 600million

Up to 15years

6-24months

Renewable EnergyTo install a renewable power generation system with aim ofselling all or part of the producedelectricity to others.

75% LBP 4 millionto LBP 1,320million

Up to 15years

6-36months

Note: LBP = Lebanese pound

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guarantee to a loan guarantee covering up

to 85% of the loan value, and increasing

the equity ratio requirement up to 50%. In

effect, this means that Kafalat could

become a silent partner in the business

during the term of the investment guarantee.

Approach: Kafalat loan guarantees are

issued based on the viability of the

business project to be financed. The

guarantee, which is made in favor of the

lending bank, allows the borrower to

provide the bank with collateral, which

reduces the bank’s loan risk. Kafalat urges

banks to waive complementary guarantees/

collateral from the SME applicant and base

their credit decision on the strength of the

business plan and the project’s feasibility/

viability. In some cases, the Kafalat offer

explicitly forbids the lending bank from

imposing any additional collateral requests

on the borrower.

The SME submits a feasibility study and

business plan to the bank. The bank reads

the proposal and after approval by its

credit committee sends it on to Kafalat for

review. However, the final decision (and the

conditions) for granting the loan rests with

the lender. Once the application is

transferred to Kafalat, the decision will take

a maximum of three weeks if all required

documents are provided.

In addition to the guarantee, the borrower

benefits from a subsidy on the interest that

is being charged by the bank, which allows

SMEs to access bank funding at a

reasonable cost. Kafalat-guaranteed loans

are subject to a Central Bank exemption

from the statutory reserve requirement,

which significantly reduces the lending

bank’s cost of capital, allowing lending at

lower interest rates. When Kafalat was

launched, the Central Bank stipulated that

the lending banks could release up to 60%

of the guaranteed SME loan value from the

banks’ statutory reserve at zero interest to

the banks, and the Central Bank would

provide a subsidy for these loans by way

of a reduced interest rate to the banks.

Kafalat still offers interest rate support to

Kafalat-guaranteed loans. The rationale for

lower interest rates is that the guarantee

reduces the banks’ risks so banks can

price the loans at a lower rate.

Kafalat does not assist clients in

developing their feasibility studies and

business plans, believing that this would

create a conflict of interest. SMEs with

less capacity to prepare these documents

may on their own accord engage consultants

to help them, including auditing firms,

private providers of business development

support services, or chambers of commerce

and industry. Some of these organizations

may provide assistance free of charge.

Innovative enterprises may also find support

from incubators and accelerators.

Kafalat does not have any products

specifically targeting young entrepreneurs

or women entrepreneurs, but many of the

Kafalat Innovative clients are young

people. According to Kafalat officials,

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social norms in Lebanon are not as

restrictive of the activities of women as

they are in other MENA countries.

However, if they wanted to favor women

entrepreneurs, the way to do it could be to

raise the guarantee ceiling. In the

meantime, they prefer to have a gender-

neutral policy.

D. Financial model

Kafalat was initially capitalized with LBP20

billion, which came through a pooling of a

percentage of the reserve requirements

deposited by the participating banks at the

Central Bank. This capital is used to issue

credit guarantees to the eligible SMEs.

Kafalat is a profitable operation, earning

commissions from each guarantee.

Revenue from commissions totaled

LBP14.6 billion in 2012, which accounted

for about 70% of its total revenue (the

remaining 30% coming from income on

investments and cash deposits). After-tax

profits in 2011 amounted to LBP11.3

billion, and, in 2012, to LBP 10.1 billion. In

2012, this amounted to a return on net

revenue of almost 64%, and 11.8% on

equity.

Although a for-profit company, Kafalat has

a sense of mission; as such, up to now, the

shareholders have agreed not to issue

dividends. This has enabled the organization

to reinvest profits into free reserves for later

use in operations.

E. Results and impact

Kafalat has grown significantly over the

past 12 years. Since 2000, it has guaranteed

13,000 loans totaling US$1.5 billion. At the

end of 2013, there were 7,500 active

guaranteed loans with an outstanding

value of US$550 million. The highest-

performing year was 2010. Since then,

Kafalat’s performance has been affected

by conflict in the region. In the years up to

2010, Kafalat was guaranteeing about

1,500 loans a year. Since 2010, the portfolio

volume has dropped by almost 20%.

However, in general, Kafalat guarantees

between 1,000 to close to 1,500 new

loans a year (Table 7), more or less

maintaining its outreach performance.

One measure of the impact of guarantee

programs is their penetration/ outreach. A

World Bank study, using the number of

guarantees issued per million people as a

benchmark, reported an indicator of 292

Kafalat guarantees per million people in

2009 (on basis of 1,169 guaranteed

loans for that year). This made Kafalat

the highest-performing scheme in MENA

countries in terms of outreach. Egypt’s

Credit Guarantee Company reported

issuing 3,595 guarantees in 2009, but

on the basis of Egypt’s much larger

population, this amounted to only 45

guarantees per million people (Saadani et

al., 2010). This demand for Kafalat

guarantees is evidence of its relevance in

the Lebanese market.

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Kafalat Basic is by far Kafalat’s most

popular guarantee product (more than

three-quarters of the guaranteed loans and

two-thirds of the loan values at issue),

followed by Kafalat Plus (almost a quarter

of the loans and a third of the guarantee

loan values). These are the oldest products

and consequently likely the best known.

Kafalat Start-ups and Innovation and

Kafalat Agriculture were launched in 2013

and hence need more time to achieve

traction in the marketplace. Although the

sector distribution of recipient SMEs varies

by type of guarantee product, overall,

manufacturing/ industrial SMEs make up

the largest group of beneficiaries (41.7%),

followed by agricultural SMEs (37.2%), and

SMEs in the tourism sector (17%)9. Just

over a third of the loan values at issue

are less than LBP 100 million, and 42%

are over LBP 200 million. The average

loan amount at issue is approximately

US$117,000.

In terms of efficiency in dealing with

guarantee requests, Kafalat commits to

providing its approval decision within three

weeks along with a letter of guarantee

back to the bank (if the decision is

affirmative).

The provision for default rates was initially

set at 3.8% to allow a comfortable margin

for operation, although historically the

actual default rate has been only 2%. As

the civil war in Syria has progressed and

9 Source of data: http://www.kafalat.com.lb/loans-statistics?field_category_tid_1=75&=Apply

Table 7: Number of guarantees by sector of recipient SMEs

2011 2012 01/01/201330/06/2013*

Sector No. of loans % No. of loans % No. of loans %

Industry 555 39,0% 449 38,6% 141 33,8%

Agriculture 531 37,3% 414 35,6% 162 38,8%

Tourism 282 19,8% 228 19,6% 80 19,2%

Craft industries 29 2,0% 48 4,1% 20 4,8%

Advancedtechnologies 26 1,8% 23 2.0% 14 3,4%

Total 1,423 100% 1,162 100% 417* 100%

Note: *Data were only publicly available for the first half of 2013

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filtered into Lebanon, the Lebanese

tourism sector has been especially

affected. In 2013, the default rate on

guaranteed loans in this sector jumped to

2.1% and was expected to rise to 2.75%,

but still within the set margin for risk and

carefully monitored.

F. Success factors

One of the most important factors in

Kafalat’s success is that it was established

as a joint-stock company owned by

the NIGD and the major banks, partners

that could provide sufficient capitalization

and also afford to recapitalize the

fund if necessary. Kafalat’s management

also has extensive knowledge of

banking, entrepreneurship, and economic

development, which are the foundations of

a successful SME guarantee scheme. In

fact, this may be one of the good practice

lessons learned from Kafalat relative to

other guarantee programs in the MENA

region.

Because the Chairman of the Board/

General Manager came from the banking

sector10, he had credibility with the NIGD

when setting up the fund. The organization

grew organically from within the country. In

other MENA programs, guarantee funds

often grew out of donor or government

projects and therefore reflect donor/

government priorities, which may impose

restrictions on the directions of their funds.

Having grown from the inside, Kafalat did

not have to compromise to meet the

priorities of donors/ governments.

In addition, Kafalat was founded in

response to a detailed assessment of

the economic development deficiencies in

Lebanon and the challenges faced by the

SME sector and the banking sector. This

was crucial to understanding the gaps

between banks and entrepreneurs/ SMEs,

and designing appropriate products to

address failures in allocation of financing to

the SME sector.

Another strength in the Lebanese context

is that the guarantee system is centralized

in one organization and able to work

through an efficient banking sector using

its broad network of branches. Lebanon is

a highly banked country, with close to

1,250 bank branches serving a small

population of about four million.

Support from the Central Bank was

important in getting the banks onside.

Apart from the fact that most of the banks

are shareholders in Kafalat SAL, various

government interest rate subsidies for

Kafalat-guaranteed products make the

10 The Chairman actually owns part of a bank, but adheres to a conflict of interest policy in carrying out his Kafalatresponsibilities.

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scheme attractive for banks (and SMEs),

with the Central Bank’s lower reserve

requirements for SME lending providing an

additional incentive.

On the other hand, in its initial three years,

Kafalat had to be aggressive in promoting

the guarantee system and breaking into

the market. The company made more than

200 presentations throughout Lebanon,

giving lectures to both banks and SMEs.

On the plus side, Lebanon is a small

country, which makes it relatively easy

to reach the entrepreneurial market. In

larger countries, these efforts would prove

more difficult. The growing popularity of

the internet has strengthened Kafalat’s

communication efforts and enabled greater

effectiveness in its marketing and advertising,

so the public can access more information

about the organization. Now, after several

years of use, the banking sector actively

promotes availability of the Kafalat guarantee

products (as evident by scanning their

websites). According to Kafalat officials,

some do more promotion than others,

but all are fairly active in extending Kafalat-

guaranteed loans.

The support donors has also been an

important factor in Kafalat’s success in

developing niche guarantee products

with parameters that fall outside their

legal framework. Partnerships with

international organizations such as the

European Union have been essential in

allowing Kafalat to respond to SMEs’

needs for the financing of higher-risk

activity, as well as for larger projects, not

covered by Kafalat’s core capital and

legal requirements.

G. Lessons learned

• Guarantee programs should begin

with a thorough assessment of the

economic context in the country, of

the entrepreneurial/ SME base, and of

the banking sector itself, because

the aim of guarantee funds is to

mediate the gaps between banks

and entrepreneurs/ SMEs by designing

appropriate products.

• Complementary incentives from the

Central Bank induce banks to lend to

SMEs and improve their receptivity to

and take-up of loan guarantee products.

• Intensive promotion efforts are

required to launch a guarantee scheme,

including outreach and communication

to banks and SMEs; aggressive

communication efforts are required on

a continuing basis to maintain awareness

of the availability of the guarantee

system and new products.

• Guarantee organizations need to

conduct regular surveys of the market

to identify gaps in financing to SMEs

and develop innovative new products

to address these gaps.

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3.2. Lease Financing

Leasing is an asset-based financial

transaction with the asset providing the

security for the transaction. Leasing

company decisions are based on the

ability of the lessee to generate cash flow

from business operations to service the

lease payment, rather than on the balance

sheet, past credit history, or supplementary

collateral. Leasing has many advantages

over traditional bank financing for the

purchase of buildings, production

equipment, automobiles, furnishings, etc.

First, the MSMEs do not have to meet the

rigid collateral requirements imposed by

banks. With leasing, the leased asset is the

security. Second, leasing offers MSMEs

access to medium- and longer-term

financing with payment periods that more

closely match the life cycle of the asset.

Banks, on the other hand, are more likely

to lend on a relatively shorter-term basis.

In addition, leasing companies are able to

process applications more quickly than

banks, with approvals generally made

within a week, and faster in the case of

small leasing deals. Also, the recovery of

leased assets is much easier in the leasing

sector than in the banking sector.

Leasing has the potential to be particularly

attractive to MSMEs that do not have a

long credit history or a significant asset

base for collateral. Since the principle

behind leasing is inherently Islamic Sharia

friendly, it is also a more attractive financing

option for many MSMEs in MENA countries,

which are reluctant to accept the interest-

bearing terms of traditional bank loans.

Quick facts

Start date 2000

Number of employees 28

BeneficiariesSMEs with 40 or fewer permanent employees in five defined sectors: agriculture, industry, tourism, traditional crafts, and high technology

Total number of guaranteed loans 13,000 guaranteed loans totaling US$1.5 billion

Number of guaranteed loans peryear

1,000 – 1,400

Active guarantee files at the end of2013

7,500 loans – outstanding loan value of US$550 million

Penetration of Kafalat guarantees 292 loan guarantees per million population*

Profitability of operationsProfit of LBP 10.1 billion in 2012; 63.8% return on net revenue; 11.8% onequity

Default rate 2%

Notes: Data to December 2012. *Benchmark based on data for 2009 from Saadani et al. (2010:27). LBP = Lebanese pound

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Most MENA countries have a leasing

industry, although some are more

developed than others. Among the

Deauville Partnership countries, the

leasing sector is assessed as being in the

late emerging stage (several competitors,

differentiated products) in Tunisia; in the

late nascent stage in Egypt, Jordan, and

Morocco; in the early nascent stage in

Yemen; and non-existent in Libya (Al-

Sugheyer and Sultanov, 2010). These

stage classifications of the leasing market

developed by the IFC are based on the

ratio of leasing volume to gross fixed

capital formation in the country. In

Tunisia, this ratio was estimated at about

9%, compared with less than 5% in Jordan,

Morocco, and Egypt, in descending order

(Al-Sugheyer and Sultanov, 2010: 10). As

a ratio of leasing volume to GDP, Tunisia,

at about 2%, also outperformed the other

Deauville Partnership countries, which

stood at 1% or less. Growth of the

leasing market, however, continues to

accelerate, indicating strong demand for

the product.

Development of the leasing sector as an

alternative source of financing for private

enterprises, especially MSMEs, has been

one of the priorities of IFIs. Consequently,

access to low-cost lines of credit has been

made available to leasing companies in the

MENA region to deepen their capacity to

on-lend to the MSME sector.

Tunisie Leasing was selected to be profiled

as a good practice for this report because

it was the first, and thus the longest-

established, leasing company in the

Deauville Partnership countries. It is the

market leader in Tunisia, with the highest

paid-in capital and the largest number of

MSME clients and volume of leasing

business. It was also a case study

specifically requested by the Deauville

Partnership countries.

Tunisie Leasing, Tunisia

Overview: Tunisie Leasing was the first

leasing company in Tunisia. It is the largest

division of the now diversified Tunisie

Leasing Group (TLG), accounting for 48%

of TLG’s total consolidated results in 2012

(TLG, 2013). Other divisions include:

Tunisie Factoring (8%), Tunisie Location

Longue Durée (car rental) (10%), and

Maghreb Leasing Algérie, its leasing

operation in Algeria (30%). The leasing

operation in Tunisia is the subject of this

good practice profile.

Tunisie Leasing has the largest portfolio of

any leasing company in Tunisia with total

assets of EUR 433 million as of June 2013.

It has maintained its position as market

leader even while the leasing industry has

expanded with a number of other leasing

firms establishing themselves in the

market.

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A. Background and institutional history

The TLG was established in 1984 by a

prominent Tunisian economist and

businessmen with international experience,

marking the launch of the leasing industry

in Tunisia. It was initially supported by

Credit Lyonnais of France. It is now a listed

company on the Tunisian Stock Exchange

with mixed ownership. The Amen Group,

a joint public-privately owned group, owns

53% of the shares; the Stusid Bank and

Rached Horchani11 each own about 8%;

foreign investors have a 6% stake, with

the remaining 25% held by public

shareholders (TLG, 2013).

Tunisie Leasing, along with the early

providers of credit for leasing operations in

Tunisia, entered the leasing market in the

belief that leasing was a key source of

finance to SMEs (World Bank, 2001). With

no requirement for loan collateral, and

generally lower risk burden to lenders,

leasing can be a feasible substitute for

bank credit for SMEs. In some economies,

such as Eastern European countries in

recent years, governments strategically

promote leasing to help the expansion of

the market for SME finance (White Clarke

Group, 2013). The government of Tunisia

has also sought to encourage the

development of the leasing market as a

partial remedy to SMEs’ lack of access to

bank financing.

The leasing market grew slowly from 1984

to 1990, but saw the movement of some

11 Rached. Horchani owns one of the largest multisector holding groups in Tunisia.

Quick facts

Start date 1984

Number of employees 140

Beneficiaries Primarily SMEs with fewer than 300 employees; at least one year of operation

Total number of leasing contractsas of 2013

5,185 contracts with value of over TND 300 million

Average size of a leasing contractin 2012

TND 59,870

Share of leasing market in Tunisia About 20%

Non-performing loan share of portfolio (2013)

6.1%

Notes: Information as of December 2012. TND = Tunisian dinar.

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banks into the field only in 1990. The sector

operated without a legal framework until

1994 when the government implemented

a leasing law to regulate the sector.

Over the last decade, the government

has strengthened legal and regulatory

frameworks in this area, created public

financing systems, facilitated the development

of financial markets, and helped to expand

the supply of financial products geared

to SMEs. Provisional conclusions from a

survey of SME finance in Tunisia, carried

out by Ernst and Young (due to be released

in 2014), reinforce the major importance of

the leasing industry in Tunisia.

Objectives: The primary and driving

objective of Tunisie Leasing is to be a

profitable business in the provision of lease

financing to Tunisian enterprises, as an

alternative to traditional bank financing, for

the purchase of fixed assets. Its goal is to

be the preferred partner of SMEs and

professionals (doctors, dentists, etc.) in

financing the equipment and property

necessary for their activities.

Beneficiaries: Tunisie Leasing has no

preference regarding the size of firms

within its portfolio, considering it desirable

to have a varied clientele. However, to

obtain a leasing contract, the enterprise,

which can have any legal form (including

sole proprietorships), has to have been in

operation for at least one full year. This

requirement effectively excludes leasing to

start-ups.

SMEs (with fewer than 300 employees)

constitute 95% of its leasing clients, the

remainder being a few large firms. This is

the general experience in the Tunisian

leasing industry as a whole (World Bank,

2009). Because SMEs12 dominate the

Tunisian entrepreneurial landscape,

accounting for well over 99% of all firms,

including in the industrial sector (INS,

2012), Tunisie Leasing’s main target and

actual beneficiaries are almost necessarily

SMEs.

The demand for leasing from the SME

sector is high due to the difficulty in

accessing bank financing. Unlike banks,

leasing companies require no collateral

beyond the leased asset, while banks

require collateral of, on average, 167% of

the loan value. This is somewhat less than

required in Morocco and Algeria, but

significantly more than in Egypt and

countries in other world regions (World

Bank, 2009: 32). From the supply-side

perspective, Tunisie Leasing views SMEs

as good clients. Not having the market

weight of larger firms, SMEs are essentially

price-takers, who accept the market price

12 Tunisia does not have an officially accepted definition for SMEs, but as per the Communique of the Council ofFinancial Markets (Bulletin 2588 of 3 May 2006), small and medium enterprises are defined as those with not morethan 300 employees and TND 4 million of net fixed assets.

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as it is with no power to change it, and are

less able to find other sources of finance

or negotiate terms on leasing offers. In

other words, they are a potentially more

profitable clientele. Irrespective of whether

they are inherently more risky as clients

than larger firms, Tunisie Leasing is

protected against risk of default.

B. Organizational model

As noted above, Tunisie Leasing is a

publicly traded company. Its head office is

in Tunis, and it has eight branch offices in

other parts of the country. Its activities are

governed by its 12-member Board of

Directors chaired by the President of

the TLG.

Staffing: Tunisie Leasing has a staff of 140

involved in carrying out its various

operations, such as dealing with clients,

assessing leasing applications, sourcing

the assets to be leased, negotiating

purchasing and lease agreements,

monitoring risk, following up on clients’

contracts, and disposing of assets that fall

into default or are not purchased by clients

at the end of the leasing contract.

C. Operational model

Products and services: Tunisie Leasing

offers leases for three product classes:

vehicles (cars, transport equipment);

production equipment (machine tools,

building and construction equipment,

medical equipment, materials handling

equipment, hardware); and buildings/

premises (construction or acquisition, plus

furnishings and office equipment), all of

which are attractive to SMEs. It also offers

a Sharia-compliant leasing product, IJARA.

Tunisie Leasing purchases the required

assets and leases them back to the client

firm on a rental basis. The average contract

term is 42 months (36-60 months for

vehicles, 36-84 months for equipment,

and 36-120 months for buildings). At the

end of the lease period, clients who have

met their payment obligations may

purchase the asset at a nominal price (e.g.

1% of the market value for real estate and

TND 1 for vehicles and equipment).

Approach: The leasing application

procedure entails submitting an online

application form stating the purpose and

amount of financing required, and

supplying copies of the company’s legal

documents, financial statements (for the

past three years, as applicable), and bank

account records for the past six months.

All applicant companies are given a unique

identification number and their legal and

financial documents kept on file, so that

repeat applicants need not re-supply them

each time. All applications are archived

electronically, including those that are

eventually rejected.

Tunisie Leasing uses a number of criteria

to assess applications. The size of the

applicant firm is not in itself a screening

criterion. In general, the financial health of

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the applicant has the strongest weighting

in the selection decision. However, the

financial information supplied is not always

definitive and supplementary information

is used to assess the basic information

provided in the application. First, the

applicant’s internal credit risk score is

calculated based on information from

the Central Bank of Tunisia’s Centrale des

Risques, a credit registry with a database

of past and outstanding loans for all firms13.

For repeat clients, Tunisie Leasing’s internal

records are consulted for the firm’s previous

repayment record. Finally, in doubtful cases,

local knowledge is garnered through the

company’s local agencies on the personal

standing and business reputation of the

applicant. The treatment of applications by

each of the nine offices follows company-

wide rules and procedures for making

leasing approval decisions.

Sectoral issues are not very important. Any

structural differences in risk are counter-

balanced by the case-by-case approach

taken by Tunisie Leasing in the issuing of

leasing contracts. In general, where a sector

as a whole is considered risky, the company

may raise the charge rate to the client. For

example, according to the Central Bank of

Tunisia, the rate charged to agricultural

producers averages 11.3%, compared with

the total industry average leasing rate of

9.77% in 2012 (BCT, 2013: 97).

Apart from assessment of an applicant’s

financial status and the risk status of the

industry and sector involved, the quality of

the asset to be leased is considered by

reference to its resale value in a secondary

market in the case of default. Applications

for lower-quality assets can also be

approved if the client has a strong financial

record and/ or if higher rental charges can

be applied. Assessment and approval

decisions are usually made within two to

seven days.

Clients in default may be passed to dispute

resolution and the assets reclaimed and

sold in batches of recovered used vehicles,

construction equipment, etc., including on

the company website. As full and exclusive

title in all of the leased-out products

remains with Tunisie Leasing, recovery

from defaulters is generally straightforward

and recovered assets are not subject to

large write-downs in value.

The gender of the firm’s owner/ manager is

not taken into account in the assessment

of applications. Increasingly, IFIs tend to

ask for “social” data of this kind. Pending

approval of a line of credit from the

European Bank for Reconstruction and

Development (ERBD), the Bank has asked

Tunisie Leasing loan officers to record social

information and to enquire about applicants’

employment figures and job creation

13 There is no register of securitized loans in Tunisia, which is a barrier in accessing traditional bank financing.

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expectations. So far, Tunisie Leasing does

not see any gender differences emerging

on this basis, at either the appraisal stage

or in clients’ repayment performance.

D. Financial model

Tunisie Leasing earns most of its revenue

from charge rates on leasing contracts. In

2013, this amounted to TND47.5 million,

generating before-tax profit of TND9.2

million (TLG, 2014: 15). The company’s

strategic approach in pursuit of profits is to

decide periodically – normally annually – on

target volumes and margins for each of its

three product group departments. To

finance the purchase of assets supporting

the leasing contracts, the company issues

bonds and negotiates lines of credit

with banks and IFIs. The advantage of

borrowing through IFIs is lower interest

rates, so they are better able to provide

competitive rates to clients, and longer

maturity terms. The IFIs may link the line of

credit to performance results, such as

providing access to SMEs. Over the years,

Tunisie Leasing has benefited from a

number of loan agreements from IFIs

interested in seeing an expansion of the

leasing industry in Tunisia.

Tunisie Leasing’s first IFI loan (covering

1993–2001) was through the Tunisia –

Private Investment Credit Project, which

aimed to contribute to the growth of

Tunisia's leasing industry by providing the

newly formed leasing companies with

medium-term credit and advice in

organizational aspects of their business

(World Bank, 2001). The project had a total

budget of US$200 million, financed jointly

by the World Bank/ International Bank for

Reconstruction and Development (IBRD)

and the Japan Bank for International

Cooperation. In addition, the IBRD lent a

total of US$19.4 million to three leasing

companies, of which US$6 million was

allocated to Tunisie Leasing. In total,

Tunisie Leasing drew down credit of

US$23.7 million from the project.

In 2003, Tunisie Leasing received a EUR 8 million

line of credit from AfDB to finance small

enterprises with small-scale leases of

TND20,000 to TND300,000. Subsequently,

the company secured a line of credit of

EUR 4 million from the OPEC Fund for

International Development in 2004, geared

to enabling the company to meet its

clients’ longer-term financing needs, and

to support the Tunisian government’s

industrial sector modernization program

funded by the European Union. In

June 2014, EBRD, together with the

International Cooperation and Development

Fund of Taiwan, agreed to extend to

Tunisia Leasing a loan of EUR 10 million

to increase the volume of its leasing to

MSMEs. EBRD’s interest is in increasing

MSMEs’ access to financing in Tunisia

in the face of persisting liquidity

constraints.

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E. Results and impact

The leasing industry in Tunisia has

expanded strongly over the past decade.

The leasing market experienced a surge in

2007 and has continued to expand since

then, but more modestly. The quality of the

sector portfolio improved over the same

period with better management and more

rigorous scoring of applications (World

Bank, 2009). In 2007/08, the share of

leasing in gross fixed capital formation

was approximately 11%, rising to 16.4% in

2012 (BCT, 2013), similar to the level

in Morocco. This increase reflects a 19%

growth in the leasing sector from 2011 to

2012, reaching TND1.4 billion. Following

Tunisie Leasing’s success in opening

up the leasing industry in Tunisia, more

companies have entered the market,

which in turn means that more SMEs

have access to this alternative form of

financing.

The increase in new business has resulted

in a steady rise in the value of total portfolio

obligations. The total number of leasing

contracts grew by almost one-third

between 2007 and 2012 (an annual

average of 6%), but dipped in 2011, while

the volume of new contracts rose by

60% (an average of 12% a year), and the

total outstanding portfolio of financial

obligations almost doubled (Table 8). By

2013, the number of leasing contracts had

risen to 5,185. The average size of

contract leases fluctuated considerably

over the period, from a low of around

US$30,000 (2007) to a peak of

US$60,000 (2011).

The annual increase in new contracts

and leasing volume indicates growth in

demand for leasing products. The high

volume of repeat customers is also

indicative that SMEs find leasing from

Tunisie Leasing a relevant and attractive

alternative to financing the acquisition

of assets. The entry of around ten new

leasing companies into the market has not

dislodged Tunisie Leasing from its position

as market leader, although its market share

has steadily declined from 25.6% in 2007

to 19.7% in 2012.

2007 2008 2009 2010 2011 2012

New contracts (TND million) 186.6 208.2 219.3 294.4 239.2 299.0

Number of contracts 3,783 4,135 4,044 5,118 4,033 4,994

Average contract size in TND 49,325 68,198 72,800 57,522 97,198 59,870

Total outstanding portfolio obligations (TND million) 280.2 328.0 373.0 460.6 489.6 519.5

Market share 25.6% 25.4% 21.7% 21.3% 20.4% 19.7%

Source: “Chiffres clés de la branche leasing en Tunisie”. Online at: http://www.tunisieleasing.com.tn/document/graphiques_2012.pdf?id_article=63

Table 8: Selected operational statistics for Tunisie Leasing, 2007–2012

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Leasing companies must abide by the

rules of the Central Bank of Tunisia, which

aim to improve the quality of leasing

companies’ portfolios. They must meet

international standards in terms of risk,

specified as a rate of non-performing loans

(NPLs) of less than 15% and a coverage

rate of at least 70%. Tunisie Leasing

performs well on the NPL indicator and

generally well on the coverage indicator,

except for the aberrations in 2011 that

were likely a result of the negative

economic impact of the Arab Spring (as

shown in Figure 2). Careful and efficient

monitoring of NPLs enabled Tunisie

Leasing to respond quickly to the spike in

2011 and bring the NPL and coverage

ratios back to acceptable standards.

At the end of 2013, NPLs represented

only 6.1% of the portfolio and the NPL

coverage rate had increased to almost

80%.

Figure 2: Trends in non-performing loans and coverage - Tunisie Leasing,2007–2013

10.4

7.2 6.1 6.3 8.7

6.5 6.1

0 2 4 6 8

10 12

2007 2008 2009 2010 2011 2012 2013 % of

leas

ing p

ortfo

lio

NPLs portfolio share (percent)

81.6 87.8 88.0 77.5 59.1

75.2 79.4

0 20 40 60 80

100

2007 2008 2009 2010 2011 2012 2013

% re

cove

ry on

NPL

s

NPL coverage (percent)

Note: * NPL coverage refers to the ratio of allowances for provisional losses to the gross of NPLsSource: “Chiffres clés de la branche leasing en Tunisie”

Fitch Ratings, a global ratings agency,

confirms that Tunisie Leasing is the market

leader in leasing in Tunisia with sustained

profitability, satisfactory asset quality

(better than the sector average), good risk

management compared with peers (bad

debt ratio below the industry average),

and, given its superior capital ratio,

better placed than peers to cope with a

deterioration of credit risk.

The entry of new leasing companies

into the market obliges Tunisie Leasing

to continuously seek improvements in

its operational efficiency to remain

competitive. In 2012, its operating ratio

(expenses to net income) was 48.1%,

ending the year with an after-tax profit of

25% on net revenue (TLG, 2013). This is

highly competitive with other leasing

companies in Tunisia.

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F. Success factors

The success of Tunisie Leasing’s

operations can be attributed to factors that

are both internal to the company and

external. First, operations are conducted

within the framework of the Tunisian

Leasing Law (Law 94-89 of 26 July 1994).

The law is conducive to good performance

because it sets the terms and conditions

for the industry, defines the scope of

the market, and establishes benchmark

indicators for minimizing risks.

Second, Tunisie Leasing’s expansion in

the mid/late 2000s and the subsequent

consolidation of the industry have been well

managed. When the risks in the portfolio

increased without commensurate financial

coverage, the company tightened its

assessment procedures, introduced a

system for setting targets for contract

volumes and margins by product category,

tightened up supervision of payment arrears

and delinquencies, and speeded up asset

recovery (TLG, 2013). This turned the

situation around and brought down the

share of NPLs within a short period.

Management effort continues to seek

improvements in financial risk assessment

procedures for leasing applicants.

Third, expansion has been fueled by the

high proportion of repeat clients, who

account for 60% of the business. This

strong client retention rate is attributed to the

high quality of service offered by Tunisie

Leasing and actions taken by the loyalty

marketing teams (customer visits, telephone

contacts, operations conducted by the call

center to encourage customers whose

contracts come to maturity to renew

contracts), which are facilitated by the use of

commercial customer relationship management

software.

Fourth, Tunisie Leasing’s relatively large

and expanding branch network facilitates

greater outreach to SMEs and other

regional businesses than other leasing

companies in Tunisia may manage. In

2013, Tunisie Leasing operated through

eight regional offices, compared with only

one or two for other leasing companies.

Last but not least, commercial success

has been supported by its strong record in

obtaining lines of credit from the IFIs. This

has provided it with relatively low-cost

sources of finance and associated

technical advice, and given it commercial

advantage in a competitive market place.

G. Lessons learned

A major challenge for Tunisie Leasing is

that as many as 90% of applicants do not

generally provide accurate or complete

financial information. Tax returns are not of

help since only enterprises with a turnover

of at least TND5 million (US$3.9 million) are

legally obliged to submit certified and

independently audited accounts to the

authorities (World Bank, 2009). Tunisie

Leasing finds that SMEs regularly declare

up to 50% less than their real turnover to

the tax authorities, so applicants’ bank

statements give a truer picture of their

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financial health. The opacity of Tunisian

SMEs is also of great concern to the

banks, which cite the poor quality of

financial information submitted by SMEs

requesting loans to be a major constraint.

The Central Bank does not have a

database on SMEs’ financial status, and

the credit risk registry relates only to firms’

credit histories and outstanding loans.

Although leasing has been gaining ground

as a financing alternative for SMEs in

Tunisia, continuing efforts are needed to

educate the market about leasing as a

financing tool. Tunisie Leasing is addressing

this issue by promoting its services through

its branch offices and making use of a call

center to prospect for new clients. This

approach has helped reach a wider pool

of potential clients.

Competition from other leasing companies

is also a challenge. Gross margins for the

industry are relatively tight. In 2012, the

average rate of interest in industry-wide

leasing contracts was 9.77%, while the

average cost of borrowing resources from

money markets was 5.6% (BCT, 2013:97-

98.). To improve its margins, Tunisie Leasing

seeks to lower its operating costs and to

secure lower-cost sources of capital, such

as from the IFIs (as discussed). Not only do

loans from IFIs carry lower rates of interest

than local money markets, but also

longer maturity dates. In addition, the

development IFIs are keen to support

leasing activity that is geared to MSMEs.

The impact of recent economic shocks on

Tunisie Leasing’s business has been

mixed. The global recession has not had a

great effect in Tunisia, but the situation is

delicate in the aftermath of the revolution.

Political uncertainty has negatively affected

investment and growth in the country,

causing some firms to close, but it has not

had much of an impact on Tunisie Leasing.

The ratio of NPLs did increase sharply in

2011 – though not reaching 2007 levels –

but fell in 2012/13. Tunisie Leasing’s

experience in this respect thus echoes,

with a lag, the performance of the leasing

industry worldwide, which increased in

total size by 21.9% in 2010/11 after a

collapse the year before (White Clarke

Group, 2013). Another negative factor for

the company is inflation, which has

resulted in a declining exchange rate. This

has pushed up the cost of imported

vehicles and equipment and made

them more expensive under leasing

contracts.

Overall lessons learned:

• A separate leasing law provides a

sound legal basis for developing the

leasing industry. Legislation needs to

cover the roles and responsibilities of

lease parties, effective procedures for

repossession of leased assets in case

of default, a registry for leased assets,

and neutral tax treatment to ensure

equal treatment for leasing companies

vis-à-vis other forms of credit.

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• Access to low-cost lines of credit from

IFIs (with long maturity dates) to

finance the purchase of leased assets

for SMEs, allows leasing companies to

keep costs competitively lower for

clients and still generate profitability. IFI

lines of credit may also bring technical

advice to the leasing companies.

• It is important to actively promote

leasing as an alternative form of

financing among SMEs. Effective

strategies include: forming cooperative

relationships with vehicle and

equipment dealers to develop referrals

to SME customers; operating through

a regional office network to increase

exposure and accessibility; and making

use of advertising and coordinated

prospecting approaches.

• Leasing to SMEs can be a profitable

business, but leasing companies must

pay attention to the quality of SME

applicants and leased assets, and

develop effective systems for assessing

financial risk (e.g. credit scoring methods)

and monitoring the level of NPLs.

• Screening new leasing applications

from SMEs requires innovative (and

often qualitative) approaches to assessing

their financial health, as many do not

have accurate and reliable financial

statements.

3.3 Capacity Building to Facilitate BankLending to SMEs

Although a few banks in the Deauville

Partnership countries have begun to

recognize the potential of the SME market

and have experimented with different

models of promoting their services,

including loan products, to SMEs, the

majority are still reticent about lending to

SMEs. Their reasons for this vary, from lack

of credit information, to higher risk, to

higher transactions costs. But one of the

biggest barriers is their lack of knowledge

of the SME market and the know-how and

tools for assessing the risk of smaller

enterprises in an efficient and cost-effective

manner. According to a European

Investment Bank report on access to

finance for MSMEs in MENA, “human

resources is one of the main limiting factors

of this industry….[especially the] limited

capacity (mostly shortage of trained

professionals) of existing financial

institutions to process financing proposals,

and the need to train professionals in the

main proposed fields of intervention” (EIB,

2010: 4).

The Egyptian Banking Institute (EBI) was

selected to be profiled as a good practice

because its uniqueness in the Deauville

Partnership countries (and in fact in the

MENA region) for having established an

SME department and implemented a

complete range of training courses,

certification programs, and technical

assistance to increase the capacity of

banks for SME banking. It also targets

the financial literacy of SMEs to enhance

their knowledge of dealing with banks

and their ability to develop bankable

proposals.

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Egyptian Banking Institute, Egypt

Overview: The EBI is the official training

arm of the Central Bank of Egypt and a

center of knowledge excellence, serving

the professional development needs of all

banks in Egypt. Its mission is to enhance

the capabilities of the banking and financial

sectors through interactive educational

programs, training, up-to-date knowledge

and consultancy. Its SME Department

offers a wide range of capacity-building

services to SME units and staff in all

banks and extends the EBI’s services to

entrepreneurs and SMEs by enhancing

their awareness about access to finance.

A. Background and institutional history

The EBI was established in 1991 as a not-

for-profit organization under the auspices

of the Central Bank of Egypt. Its mission is

“to apply international best practices in

developing the technical and managerial

skills of financial service professionals

as well as learning, consultancy and

knowledge management to enhance the

capabilities of the banking and financial

sectors on the national and regional

levels14.” The EBI aims for excellence

in banking education for banking

professionals, and to produce world-class

research and dissemination on related

topics. Its training and support services

are intended to improve the management

14 www.ebi.gov.eg/about-us/

Quick facts

Start date EBI in 1991: the SME Department in 2009

Number of employees Total of 170 in the EBI; 5 in the SME Department

BeneficiariesBanksBanking professionalsEntrepreneurs and SME owners

Number of bankers trained in SMEbanking

2,000

Number of entrepreneurs/ SMEstrained in financial literacy anddoing business with banks

2,000

Increase in the number of bankswith SME banking operations

In 2013, 10 of the 41 banks in Egypt had SME Units or specialized SMEoperations, up from 3–4 banks in 2009

Increase in the volume of SME lending

From 2011 to 2013, the volume of SME loan portfolios increased from EGP 20 billion to EGP35 million

Notes: Data as of December 2013. EGP = Egyptian pound

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and profitability of financial organizations,

including in their dealings with SMEs. Its

activities mostly take place in Egypt – in its

own premises and elsewhere – in banks

(public or private) on demand, or in regional

venues and occasionally abroad.

Since 2003, the EBI has experienced

significant growth and development in

terms of the size and diversity of its

constituency, training facilities, internal

resources and, most importantly, its

training services and products. It values its

international standing as a service provider,

and in 2009, became the only financial

institution in Egypt and the surrounding

region to be accredited by the Accrediting

Council for Continuing Education and

Training – a United States-based accrediting

agency for improving continuing education

and training. This distinctive advantage

allows the EBI to satisfy professional

certification and development qualifications

for continuing education units for all of its

training courses, as well as the credit hours

of its certificates. In 2009, it also received

accreditation from the International

Organization for Standardization for the

quality and customer responsiveness of its

services and its organizational learning

capabilities.

EBI’s SME Department was set up in 2009

as part of a national financial sector reform

program in Egypt. It was created under a

Central Bank decree for improving access

to finance, which included a regulation

that reduced the reserve requirements

of banks on any lending to SMEs. The

SME Department was established in

collaboration with the Business Development

Services Support Project (BDSSP), a major

SME development project funded by

the Canadian International Development

Agency (CIDA).

The rationale for the EBI’s SME banking

program came from the highest levels

when, in the late 1990s and early 2000s,

the government of Egypt began to

acknowledge the importance of the SME

sector to the economy. In 2004, the

Ministry of Finance issued an influential

strategic framework and action plan for

developing the SME sector, which included

a number of measures to improve access

to both credit and equity financing

for SMEs (Ministry of Finance, 2004). By

2008, the financial sector had been

significantly restructured and its capital

position improved. The interests of the

Central Bank then became more focused

on (among other things) improving SME’s

access to finance. The challenge is great.

The general level of financial penetration is

low (only 10% of all adults in Egypt engage

with the banks), the share of total bank

lending to SMEs is below 6% (Rocha et al.,

2011: 45), and SMEs have disproportionately

low levels of capital accumulation. Of

formal SMEs with five or more employees,

excluding the small-scale personal

services and retail industries, only 47%

have dealings with banks (where dealings

include any kind of operation: bank

account, credit card, loan, etc.) (El-Said et

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al., n.d. 2013; El-Said et al. n.d.). An OECD

assessment of SME policies in Egypt

reported that 92% of SME applications for

bank loans are rejected, and included

among its recommendations the need

for improved service provision and

financial support to innovative SMEs

(OECD, 2010).

The premise underlying the work of the

EBI’s SME Department is that the banks’

portfolio composition of SME loans could

be improved if: (i) they paid more attention

to risk mitigation and increased their

technical expertise; (ii) they were

familiarized with the needs and difficulties

of accessing bank finance from the

perspective of entrepreneurs; and (iii)

business development support services

were provided to improve the quality of

start-ups (and lending proposals) by

reaching out to university students and

graduates.

The EBI achieves its goals by providing

a cluster of training programs, technical

assistance services, and research to both

enhance the capacity of the banks in this

domain and raise the awareness of SMEs

concerning banking requirements and

good governance.

Objectives: The aim of the SME Department

is to boost the volume of bank financing to

Egyptian SMEs by providing training,

technical assistance, and knowledge

management activities to the benefit of

banks and SMEs.

Its specific objectives are to:

• Identify the training needs of

stakeholders regarding future prospects

for the role of SMEs;

• Design the required training and

events, including the application of

international best practices in supporting

the SME sector;

• Provide the financial sector with the

mechanisms and essential tools to

enable a better financing environment

for SMEs;

• Support the banking sector to

establish qualified and specialized

units to provide SME banking products;

• Establish a strong SME database to

provide the required data and information

to policymakers, planners, the banking

sector, and SME entrepreneurs;

• Conduct applied research on SMEs

to identify trends in new financing

programs; and

• Exchange experiences relating to

successful models for developing SME

banking in developed and developing

countries.

Beneficiaries: The SME banking program

addresses three audiences:

(i) Banking professionals in SME finance

operations, with training courses and

technical assistance;

(ii) Senior bankers, with round tables and

forums to stimulate interest in the

potential for increased lending to SMEs

in Egypt;

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(iii) SMEs and entrepreneurs (including

would-be entrepreneurs, pre-start-ups),

with banking awareness campaigns

and financial literacy programs.

B. Organizational model

The EBI is governed by a nine-member

board of directors, chaired by the Governor

of the Central Bank of Egypt, with

members comprising strategic banking

specialists and executives. The SME

Department is one of eight departments

and the Director is a member of the senior

management team.

Staffing: The SME Department is staffed

by five persons with different disciplinary

backgrounds. The expertise of staff is

maintained through the establishment of

individual professional development plans

and annual performance assessment

reviews. The staff develop the annual SME

banking training program, organize training

courses and sessions, manage the EBI’s

SME banking promotion and knowledge

management activities, and deliver training

courses in collaboration with a roster of

externally contracted experts and trainers.

C. Operational model

Products and services: The EBI provides

a range of products and services to

improve the governance and efficiency

of banks and provide professional

development for banking officials. It also

delivers financial literacy programs to youth

through partnerships with the education

system and by supporting train-the-trainer

programs for educators to create niche

financial education teachers.

The SME Department offers a comprehensive

range of capacity-building and training

services to all banks and their SME units,

and initiatives to enhance the awareness

and skills of entrepreneurs regarding

access to finance. It has four areas of

activity: (i) training services; (ii) networking

initiatives; (iii) technical assistance services;

and (iv) studies and applied research.

Specializing in products and services

geared specifically to expanding SME

banking services, it follows a beyond-

training concept by offering a wide range

of capacity-building services to SME units

and staff in banks, which include training

and certification, as well as financial

awareness and training sessions with

entrepreneurs and SMEs.

Training courses. The SME finance training

program is designed to provide professionals

with SME banking qualifications, promote

best practices for supporting the economic

viability of SME banking clients, and

reinforce and nourish the potential of

SMEs. Two SME finance-related courses

were offered initially: SME Banking for

Bankers (20 hours) and Financing SMEs

(16 hours). Later, a specialized SME

Banking Certificate was developed,

requiring 116 hours of course work and

followed by a study tour to a developed

country demonstrating good practice in

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SME banking (see box). Also on offer is a

range of courses for bankers working in

microfinance units, including Management

Functions for Microfinance Units (8 hours),

Delinquency Management for Microfinance

(12 hours), and Credit Officers Skills for

Microfinance (30 hours). The full list and

description of SME banking courses

offered by the EBI during 2013/14 can be

found on their website15.

Improving SME access to finance also

requires efforts to improve the demand

side. To contribute to the development of

stronger entrepreneurial and managerial

competencies, the SME Department

provides several training packages for

SME owners that seek to enhance their

knowledge of good practice in managing

and operating a small business, and

their understanding of dealing with and

satisfying the requirements of banks. One

of the major training courses is the 15-hour

SME Guide for Dealing with Banks,

which covers the basics of business

management, strategic planning and financial

forecasting, and explains the sources of

external finance, discusses banks as

institutions and explains techniques for

dealing with banks.

For delivery of its training courses, the SME

Department provides its own staff and

draws on a pool of local trainers (banking

professionals) and international experts. At

the banks’ request, the Department has

recently introduced a number of courses

on Islamic banking for SMEs. Four of the

41 currently accredited banks in Egypt are

fully-fledged Islamic banks, and about ten

others have Islamic finance windows.

Many small entrepreneurs in Egypt prefer

to deal with banks on the basis of Islamic

financial principles, and they will expect

to find those operations amenable to

SME business lending. The Department is

also developing a special program on

agricultural finance for SMEs.

15 See: http://egyptianbankinginstitute.com/category/sme-department/

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Networking initiatives. An important part

of the SME Department’s mandate is the

hosting of networking and policy dialogue

events. The aim of the SME Bankers’

Forum, designed for the heads of banks’

SME units, is to provide a platform for

dialogue among bankers working in SME

units to discuss bottleneck issues, assess

training needs, and share international best

practices. Nine meetings of the Forum

were held in 2009–2011. Round-table

meetings are held to bring senior

bank officials into contact with senior

policymakers, experienced local and

international professionals in the field, and

entrepreneurs, with one of the aims being

to stimulate interest among senior bankers

who are unconvinced of the potential of

SME lending. Networking activities also

include consultation round tables with

The SME Banking Certificate from the EBI

Certificate objectives:

By the end of the certificate program, participants will be able to: (i) understand the

importance and techniques of strategic planning; (ii) apply the operational setup for an

SME banking unit; (iii) define SME customers’ product needs and get acquainted with

successful clients’ product management; (iv) identify tools for marketing and delivering

SME products and services; and (v) determine major risk and how to mitigate it in SME

banking.

Certificate outline:

Module 1: Strategic planning for SME banking (28 hours)

Module 2: Operational set-up for SME banking (24 hours)

Module 3: Product development for SME banking (24 hours)

Module 4: Marketing and delivery channels for SME banking (24 hours)

Module 5: Risk management for SME banking (24 hours)

Module 6: International exposure.

Assessment strategy:

Participants are assessed based on participation (interaction and group exercise) and

through a written test after each module. Participants are also required to submit a project

in one of the designated areas of study that will be presented and assessed by a panel

of SME banking experts.

Source: http://egyptianbankinginstitute.com/sme-banking-certificate/

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sector and industry associations to identify

the financial challenges of SMEs and build

a constructive dialogue between banks

and SMEs.

The SME Department has collaborative

agreements with the IFC and the World

Bank and has established links with SME

banking experts in India, Kenya, Malaysia,

the United Kingdom, and other countries

to facilitate study visits for participants in

its SME banking courses and for some

start-up entrepreneurs.

Technical assistance services. The SME

Department facilitates technical assistance

to banks in the field of SME banking

through the use of international experts.

Egyptian banks are in different circumstances

and at various stages in terms of SME

banking. Some of the banks are more

advanced with access to SME banking

expertise via parent banks and international

networks, while others are less advanced

and have little support. The SME Department

has succeeded in facilitating technical

assistance to help several banks introduce

SME banking in their operations, including

with the necessary infrastructure and tools

to facilitate the process of high-quality

lending to the SME sector.

Studies and applied research. The SME

Department carries out knowledge

management activities to provide

information to bankers and entrepreneurs

on international best practices, success

stories, and information on the current

state of SMEs in Egypt. One of the

central components of this knowledge

management work is the operation of

an SME electronic portal16. This online

resource contains data, analytical papers

by EBI staff and others on SMEs in Egypt

and in other countries, and information

about SME training and related events in

Egypt and abroad.

D. Financial model

The EBI collects membership fees from

participating banks and charges them for

its training and certificate programs. It also

draws on funding and technical support

from a range of external donors and

technical agencies, including central

banks, IFIs, bilateral donors (from Canada,

France, Japan, the United Kingdom, etc.),

international educational providers, and

professional financial training and technical

bodies. Fees are generally not charged to

SMEs for training on how to do business

with banks or participation in awareness-

creating events.

The initial development of the SME

Department was funded by the BDSSP,

including the pre-establishment business

16 See: http://www.sme-egypt.org/Pages/About-Us.aspx

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plan. The project also supported many of

the Department’s initial activities (such as

course preparation). Other donors have

supported aspects of its operations,

including the World Bank and the IFC,

with a specific focus on expanding

the SME banking training programs and

implementing the National SME Census.

E. Results and impact

Since 2009, some 2,000 bankers have

attended the EBI’s SME banking

courses. In addition, another 2,000

persons have attended awareness

campaigns for entrepreneurs organized

in various locations around Egypt. This

has resulted in a much higher level of

awareness and competence in the area of

SME banking, both on the supply and

demand sides. The SME banking courses

are developed to be highly relevant to the

learning needs of both bankers and SMEs.

They are popular, with interest growing

over time, and now account for one-third

of all the certificates issued by the EBI.

Bankers find the training courses of

considerable value because they cover all

of the areas of knowledge required to

develop and integrate an effective and

efficient SME banking service. The training

courses for entrepreneurs and SMEs

are designed to address the key areas

of competence required and improve

participants’ ability to develop bankable

proposals and deal with banks, as well as

enhancing their overall management

competency.

In terms of the wider impact of its work, the

SME Department has two performance

metrics: the number of specialist SME

units in banks; and the quantum of bank

lending to SMEs. A major indicator of EBI’s

effectiveness is the growth in the number

of Egyptian banks engaging in SME

banking. In 2009, only three or four banks

had SME units or specialist SME

operations. By 2013, ten of the 41 banks

in Egypt had set up specialist central SME

units and another nine had dedicated SME

operations within the retail arm. This is

close to a fivefold increase in the number of

banks with an SME focus since 2009

when the SME Department started its

work in the EBI.

In terms on the volume of bank lending

to SMEs, over the 2011–2013 period,

Egyptian banks experienced almost a

doubling of their SME loan portfolio – from

EGP 20 billion in 2011 to EGP 35 billion in

2013. Although the substantial increase in

volume of bank lending to SMEs cannot be

attributed solely to EBI’s competency

building and technical assistance, the

doubling of the banks’ SME loan portfolio

over the last three years can be seen as a

testament to the effectiveness of these

efforts.

Egyptian stakeholders are now relatively

well informed and familiar with best

practices in SME banking. The challenge

going forward is to implement a coherent

and coordinated development process for

SME banking and strong leadership

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involving many stakeholders (Poldermans,

2011).

F. Success factors

The success of the EBI’s SME financing

program has been driven by strong

interest at high levels of government and

policymaking in improving SME’s access

to finance in Egypt, specifically the strong

commitment of the Central Bank.

The SME Department’s strategy has been

to make use of all available resources to

raise its profile and gear up its work,

aware of the importance of linking with

and leveraging all stakeholders in the

field according to their special areas of

competence. For instance, regulatory

change and dialogue with the Central Bank

was essential. Also fundamental has

been its efforts to become familiar with

international best practices in order to

transfer these to the banking community,

and to develop close professional

relationships with international organizations

and experts.

There is no one-size-fits-all approach to

SME banking. Access to expertise and

recourse to technical assistance is

essential for understanding the specific

economic and cultural situation in

each country. The SME Department’s

commitment to developing all-round

expertise and maintaining its knowledge

management function has been one

of its major success factors. Having the

competence and capacity to provide

technical assistance and advisory services

to banks has been indispensable for

recommending the design of appropriate

interventions.

G. Lessons learned

One of the main problems faced by the SME

Department has been bankers’ resistance

to the idea that providing banking services

and financing to SMEs is viable and

profitable, with due attention to risk mitigation.

Convincing them rested on bringing bankers

into dialogue with senior policymakers,

entrepreneurs, and technical experts, and

then providing the necessary technical

training and advice for the implementation of

SME finance operations. The SME banking

training courses have evidently succeeded

in this respect, at least in terms of the two

measures of impact noted earlier. Still, the

portfolio performance with increased SME

lending has to be proven.

In developing its own competencies in

SME banking, the EBI had to invest in

developing relationships with international

good practices models in this area

and engage international experts in the

delivery of training courses and technical

assistance to banks in Egypt. Entering the

arena slowly by offering only a few courses

initially was an important strategy for its

start-up, but developing a sequence of

courses that could be accredited towards

the full SME Banking Certificate was

ultimately necessary and appropriate.

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One of the lessons for other MENA countries

is that, while providing technical assistance

to the banks is important and leads to

results, capacity building and training efforts

need to be complemented by other public

support policies. These include Central Bank

incentives to encourage banks to direct

more of their lending to the SME sector

(such as reduced reserve requirements);

increased guarantee schemes to help

mitigate the risk to banks in lending to SMEs

(and promising start-ups) that are viable

but lack credit histories, track records, and

collateral; and wide coverage of individuals

and SMEs in a private credit bureau. Egypt

has achieved some success with passing

legislation for the establishment of a private

credit bureau: the introduction of the I-Score

credit bureau in 2005 has been instrumental

in providing rapid credit data to the banks

and facilitating their lending decisions.

The new Egyptian government (2013) is

expected to announce new policies to

increase the package of incentives to the

banks to lend to SMEs. Changes of this

kind might in due course lead the

remaining Egyptian banks to follow the

example of the pioneers in building their

capacity and adapting their operations for

increased SMEs lending.

Overall lessons learned

• In addition to its regulatory and

supervisory roles, the Central Bank can

play an important role in helping to

build the capacity of the banking sector

to provide SME banking services.

• Shifting into SME banking requires

changes in the operating culture of

banks, which can be facilitated by

setting up an SME unit or distinct

operating department with a certain

amount of decentralized autonomy.

• To serve SMEs effectively, banks have

to change the way they do business

and manage risk, implement credit

scoring techniques, innovate with

appropriately priced SME products,

implement fast and simple application

and decision processes, educate and

advise customers of the services, train

bank officers in customer relationship

management, and innovate with client

delivery systems.

• The presence of an institutional body

to promote SME banking and build the

capacity of banks and bank staff to

deliver banking (and lending) services

to SMEs is an effective model for

improving performance at the national

level.

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4. Business Development Support Services for SMEs

The aim of business development

support (BDS) programmes and

services in the developing economy context

is to help start-ups and existing micro, small

and medium enterprises (MSMEs) become

more stable and grow so that they can

improve the livelihood of families, generate

jobs, and contribute to economic growth

(McVay, 1999). The most common services

in Middle East and North Africa (MENA)

countries are advice and counseling for pre-

start-ups and start-ups, entrepreneurship

training, advice and counseling for existing

enterprises, help with developing business

plans, and training in business management

skills, although many also help with feasibility

studies, marketing planning, and access to

financing (OECD, 2014). BDS provision can

serve to develop the capabilities of the

entrepreneur so they are able to plan and

manage their operations more effectively as

well as to move out of low-quality, low-price

products and services to higher-quality and

value-added markets. One of the major

principles of BDS is that services need to be

tailored to fit the particular needs of individual

enterprises and/ or sectors: that is, they

need to be market-driven rather than

supply-driven (CDASED, 2001).

Although a wide array of government

agencies, business associations, NGOs,

and community-based organizations offer

different types of support services to

entrepreneurs, BDS is largely underdeveloped

in the MENA region (Stevenson, 2010),

with large gaps between their provision in

rural areas versus urban centers. Global

Entrepreneurship Monitor surveys in MENA

economies (IDRC, 2010) found that fewer

than 5% of early-stage entrepreneurs made

use of professional services for business

advice (e.g. accountants, lawyers, and

MSME support centers), being much more

likely than their counterparts elsewhere to

seek advice from within their personal

networks of family and friends (regardless

of its quality).

International donors have been

instrumental in seeding MSME support

agencies and programs. For example,

the Industrial Modernization Center in

Egypt was started with donor funding, the

National Agency for the Promotion of Small

and Medium Enterprises (ANPME) in

Morocco relied heavily on donor funding at

the beginning of its mandate, and programs

of the Jordan Enterprise Development

Corporation continue to receive donor

support for its programs. A challenge

posed by donor funding, however, is that it

may not be continuous and therefore may

not be available on an ongoing basis.

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The Canadian International Development

Agency (CIDA) has long sought to answer

the question of how best to promote the

development of market-driven, high quality,

affordable, and accessible BDS services for

the MSME sector in Egypt, starting with the

launch of the CAD 11.9 million Small and

Medium Enterprise Development in Upper

Egypt Project (SMEDUP) (1996–2004). The

goal of SMEDUP was to build private sector

capacity to deliver good practice BDS to

SMEs. The rationale for CIDA’s support for

BDS development was based on situational

analyses of the challenges faced by

Egyptian MSMEs in accessing BDS

services, specifically: the scarcity of BDS

service institutions that could efficiently and

effectively offer tailored non-financial services

to MSMEs; the supply-driven nature of BDS

services; and the lack of awareness among

MSMEs of the availability of BDS and its

value, which led to low demand for such

services and difficulty for BDS providers in

attaining sustainability.

The El Mobadara Community Development

and Small Enterprises Association, profiled

below for its good practice in BDS, is a by-

product of the SMEDUP project and has

been involved in CIDA’s efforts to build the

BDS market in Egypt for the past 15 years.

El Mobadara was selected after being

nominated by other stakeholders in Egypt.

It demonstrates a number of good practices

in the provision of BDS, specifically for:

• Its network approach to delivering BDS

services throughout Egypt through

partner community-based Regional

Enterprise Development Centers

(REDECs);

• Its commitment to capacity building

and ongoing professional development

of the business advisors through

training courses, study tours, coaching,

and exchanges;

• Its development of BDS tools and

materials that can be used by its

advisors network-wide;

• Its approach to surveying the needs of

micro and small enterprise (MSEs) and

tailoring BDS services to meet those

needs, often on a cluster or value chain

basis;

• Its proactive approach to working with

MSEs, rather than waiting for clients

to come to the REDEC offices;

• Its commitment to gender

responsiveness, setting targets for the

inclusion of women among its clients

and beneficiaries, and adapting its

BDS approach to accommodate the

needs of women entrepreneurs;

• Its incorporation of an advocacy

component whereby the REDECs

identify problems affecting MSEs and

advance these issues to policy- and

decision-makers for resolution; and

• The value it places on monitoring and

evaluation of the BDS services,

including client satisfaction surveys

and impact assessments.

El Mobadara also provides an example of

a donor-funded project that has achieved

sustainability as a spin-off organization,

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and illustrates how microcredit services

can support BDS provision, and other

good practices in effective BDS provision,

such as experimentation with different

approaches, quality issues, outreach, and

addressing the BDS needs of women-

owned MSEs.

El Mobadara Community Development andSmall Enterprises Association, Egypt

Overview: El Mobadara is an apex

organization that supports the development

of MSEs through the design and delivery

of microcredit, training, business

development support, and technical

assistance programs that are implemented

in collaboration with branch institutions,

partner agencies, and donors17. It provides

BDS services through units set up in

its partner network of six REDECs and

delivers microcredit through 23 of its

own branch offices throughout Egypt.

The focus of this profile is on the

El Mobadara approach to the BDS

component.

A. Background and institutional history

El Mobadara evolved as an outcome of the

SMEDUP project developed and funded

by CIDA. The goal of SMEDUP (1996–

2004) was to improve the economic

conditions of marginal groups of the

population in three lesser-developed

governorates of Upper Egypt (Beni-Suef,

Qena and Sohag) through small enterprise

development. The aim was to promote

the creation of new enterprises and the

sustainability of existing MSEs by improving

the availability of financial and non-financial

17 See: http://www.mobadara.org

Quick facts

Start date Incorporated in 1998

Number of employees 560

Number of employees directly involved in providing BDS services

Six in El Mobadara and 23 business advisors in REDECs, forming the El Mobadara Network

Beneficiaries Start-ups and existing MSEs in six governorates of Upper Egypt

Number of BDS clients served 8,964 MSEs from March 2009 to June 2013

Percentage of women clients 37%

Sustainability of BDS servicesREDECs price BDS services to recover an average of 25% of their salarycosts, with the goal of reaching 50%

Notes: Information as of July 2013

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support services, the combination of which

was seen as essential to strengthening

the economic fabric of these regional

economies. In the project, CIDA partnered

with the Social Fund for Development

(SFD) and the Foundation for International

Training (FIT).

At that time, the BDS market in Egypt

was not at all developed. There were few

business advisory services available to

MSEs in remote regions and a big need

for education and professionalization of

BDS providers. Thus, the project aimed to

stimulate the creation of new institutions able

to provide competent business advisory

services on a long-term market basis. Local

institutions for this purpose were formed

in the three governorates and a central

organization, the beginnings of El Mobadara,

was established in Cairo to build the

capacity of the local institutions and

provide facilitation support.

In 1998, the central organization

incorporated itself as the Community

Development and Small Enterprises

Association – El-Mobadara – an NGO, to

respond to the needs of the MSE sector in

Egypt, and in turn to provide support to the

three governorate-level operations to

enable them to achieve independent legal

status. This led to the incorporation of the

three local organizations as community

development associations, which became

known as Regional Enterprise Development

Centers, each with management systems

and support infrastructure to provide

business support services to start-ups

and existing MSEs, and each with a team

of business advisors and information

specialists. The formation of local organizational

structures, such as the REDECs, with clear

goals, functions, systems, and resources

was fundamental to the effectiveness of

SMEDUP.

The creation and viability of these

institutions, which have emerged as

pioneers in their governorates in providing

high-quality training and technical assistance

for business start-ups and MSEs, was one

of the overarching and most enduring

achievements of this project.

However, a sustainability strategy was

needed to ensure that the work initiated

during the SMEDUP would continue. One

way of achieving this sustainability, both

in reach and financial terms, was to

supplement the BDS services with the

delivery of microcredit programs to low-

income MSEs. The offer of microcredit

services would address unmet demand

for MSE financing in remote governorates

and provide a core business that could

generate long-term financial sustainability

for El Mobadara itself, a goal that could not

be achieved from consulting assignments

and donor-funded projects.

A key achievement at the end of SMEDUP

was the signing of a five-year contract

between the SFD and the three REDECs

allowing them to access credit lines from

the SFD for on-lending of microcredit to

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new and existing MSEs. Under the

arrangement, REDECs would earn an

administrative fee of 3% based on the

value of each disbursed loan. El Mobadara

assumed the quality control and

monitoring in exchange for a fee of 1% of

the disbursed loan value. This produced a

revenue stream for the four organizations.

Another key achievement was the signing

of a five-year contribution agreement

between CIDA and El Mobadara, signed

by the Egyptian Ministry of International

Cooperation, for the Enterprise Graduation

and Promotion through Technical

Enhancement Project, the goal of which

was to provide additional support for the

development of new and more sustainable

MSEs in Upper Egypt. This project entailed

developing the competence and capacity

of the REDECs (as lending institutions) to

provide working capital loans to targeted

MSEs that incorporated an integrated BDS

package. The objective was to increase

the availability of both financial and non-

financial services to MSEs.

In 2008, El Mobadara became the executive

agency for implementation of the CAD

4.75 million CIDA-funded Egypt Enterprise

Development Project (EEDP), the first

Egyptian entity ever to be assigned an

executive agency role by CIDA in Egypt.

The EEDP is a five-year project (2009–

2014) with the goal of generating improved

employment opportunities (and reduce

poverty) through support to MSEs,

with emphasis on Egypt’s marginalized

groups, in particular women and youth18.

The main focus is on skills training and

BDS services. The target for the El

Mobadara Network under the EEDP is to

provide complementary financial and non-

financial services to support 6,000 start-up

and existing MSEs (3,000 of each) and

create 15,000 jobs (of which a minimum of

30% are to be for women) (CDSEA, 2009).

The El Mobadara Network had already

demonstrated that it could operate without

CIDA funding prior to the EEDP funding

in 2009. However, the EEDP further

strengthened El Mobadara, enabled

expansion of its partner network to three

new REDECs (and outreach to more

MSEs), and helped to solidify the REDECs

to better ensure the sustainability of this

network.

Objectives: El Mobadara’s mission is to

improve economic and social conditions

for low-income people in the governorates

of Egypt through the design and direct

delivery of microcredit, training, and

technical assistance services to MSEs,

and to build the capacity of CSOs working

in the field of MSE development.

18 See: http://www.eedpeqypt.org

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With respect to BDS services, the specific

objective is to provide gender-sensitive,

demand-driven, non-financial services

to MSEs, through the REDECs in six

governorates, in an effective and sustainable

manner, including facilitating access to

finance. In fulfilling this objective, El

Mobadara places considerable focus on

building the capacity of the El Mobadara

Network (El Mobadara, the REDECs, and

other project partners) to deliver the BDS

services and to effectively engage policy

and decision makers on MSE issues.

Gender equality in BDS is a strong cross-

cutting aim of El Mobadara. The objective

is to encourage women entrepreneurs

to develop and improve their enterprises

and move from the informal to the formal

sector. Annual and monthly targets are set

for the inclusion of women in BDS services

and their satisfaction with the delivered

services is monitored. In addition, there is

a commitment to provide soft loans to

women entrepreneurs.

Beneficiaries: The beneficiaries are

potential entrepreneurs, start-ups, and

existing MSEs in six of the poorest

governorates of Egypt: Beni-Suef, Behira,

Fayoum, Gharbia, Qena, and Sohag.

B. Organizational model

El Mobadara is governed by a seven-

member Board of Directors, which meets

at least once every three months. The

Executive Director is the Board Vice-Chair.

The Board is accountable for the formulation

and development of all regulations

governing the work of the organization and

reviewing all funding proposals.

Over the years, El Mobadara has developed

an extensive management structure

operating across three areas of focus:

microcredit, non-financial services, and

headquarters support. The non-financial

services are currently organized around the

EEDP and led by a BDS coordinator.

A Project Steering Committee was

established to implement the EEDP. The

Committee consists of representatives

from El Mobadara, CIDA, the Egyptian

Ministry of International Cooperation, and

the SFD. Its main tasks are to review and

approve the EEDP annual workplans,

provide overall guidance on major policies

and activities, and monitor progress

towards the achievement of project results.

In addition, Regional Facilitation Committees

have been formed in each of the six

governorates to serve in a consultation

capacity. These committees review annual

workplans and reports of the REDECs,

provide recommendations and advice on

advocacy activities, and actively participate

in these activities.

Staffing: El Mobadara has 560 employees,

38.5% of whom are women. The majority

of these staff work in the microfinancing

arm of the organization. The staff for

implementing the EEDP at El Mobadara

headquarters includes a full-time project

manager, a senior business advisor, a

senior communication and advocacy

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advisor, a senior capacity-building/ human

resource development officer, and a senior

monitoring and management information

systems officer, in addition to other field

and support staff.

Only six El Mobadara employees, located

in the El Mobadara branch offices in

Gharbia and Behira governorates, work

directly with MSEs in an advisory, counseling

or training capacity. Each of the REDECs

is staffed with a manager, three field

business advisors, and in some cases an

accountant and an administrative assistant.

In total, the REDECs employ 23 staff (of

whom, six women) who are delivering BDS

services to MSEs.

When hiring staff to provide BDS services,

El Mobadara looks for people with a

university degree in business, commerce,

engineering or relevant studies; two to three

years of experience in BDS provision to

MSEs; extensive knowledge of MSE issues

and constraints in the Egyptian context;

and personal competencies in the areas

of leadership, communication, business

awareness, planning and organizational

ability, computer, and language skills.

Finding people with the right set of

qualifications is often challenging, especially

in the rural governorates.

C. Operational model

Products and services: El Mobadara

provides three general kinds of products and

services: BDS services, microcredit, and

capacity building for the partner REDECs

in the provision of BDS and MSE support

in the governorates. BDS services can

encompass a wide range of activities. El

Mobadara uses the classification proposed

by the Small Enterprise Education and

Promotion Network – a global network of

123 international practitioner organizations

dedicated to combating poverty through

promoting inclusive markets and financial

systems – as the guide for BDS planning,

implementation, and evaluation. This

classification is based on addressing the

challenges typically faced by small

enterprises: (i) market access; (ii) input

supply; (iii) technology and product

development; (iv) training and technical

assistance; (v) infrastructure; (vi) policy/

advocacy; and (vii) facilitation of finance.

The El Mobadara Network through the six

REDECs offers the following BDS services:

• Entrepreneurship training, with 1- to

4-day courses on such subjects as

business start-up, business management,

financial literacy, and the use of ICT for

business development.

• In business management training, El

Mobadara often uses the Business

Edge training materials specifically

developed by the International Finance

Corporation for use with the SME

market.

• Other training and technical

assistance, in the form of advice and

counseling; help with feasibility studies

on business ideas and new projects

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and developing business plans; advice

on improving accounting systems and

setting up costing systems; help in

securing skilled employees for the

business; management consultancy to

tackle business problems; and tax and

legal services (e.g. help with business

registration, licensing requirements,

environmental certification, and other

regulatory issues);

• Facilitating access to finance, by

helping MSEs prepare their financing

proposals and developing linkages

and/ or referrals to microcredit and

other financial entities; and

• Market access, including facilitating

participation in product exhibitions;

provision of information on markets

and business opportunities; and

• Input supply, with advice on sources

for equipment and raw materials, and

other business-related matters.

The El Mobadara Network provides

additional value to MSEs by supporting

the implementation of their start-up,

improvement, or expansion projects. In this

regard, business advisors engage with

the clients in supervision and business

monitoring that includes counseling for up

to two years. El Mobadara also performs

an advocacy function on MSE issues.

Approach: El Mobadara and the REDECs

take a proactive comprehensive approach

in identifying and stimulating the demand

for their BDS services. This involves initial

surveys of the needs of MSEs in the

governorates being served and analysis of

gaps in sector value chains where BDS

services could add value to MSE

participation. It actively promotes BDS

services within the community of MSEs

and proactively engages in developing

BDS opportunities. One way of building

demand is to conduct one-to-one visits to

potential MSE clients and offer services.

This is supported by dissemination of

promotional materials and hosting of

promotional seminars. Efforts are also

made to ensure that BDS services are

accessible to women, and that these

services meet the needs of women

entrepreneurs/ managers and workers. El

Mobadara conducts training with REDEC

staff to raise their level of gender

awareness and understanding of gender

equality, and their ability to integrate the

gender approach in all REDEC activities.

Under the “facilitating access to finance”

component, El Mobadara has negotiated

agreements (through the SFD) with three

banks to give consideration to loan

proposals from MSEs that are receiving

BDS services from the REDECs (National

Development Bank, Banque Misr, and

Principal Bank for Development and

Agricultural Credit), with some private

banks, such as the El Ahly Bank, also

participating. These agreements are based

on an SFD-issued credit line of EGP 120

million that is available to banks for lending

to MSEs. REDEC business advisors assist

MSEs in preparing their loan documents,

which are first approved by the Regional

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Facilitation Committees, thus reducing the

due diligence requirements of the banks.

El Mobadara provides training to bankers

in the six governorates and also promotes

capacity-building opportunities for bank

staff to attend the SME Banking workshops

organized by the Egyptian Banking Institute.

As coordinator of BDS services for six

governorates, El Mobadara also provides

services to the REDEC network. These

include capacity building; executive

recruiting and management; and business,

technical, and managerial support to

project staff. El Mobadara has developed

several tools for use by REDEC business

advisors, such as a BDS management

manual, a BDS pricing tool, and a simple

e-Business Planner, this last based on a

Canadian good practice, translated into

Arabic, “Egyptianized” and made accessible

online for potential entrepreneurs and

MSEs. It regularly develops and updates

management information systems, including

databases of businesses, suppliers and

trainers; develops and updates gender

policies and procedures; supports REDECs

in undertaking environment and safety

mitigation procedures; prepares reports on

BDS services delivery by the REDECs; and

coordinates field surveys (e.g. on jobs

created, participation of women, and

environmental issues).

D. Financial model

El Mobadara started with a grant of

EGP600,000 from CIDA in 1996 to subsidize

the provision of BDS services, and by

2013 had EGP 50 million of capitalization.

It has achieved financial sustainability from

a combination of revenue sources: it earns

revenue from its microfinance activities,

and fees for facilitating access to financial

services that can cross-subsidize operations;

charges MSEs a fee for BDS services; and

pursues grants from donor or government

programs for specific services.

The 2011 report of an external evaluation

of El Mobadara’s organizational capacities

found that it was financially self-sufficient

thanks to the income from its microcredit

activity, which covers operating and

financing costs plus loan loss provisions

(Lynch, 2011).

El Mobadara has a policy of charging

clients a fee for the BDS because, in

principle, it would like to see BDS for MSEs

in Egypt become more of a commercial

value proposition. However, the professional

provision of BDS in Egypt is a relatively

new concept and MSEs are not used to

paying for these services. In addition, it is

well known that achieving full cost-

recovery on fees paid by MSE clients for

BDS services is difficult. Consequently, the

REDECs adapt the fee policy for certain

clients. Small clients usually pay the full

cost of service (because they are more

likely to be able to afford to), but

microenterprises pay only a portion of the

service cost. Fees for training are

discounted for women clients to reflect

their lower ability to pay the full costs. In

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many cases, initial BDS services are

offered at no charge to the client. This

serves to promote the services during the

early stages of a project and to gain

credibility and trust with the client. To

reduce the cost of services to individual

MSEs, El Mobadara works with groups

on a sector basis whenever possible and

feasible. As a result of these various

tactics, it anticipates that the portion of

revenues contributed by these fees will

increase over time.

From April 2010 to March 2013, the

REDECs generated revenues of almost

EGP 1.1 million from BDS services. These

earnings are held in reserve accounts and

can be applied to operational costs after

donor funding ends. The EEDP Annual

Report for 2010/2011 showed that BDS

revenue covered about 25% of REDECs’

staff salary costs that year, ranging from

16% to 39% depending on the REDEC.

By the end of the EEDP (in 2014), El

Mobadara estimates that fees for services

will cover half of the cost of BDS, while

revenues generated from the mediation

and direct provision of financial services

will serve to cover the costs of BDS on a

declining basis.

El Mobadara also receives project

funding from various donors, including

the European Union, but CIDA is the most

significant. The five-year EEDP (2009–

2014) received CAD 4.75 million from

CIDA and a contribution from El Mobadara

of CAD 550,000. Separately, the SFD

filtered a CAD 24 million credit fund to El

Mobadara for re-lending to MSEs.

E. Results and impact

El Mobadara’s commitment under the

EEDP was to offer BDS packages to

approximately 6,000 start-ups and

existing MSEs and enhanced access to

affordable financial services to support

the creation of at least 15,000 jobs with a

minimum of 30% for women. As of June

2013, El Mobadara had exceeded these

targets by providing BDS to almost 9,000

MSEs, with women accounting for about

37% of beneficiaries (Table 9). About

20% of the MSEs are repeat clients, with

women twice as likely as men to make

ongoing use of BDS services. Direct BDS

provision resulted in the creation of 2,973

jobs in the supported MSEs (66% of

them for women), and success in

enabling BDS clients to access financing

from partnering and other private banks

resulted in the creation of more than

15,000 jobs (more than 30% for women),

and attracting over EGP 126.5 million in

loan financing.

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The El Mobadara Network has achieved a

favorable representation of women among

BDS clients, which reflects its commitment

to gender mainstreaming of BDS services.

Women represent over 55% of those

receiving entrepreneurship training, over

33% of those receiving other training and

technical assistance and market access

BDS, and more than 25% of those who

have benefited from access to finance

facilitation. This has been the result of

special efforts to respond to the needs of

women entrepreneurs in Egypt. Because

of mobility restrictions, especially in rural

areas, services need to be offered in

close proximity to the woman’s enterprise.

To accommodate the demands on

their time due to family responsibilities,

entrepreneurship and other training has to

be delivered to women clients in shorter

modules. Women in rural areas also often

have less education and experience, so

they need simpler training materials. They

also need more flexibility with cost-

recovery fees because they have less

ability to pay for training.

Working through the REDECs, El

Mobadara, has responded to these

circumstances by making training and

advisory services available closer to the

woman entrepreneur’s residence and

often providing group transportation to

bring women to training locations. Training

materials have been simplified and the

scheduling of training takes into account

Table 9: Number of MSEs receiving BDS services by gender, 2009–2013

2011-2012 2011-2012 2011-2012 2012-2013* Total

M F M F M F M F M F

Entrepreneurshiptraining 0 7 223 166 149 115 79 272 451 560

Other training and technical assistance

128 87 1,559 956 2,257 1,169 572 281 4,516 2,493

Facilitatingaccess to finance 22 4 118 46 191 75 122 36 453 161

Market access 7 1 7 16 50 25 19 2 83 44

Input supply 0 3 12 4 85 27 61 11 158 45

Total 157 102 1,919 1,188 2,732 1,411 853 602 5,661 3,303

Combinedmale-female 259 3,107 4,143 1,455 8,964

Notes: M = male; F = female. *As of June 2013.

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women’s time constraints. In addition, the

fees charged to women clients are lowered

(never more than EGP 100).

El Mobadara was subject to an

organizational evaluation in late 2010 to

identify its capacities and performance

in fostering BDS service delivery and

recommend improvements to its operations

and organizational sustainability. The

assessment report stated that “the

commitment to providing quality services

to SMEs is strong within the organization

and across all levels of staff….The ‘brand’

El Mobadara and its approach to service

delivery give it a competitive advantage

within the market”. The overall conclusion

was that it “is an efficient and effective

organization that possesses a high degree

of relevance in terms of meeting the needs

of SMEs in Egypt” (Lynch, 2011: 26).

F. Success factors

An underlying key to El Mobadara’s

success has been the vision, leadership,

and commitment of the Executive Director

and the BDS Coordinator, who have been

with the project since its beginning and

come from a long association with CIDA

projects designed to experiment with

effective BDS practices in Egypt. Also

important, as El Mobadara grew over time,

was building an institutional system with a

capable second layer of management and

staff who could carry out management

roles. Job descriptions and performance

indicators were developed for each job

and efforts made for continuous capacity

building of every staff member.

Besides the high quality of its management

and staff, the following contributed to El

Mobadara’s success:

Building on the good practice of others.

El Mobadara benefited from lessons

learned from CIDA’s Business Development

Support Services Project in setting up the

BDS initiatives in the REDECs. The main

lessons were related to how to properly

design BDS services and select partner

organizations, and the importance of

offering a diversity of services, building

efficient networks, and engaging all

stakeholders in the design and planning

processes.

Partnering with the REDECs and other

NGOs. Through this practice, El Mobadara

has been able to extend the reach, quality

and consistency of BDS services. This has

been backed by its commitment to build

the capacity of BDS staff in the REDECs

through training, study visits, workshops,

coaching, and opportunities to participate

in the Business Advisors Program at the

American University in Cairo, and the

provision of BDS tools and training

materials.

Partnering with other microfinance

institutions MFIs to expand the provision

of BDS services. Most MFIs in Egypt do

not provide BDS services to their clients,

so El Mobadara can assist them in setting

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up BDS units alongside the microcredit

services, training BDS officers, and

providing ongoing monitoring.

Combining the provision of microcredit

with BDS services. This has been a

success factor on two levels: first, it has

increased the probability that entrepreneurs

can access both non-financial and financial

services to support further development

and job creation; and second, the surplus

generated from the 40,000 active microcredit

clients enables the organization to be

financially sustainable in offering BDS

services.

Responding to clients’ needs through

regular surveying. El Mobadara has

developed a database to track the

performance of its BDS and microcredit

clients on indicators related to sales,

needs, and impact. The loan-tracking

system monitors average loan size,

number of jobs created, share of women

among clients, and loan values. Clients

who have participated in entrepreneurship

training programs are tracked to ascertain

the percentage that go on to start a

business and the number of jobs they

create, as well as the percentage who

obtain employment following the training

program. Client satisfaction forms are

completed after each BDS service is

delivered to evaluate the level of client

satisfaction on the services offered through

the REDECs, and semi-annual client

surveys are used to assess the impact of

services on the enterprise in terms of

increased production, increases in

workers’ salaries, improvements in product

quality, increase in sales, and decrease of

production costs. Results of these surveys

enable El Mobadara to tailor BDS services

accordingly.

Having the ability to generate new ideas

and products in response to market

demand. This has played a pivotal role in

piloting and expanding new demand-

driven services, and has resulted in the

continuous development of new BDS tools

and approaches.

G. Lessons learned

El Mobadara has faced a number of

challenges to developing the BDS market

in Egypt. The main challenge has been to

build its capacity to serve the thousands of

Egyptians who need BDS services. One

way to deal with the potential unmet

demand was the decision to charge a

small fee for the services, although

Egyptian MSEs lacked a culture of paying

for BDS services, and many of the

potential clients in rural and low-income

areas cannot afford to pay for training and

advice. Consequently, El Mobadara has

had to experiment with different models for

generating revenue from BDS services,

including finding a way to balance cost

recovery with the ability of clients to pay for

the services. Developing shorter, lower-

cost training programs (to keep the fees

low) was particularly critical to enabling

more low-income women to participate

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and thereby improve their employability

skills and ability to start and manage a

microenterprise.

El Mobadara also tries to reduce the costs of

delivering the service by working as much

as possible with groups of MSEs. Another

successful approach has been to integrate

BDS with financial services. By providing

BDS to help MSEs with their loan

applications and negotiations with lenders,

the REDECs have been able to demonstrate

that this support leads to higher success

rates in MSEs being approved for financing.

Post-loan counseling and monitoring has

also resulted in improved loan repayment.

MSEs have seen value in paying a fee for

this kind of service (as long as it is affordable)

and it is a BDS niche that has worked well

for some of the REDECs.

The lack of an entrepreneurship culture in

Egypt has also presented a challenge.

El Mobadara has had to do a lot of

promotion, distributing flyers on the

e-business planner and developing links

with the universities to spread the word.

There is also a general lack of available

information for Egyptians who are starting

a business.

Another challenge is finding fully qualified

staff to deliver BDS services, or alternatively

staff with training potential, especially in the

remote governorates. BDS provision is a

relatively new concept in Egypt at the NGO

level, and universities generally do not

provide programs related to entrepreneurship

or BDS. Thus, experience is usually gained

on the job. El Mobadara provides several

capacity-building opportunities for REDEC

staff to gain the knowledge and skills

needed to provide quality BDS. El Mobadara

does salary and benefits surveys to find

out what they have to offer to attract and

retain good staff, but even so, turnover is

high and retaining staff is a big problem.

To deal with this, El Mobadara has initiated

a trainee and internship system to ensure

that they always have a pipeline of

replacement staff.

El Mobadara has learned that BDS

services have to be adapted and tailored

to respond to the needs of women

entrepreneurs. This relates to scheduling

and location of training and assistance,

offering shorter training modules, and

modifying the fee policy so women can

afford the services. REDEC staff are also

given training on how to mainstream

gender in the BDS provision by conducting

gender-sensitive value chain analysis in the

agribusiness sector.

In addition, as an organization that works

with donors, El Mobadara has learned that

it is important to work with more than one

donor at a time in order to diversify

organizational risk, especially given the

changing landscape of donor priorities.

Overall lessons learned

El Mobadara’s experience highlights the

need to:

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• Design and deliver demand-driven

BDS. This goes well beyond delivering

advice to MSMEs in an office

environment or through classroom-

based training.

• Be flexible when providing BDS

services, broadening them to include

assisting MSEs in developing or

accessing new value chain opportunities,

linking them with other technical

centers, etc;

• Tailor programs to the specific needs

of micro and small enterprises. The

difference between the micro and small

enterprises tends to be on the

management and technical levels. The

needs of small enterprise clients tend

to be specific to the enterprise and so

require more individual responses.

These needs are mostly related to

technical production challenges, cost

reduction, project management skills,

and growth strategies. The needs of

microenterprise clients are similar so

they can often be dealt with in groups;

• Invest in building the knowledge, skills,

and professional development of BDS

advisors, counselors, and facilitators

through training programs, workshops,

international study tours and use of

best practice guides for delivering BDS

services;

• Integrate a gender approach to BDS

services by providing gender-sensitivity

training to BDS staff, setting targets for

the share of women clients, and

tailoring services to be responsive to

the needs of women MSE clients

(OECD, 2014 forthcoming);

• Select the most important sectors and

MSE clusters. In the case of Egypt, a

good example is targeting the agricultural

sector, where MSEs are dominant;

• Perform evaluations and client

satisfaction studies to provide

feedback on services, new offerings,

etc; and

• Maintain networks with other

organizations, facilitate exchanges

between BDS staff in different regions

so they can learn from each other,

and organize exchanges with other

countries to stay abreast of innovations

and good practice trends.

Finally, MSE clients are willing to pay some

of the costs of BDS if the services are

demand-driven and will result in value-

added to their activity. However, a high

level of commitment is needed from all

stakeholders, including the government,

other NGOs, and donors, to properly build

the BDS market and offer demand-driven

services.

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Globally, interest in women’s

entrepreneurship development has

been escalating over the past decade,

during which time the international financial

institutions (IFIs) and international organizations

have made significant efforts to advance

policy and program efforts in favor of

women’s entrepreneurship development.

This includes noteworthy efforts by the

Organisation for Economic Co-operation

and Development (OECD), the European

Union, the World Bank Group, and the

regional development banks.

The significant gender gap in the level of

entrepreneurial self-employment activity in

Middle East and North Africa (MENA)

countries has been increasingly focusing

attention from researchers, international

organizations, and policymakers on

the issue of women’s entrepreneurship

development in the region. Across the

Deauville Partnership countries (excluding

Libya), women constitute an average of

about 10% of self-employed persons

(Stevenson, 2011). Women represent

fewer than 5% of the self-employed

in Jordan; about 5% in Yemen; 10%–11%

in Morocco; 13% in Egypt; and 16%

in Tunisia. Although women are

underrepresented among business owners

in most countries around the world,

their representation in self-employment in

MENA countries is the lowest of any

region.

The policy case for women’s entrepreneurship

development is based on two premises:

(i) the gender gap in entrepreneurial

activity levels between women and men

points to inequality in opportunities;

and (ii) the underdevelopment of women’s

entrepreneurship represents unexploited

potential for poverty reduction, growth,

and prosperity (OECD, 2012). Starting a

business is a way for women to create

jobs for themselves, produce income to

improve the livelihoods of their families,

meet marketplace needs, and generate

employment for others. Women’s

participation in entrepreneurial activity

can help economies expand, reduce social

inequalities, and enhance women’s

economic empowerment (IFC, 2011).

However, women-owned enterprises

generally perform at a lower level than

enterprises owned by men. They start

smaller, are less likely to be employers,

grow more slowly (if at all beyond the

microenterprise stage), operate with lower

levels of capitalization, and are less likely to

export. Although the extent of these

differences in performance varies across

countries, within countries, the relative

story remains similar.

5. Development of Women Entrepreneurs/Women-Owned MSMEs

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As a result of systemic and market failures,

women entrepreneurs in general tend to

face disproportionately larger obstacles

than men in accessing financial and non-

financial support services, information,

business networks, and market opportunities,

and can also experience gender barriers

in the legal and policy framework. This

is particularly the case in developing

countries, including in the MENA region

(OECD, 2012). On the other hand, studies

in MENA reveal that the productivity of

formal (registered) women-owned enterprises

compares favorably with those owned by

men, including being as likely as to employ

educated and skilled workers and engage

in export activity (Chamlou, 2008). Women-

owned enterprises are also more likely to

hire women workers, which contributes to

the goal of integrating more women into

the labor force. This is an important

outcome in Deauville Partnership countries,

where rates of women’s labor force

participation are low compared with

international benchmarks, and women

face many challenges in securing paid jobs

in the formal private sector.

One of the pillars in the Deauville

Partnership Small and Medium Enterprise

(SME) Action Plans also references

women’s entrepreneurship within the

context of improving entrepreneurship

policies, with emphasis on equality of

education and training opportunities,

career orientation towards entrepreneurship,

and more widespread access to

mentoring, coaching, incubation, and

other forms of business development

support (including financing). This has

guided the Deauville Partnership countries

to at least consider policy actions to

address the entrepreneurial gender gap.

Furthermore, the Deauville Partnership

countries have been rated against an

indicator for women’s entrepreneurship as

part of the 2014 SME Policy Index

assessment of progress towards

implementation of the European Union’s

Small Business Act for Europe in the

Mediterranean MENA countries (under the

education and training for entrepreneurship

policy dimension). Although the focus on

entrepreneurship education and training

for women is critically important, the issue

of women’s entrepreneurship development

is broader.

Also essential is ensuring that women

entrepreneurs are participating on an

equitable basis with men entrepreneurs as

clients of financial institutions and of

organizations providing business

development support (BDS) and have

access to the full range of financing,

advisory, counseling, management

development, incubation, upgrading and

modernization, supply chain development,

and export orientation services to fully

develop their enterprises.

On the other hand, the recent study

conducted for the OECD-MENA Women’s

Business Forum across 17 MENA

countries reveals that fewer than half of the

responding BDS organizations make

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special efforts to promote their services to

women-owned enterprises (OECD, 2014

forthcoming). While these organizations

reported that their service provision is open

to all enterprises regardless of gender, the

share of women among their clients/

beneficiaries indicates that women are

participating at a much lower level than

men, although women entrepreneurs

make up a higher share of the beneficiaries

in entrepreneurship training programs than

in other more intensive BDS services, such

as mentoring and coaching, incubation,

and management consultancy. The

implication seems to be that either the

women entrepreneurs/ enterprises do not

meet the criteria for access to these more

sophisticated forms of BDS (e.g. do not

have the technology profile, have not been

in operation long enough, are not in the

right sectors, etc.) or they are less likely to

be aware of their existence and value

(OECD, 2014 forthcoming).

To address the gap in women’s access to

BDS services, a number of organizations

in the region (and other parts of the world)

have been formed to deal exclusively with

serving their needs. In MENA countries,

the driving entity is often a women

entrepreneurs’ association which provides

a range of training, coaching, incubation,

and networking services to women

entrepreneurs, such as the Egyptian

Business Women Association, the Jordan

Forum for Business and Professional

Women, and the Association of Women

Entrepreneurs of Morocco (AFEM).

At the political level, the governments in

MENA countries have agreed on the

importance of fostering women’s

entrepreneurship. In 2009, they signed a

declaration reinforcing their support for

actions to increase the role and participation

of women entrepreneurs in the economy

(OECD, 2009a). At the present time,

Morocco may be advancing more

quickly on the women’s entrepreneurship

development agenda than the other

Deauville Partnership countries. Provisions

of the new constitution make it clear that all

public support must target women on a

basis of equality. The Moroccan government

is encouraging all of its MSME support

programs to adopt a gender approach,

with the aim of attaining a higher

percentage of women-owned enterprises

among beneficiaries.

The decision to include an initiative focused

on developing women’s entrepreneurship

in this good practice publication was

based on interest among stakeholders in

Deauville Partnership countries, particularly

Egypt and Jordan, for an example of

an effective gender approach to MSME

support. The EntreElles en Régions

Program in Morocco was selected as the

profile because it is driven by the National

Agency for the Promotion of Small and

Medium Enterprises (ANPME) and can

thus serve as a model for other government

entities in the region to follow. Further, it

has achieved demonstrable results in

terms of upgrading the management

skills of women entrepreneurs, improving

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the performance of their early-stage

enterprises, and increasing the share of

women among clients of ANPME’s main

SME assistance programs.

EntreElles en Régions Program,Morocco

Overview: ANPME is the operational arm

of the government for the development of

SMEs. Established in 2002, the agency

focuses primarily on offering grant

schemes to support SMEs in the process

of upgrading and modernization to

improve their competitiveness. It also

promotes the provision of national

consultancy services to SMEs; provides

assistance in the establishment, operation

and strengthening of associations and

support structures for SMEs; contributes

to the promotion and facilitation of SMEs’

access to public procurement; develops,

collects, and disseminates information

required by SMEs (regulation, legislation,

industry information, role and contribution

of SMEs to the national economy); and

assesses the impact of state policy to

promote SMEs. The focus of this profile

is their successful efforts to increase

the share of women-owned enterprises

among applicants and beneficiaries of its

competitive SME support programs, with

a specific emphasis on the EntreElles en

Régions project.

A. Background and institutional history

ANPME was created in 2002 to implement

state policy in support of SMEs, as well as

the evaluation of its impact. It offers

companies a range of products to assist

them in their efforts to modernize and

strengthen their competitiveness. In the

design, deployment, and promotion of

SME development support programs, the

Quick facts

Start date of ANPME 2002

Number of ANPME employees 74

Start date of EntreElles en Régions 2009

Beneficiaries of EntreEllesWomen entrepreneurs with businesses that have been in operation for atleast one year who meet select criteria, including promising growth potential

Program partnersANPME, the regional investment centers (CRIs), and the German Agencyfor International Cooperation (GIZ)

Number of women-owned enter-prises participating

80 in phase 1 (2009/10); 40 in phase II (2011/12), 40 in phase III (launchedand ended in 2013)

Impact

Improvements in the managerial capacity of participating women entrepreneurs and the performance of their enterprises

Increase in the percentage of women-owned enterprises in ANPME’s mainSME assistance programs from 2% in 2008 to 10%-12% in 2013

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agency aims to facilitate SMEs’ access to

expertise, funding, support, and information

related to economic, sectoral, regulatory,

and legislative issues. ANPME establishes

partnerships with agencies and SME

support structures at the national and

international levels. In addition, it encourages

the development of a network of

interconnected partnerships between very

small enterprises (VSEs), defined in

Morocco as enterprises with annual

turnover of less than MAD 3 million, and

SMEs, and between SMEs and large

companies.

Initially, ANPME delivered SME upgrading

programs funded by the European Union,

but gradually decreased its dependence

on donor funds for its activities. It now

offers a variety of grant programs under its

annual budget allocation from the State.

The key BDS program is Moussanada,

which aims to improve the competitiveness

of up to 700 SMEs annually by subsidizing

consultancy services to help solve their

technical and operational challenges

and enhance their growth potential. This

program has achieved significant results in

enabling assisted SMEs to improve their

overall performance. However, women

entrepreneurs were not availing themselves

of the program. In fact, in 2008, ANPME

observed that only 2% of its SME program

clients were women-owned enterprises.

Even if a woman-owned enterprise applied

to one of ANPME’s programs (through the

competitive process), it often did not meet

the criteria for acceptance.

This could occur because the woman

entrepreneur was not able to cover the

unsubsidized portion of the consultancy

work, her business had not reached the

point where it would benefit from the

professional consultancy, or she did not

have an adequate proposal for future

development and improvement.

To improve its performance in attracting

women-owned SMEs to its programs,

ANPME started to implement remedial

actions. One of its initial efforts to increase

the share of women clients in the

Moussanada programs was to implement

Moussanada for Women. Under this

project, consultants were contracted to

proactively identify women entrepreneurs

with the potential to be Moussanada

clients and then to assist them in meeting

the eligibility criteria for this and other

ANPME programs. This was an important

response on the part of the ANPME, since

a large share of women entrepreneurs

in Morocco (and other MENA countries)

tend to be concentrated in (informal)

microenterprises and are in need of

pre-program counseling interventions to

build up their managerial, organizational,

and operational capacities to the standard

required to benefit from many government

support programs.

Until 2014, when it was given responsibility

for implementing the National Strategy for

the Promotion of Very Small Enterprises,

ANPME did not have a mandate to

support VSEs. However, in the past, and

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with donor support, ANPME had partnered

with AFEM and the Espace Point de

Départ: Association pour la Promotion de

l’Entreprise Féminine (ESPOD) to run

training programs for women in the early

stages of developing a business idea. A

challenge encountered was that, after

receiving training, women entrepreneurs

were often held back by their inability to

access financing. A main barrier was their

lack of know-how in developing bankable

proposals and presenting these to banks.

ANPME responded by aiding women

entrepreneurs to form networks of

groups of women, and providing them with

training and coaching on how to approach

banks. In partnership with the German

Agency for Technical Cooperation (GTZ)

(now GIZ) and AFEM, the agency also

produced a “Toolkit for Women

Entrepreneurship” (GTZ and ANPME,

2010), and short videos profiling women

entrepreneurs’ success stories, which

served to share information on how to

support women entrepreneurs and promote

positive role-model examples to others.

With the experience gained in developing

tools to advance women’s entrepreneurship

through previous projects supported by

GIZ, ANPME was eager to move ahead

with GIZ on a more comprehensive and

integrated approach to supporting the

development of women’s enterprises that

would both recognize the important role of

women in the socioeconomic development

of Morocco’s regions, and improve the

gender representation among its own

program participants – hence, the inception

of the EntreElles en Régions program.

Objectives: The program’s main goal is to

improve the technical and managerial

skills of women entrepreneurs in order to

positively influence the sustainability and

growth performance of their enterprises. Its

specific objectives are to:

• Strengthen the managerial capacities

of women entrepreneurs through

training and coaching;

• Improve the development possibilities

of women-owned VSEs in the critical

post-creation phase; and

• Stimulate the formation of networks for

women entrepreneurs in order to

augment their development opportunities

though self-help and mutual support

groups.

Once women entrepreneurs have

completed the EntreElles program, they

are better equipped to meet the eligibility

criteria for ANPME’s mainstream support

programs, and thus able to further improve

the performance and competitiveness of

their enterprises.

Beneficiaries: The program’s target is

women entrepreneurs in the post-creation

phase, whose VSEs show promising

growth potential.

The three cycles of the program supported

a total of 160 women-owned enterprises.

Four regions were targeted in the first and

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second cycles: Agadir, Kénitra, Meknès,

and Safi, with an expansion in the third

cycle to Tangier, Oriental, and Casablanca.

Information on women entrepreneurs

accepted into the program’s second cycle

indicates that the majority had at least one

university degree; almost 70% had a

business that was at least one year old;

more than three-quarters had at least two

years of previous experience in a field

related to the business; 60% had at least

three permanent employees; 57% had

revenue of more than MAD 50,000, and

half had an ambitious plan for developing

and diversifying the business. Their

businesses spanned a range of sectors.

B. Organizational model

The program is a tripartite agreement

between ANPME, the CRIs, and GIZ, and

managed by a committee represented by

officials from each of these organizations.

Local committees were established in

each of the four regions to promote

the program, pre-select women-owned

enterprises for participation, coordinate the

coaching interventions, and assist in the

formation of EntreElles networks.

Staffing: An external consultant was

contracted to manage the program on

behalf of ANPME and GIZ, including the

hiring of local consultants to provide the

training and coaching components.

Although ANPME played a coordination

role and the participating CRIs assigned a

program manager at the local level, no

additional staff was hired by either

organization. External trainers, consultants,

and coaches retained to deliver the

program components were drawn from

ANPME’s database of qualified suppliers.

To deliver the EntreElles program, they

were required to participate in a training-

of-trainers workshop geared to honing

their knowledge of the GIZ approach to

entrepreneurship training, and making

them more sensitive to the nuances of

coaching women entrepreneurs.

C. Operational model

Products and services: To implement

the EntreElles program, starting in 2009,

ANPME approached the regional one-

stop shops at the CRIs and offered to

make its tools and training methodologies

available to help them better respond to

the needs of women entrepreneurs. Four

CRIs responded (from Agadir, Kénitra,

Meknès, and Safi), each of which assisted

in identifying the first group of 20 women

entrepreneurs (80 in total) from those who

had benefited from CRI services.

These 80 women (mostly with VSEs) were

then given up to ten months of EntreElles

post-creation training and coaching. The

second phase of the program, including

40 women, was completed at the end

of 2012. The third phase, which also

benefited 40 women entrepreneurs but

in more regions (Casablanca, Tangier,

Oriental), ended in 2013.

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The EntreElles process included six

stages: (i) program preparation; (ii) pre-

selection of participants; (iii) pre-diagnosis

of the problems, challenges and

opportunities of each selected enterprise;

(iv) business management training; (v)

individual coaching and mentoring; and (vi)

development of EntreElles networks in

each region. To promote the program,

ANPME partnered with AFEM to conduct

roadshows in the regions, and with

CRIs to help in identifying candidates.

The criteria for selecting the women

entrepreneurs were, first, their professional

qualifications (e.g. level of education, years

of experience prior to starting the

business, and years of previous related

experience to her business); and, second,

aspects of their business (e.g. age,

number of permanent employees, sector,

type of business premises, amount of

invested capital, and potential for

development). Meetings were held with

candidates who received a score of at

least 80% on these criteria. The program

then assigned consultants to carry out an

initial diagnosis of each business to identify

its major strengths and weaknesses, and

specific areas where coaching would be

beneficial. The final selection of candidates

was based on this diagnosis. Any

businesses not judged as being at an

adequate level of development to benefit

from the full impact of the EntreElles

intervention were eliminated. The diagnosis

also served to establish a professional

relationship between each woman

entrepreneur and the program, and a

baseline for the eventual evaluation of the

impact of the EntreElles interventions.

Once selected, the women entrepreneurs

were brought together for an initial two-day

briefing and awareness session and then

started the program of instruction and

coaching. The instructional part of the

program included four modules of training

requiring a commitment of one day a

month. The training drew on materials

previously developed by GIZ, AFEM, and

ESPOD.

These modules cover marketing and

sales, management and organization (time

management, fundamentals of productivity

and quality, resources management,

negotiation skills), personnel development,

accounting and taxation (e.g. cash

management, the relationship with the

banks, tax, and social legislation), and IT use.

As a follow-up to the training modules, a

coach was assigned to each entrepreneur

to help her assimilate and apply the

techniques covered in the training. Half-

day coaching meetings were held every six

weeks, either at the woman’s business or

other mutually agreeable location, during

which the coach offered advice and

assistance in addressing problems related

to managerial, technical or marketing

challenges. This use of individual coaching

was one of the unique aspects of the

program.

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Another unique feature was encouraging

the participating women entrepreneurs in

each region to form a regional EntreElles

Association to provide a networking forum

for mutual learning and exchange. The

program consultant created awareness

among the women of the advantages of

working in a network, and the CRIs

provided training on how to organize and

operate these associations. Through these

networks, the women are able to discuss

their common challenges, benefit from

sharing different approaches and strategies

for dealing with problems, and provide

peer support to each other on management,

operational, and personal issues.

At the end of each program cycle, the

women entrepreneurs participated in a

graduation and awards ceremony in each

of the regions where those who achieved

the most improvement (based on a post-

diagnostic) received awards. One award

was for the woman entrepreneur with the

greatest improvement in business and

management acumen; the other was

for the business with the greatest

improvement in performance.

D. Financial model

ANPME’s operating and SME support

funding comes from a central government

budget allocation. Its annual workplan

is covered by an agreement with the

government that allocates funding to

deliver ANPME programs to a specified

number of beneficiary SMEs. However, the

past public funding model did not cover

development projects targeting VSEs or

start-ups. To support special initiatives for

women starting enterprises or to build their

capacity to meet the criteria of its flagship

SME support programs, ANPME has been

reliant on donor partnership funding.

Funding for the EntreElles en Régions

Program came from GIZ.

The total program cost for the three cycles,

involving 160 women entrepreneurs,

was EUR 480,000. This was based on

a projected cost of EUR 3,000 per

participating enterprise for the diagnostic,

training, and coaching components. The

women entrepreneurs were not required to

contribute towards the cost of the services.

With a broadened mandate to implement

the National Strategy for the Promotion

of Very Small Enterprises (as of 2014),

ANPME has more flexibility for including

programs such as EntreElles in its annual

publicly funded workplan; however, the

long-term sustainability of the program is

under consideration. For example, cost

reductions may be possible if ANPME

builds its internal capacity to assume

responsibility for program management

(instead of contracting this to an external

consultant). Also, for future editions of

EntreElles, a subsidy model could be

applied whereby the participating women

entrepreneurs contribute a percentage

towards the costs of the training and

coaching services (or pay a small monthly

fee), and more use is made of the

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EntreElles networks to facilitate the

coaching aspects.

E. Results and impact

From 2009 through 2013, the program

benefited 160 women entrepreneurs.

Based on the intended impacts of

improving the performance and

competitiveness of women’s enterprises,

the program has been effective in attaining

its objectives and has reaped positive

outcomes.

Most of the women entrepreneurs

participating in the program had not

previously considered their management of

the enterprise in a structured way and

expressed keen interest in the themes

covered by the training. Over 90% of

participants rated the training useful and

the training materials practical and easily

applied.

To evaluate the impact of the program

interventions, coaches performed regular

monitoring of the progress of the women

entrepreneurs in improving the performance

of their enterprise and their own

managerial capacity. At the end of the each

program cycle, comparisons were made

with the pre-program diagnostic results

and each enterprise given two

performance ratings, one linked to the

performance of the business and the other

to improvements in the entrepreneurial

and managerial skills of the woman

entrepreneur. Post-program evaluations of

improved performance in the beneficiary

enterprises indicate that they had acquired

new materials, upgraded or moved into

new premises, developed subcontracting

relationships with large firms, expanded

their sales channels, better defined their

products and services and diversified their

offerings, hired more staff, achieved

greater efficiency in their operations,

improved their financial situation, and were

better prepared to access financing. In

addition, the women were helped to

formalize their enterprises, and the

presence of the program increased

awareness in the regions of the importance

of women’s enterprise development and

the profile of women entrepreneurs. The

program also had a positive impact in

terms of promoting networking among

participating women entrepreneurs in the

regions through the creation of EntreElles

associations.

At a broader level, the program, along

with ANPME’s other developmental

and promotional efforts, contributed to

bringing more women entrepreneurs into

ANPME’s conventional SME assistance

programs. As a result of the preliminary

preparation women entrepreneurs

received in the program, the share of

women among ANPME’s mainstream

SME clients increased from 2% in 2008

to closer to 10% to 12% in 2013.

Cumulative data for the percentage of

women-owned SMEs benefiting from

ANPME’s main programs to the end of

2012 indicate variations by program: from

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close to 10% in the Moussanada program

to less than 5% in the Inmaa lean

production program (Table 10). However,

the overall increase in representation of

women clients illustrates the impact of

making efforts to scale up the

management skills and performance

of women-owned enterprises so they can

meet the criteria for other government-

support programs.

F. Success factors

Several factors have accounted for the

success of the EntreElles Program:

• Partnering with the CRIs, which

provided a local presence for program

management (and venues for training

and other meetings), and better

oriented the CRIs to the benefits

derived from special efforts to upgrade

women’s enterprises;

• Use of a personalized (hands-on)

approach tailored to the needs of

Table 10: Cumulative share of women-owned enterprises among ANPME programparticipants, 2013

Program Total number of SME

beneficiaries

Number of women-owned

enterprises participating

Women’s share of program beneficiaries

Moussanada (to July 2013) Program subsiding the cost ofconsultancy to address technicaland operational challenges to improve the competitiveness ofSMEs.

913 90 9.8%

Infitah IT (to December 2012)Program targeting the accelerationof digital technology usageamong VSEs.

Issued 2,602 numericpermits and 425 digital IT packs

195

6.5% of permits and6.1% of IT packs(target to raise shareof women amongbeneficiaries to 20%)

Imtiaz (to July 2013) Access to financing for SMEs with highgrowth potential that do not needconsultancy assistance but require equity to enable furthergrowth.

116 10 8.8%

Inmaa clients (to mid-December2012) Program to assist SMEswith at least 50 workers in thetransformation to lean productionsystems and more efficient workorganizations.

86 4 4.6%

Source: Information supplied by ANPME

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women entrepreneurs, with the aim of

detecting obstacles and problems

inherent in the daily and strategic

management of their enterprises (e.g.

marketing, human resource management,

production, financial issues), and

proposing remedies;

• Providing gender training to all trainers

and coaches in order to refine their

ability to support the needs of women

entrepreneurs according to their

personal and professional specificities;

• Facilitating networking for the women

entrepreneurs as a source of inspiration,

exchange of experiences, and pooling

of means and resources;

• Collecting views of the participants

about the program components and

ongoing monitoring of changes in the

performance of the enterprises and the

management ability and acumen of the

women entrepreneurs, which has

allowed ANPME to measure outcomes

and make adjustments to program

activities; and

• Holding awards ceremonies at the end

of each program cycle to recognize

improved performance of an enterprise

and of the woman entrepreneur

herself. This created more public

awareness of the role and achievements

of women-owned enterprises as

economic contributors and served to

promote successful role models to

other women entrepreneurs.

G. Lessons learned

Based on its experience, underpinned by

studies and analysis, ANPE has concluded

that offering special support programs

for women entrepreneurs can make a

substantial difference in their managerial

and business performance. However,

these programs alone cannot address the

challenges faced by women entrepreneurs.

Aspects of the socio-cultural environment

hinder women entrepreneurs in ways that

limit their opportunities for networking and

pose difficulties in accessing financing.

In many cases, their ability to secure

financing is also linked to the small size of

their enterprises, their lack of skills in

preparing business plans, and lack of

experience in negotiating with lenders. In

addition, entrepreneurship in Morocco is

generally viewed as a male domain,

involving skills considered masculine, such

as risk-taking, aggressive spirit, and

independence. Thus, women’s skills are

frequently called into question by staff,

customers, suppliers and partners.

Reconciling the time demands of both

business and family life is another major

problem faced by women entrepreneurs.

One of the major obstacles in delivering

the EntreElles en Régions program was

ensuring that the women entrepreneurs

were able to engage fully in all

components. In the program’s second

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edition, the average attendance in the

training sessions was only 76%, and some

of the women were not able to take full

advantage of the coaching component.

Lack of time, due to conflicting demands

of domestic responsibilities, partly

accounted for this, but also difficulties in

certain cases in finding appropriate

premises/ locations for the coaching

sessions. Corrective actions were taken in

the third edition of the program, such as

more strictly following the selection criteria

in the choice of candidates, replacing

women entrepreneurs who were absent

from training sessions or showed lack of

interest, and carefully monitoring the

coaching component to ensure that

scheduled sessions took place.

ANPME also encountered a problem

during the expansion of the EntreElles

program into new regions for its third

edition, particularly in identifying local

organizational partners capable of mobilizing

promotional support and helping to identify

suitable candidates from their area. This

suggests that for a kingdom-wide roll-out

of the program, capacity building of

potential local partners needs to be taken

into consideration at an early stage.

In addition to specific programs targeting

women entrepreneurs, ANPME recognizes

the need for complementary actions to

improve their general access to business

development support and the overall

environment for women’s entrepreneurship

development in Morocco. In this respect,

it recommends that:

• Public policies related to women-

owned enterprises and their incubation

be developed, building on existing

structures (such as the AFEM business

incubators) and then be scaled up

kingdom-wide;

• Mechanisms enabling women to

access financing (e.g. loan guarantees,

financial training, mentoring, coaching,

and seed capital) be strengthened;

• Custom-tailored training specifically

addressing the barriers faced by

women entrepreneurs be implemented

and solutions proposed;

• The formation of networking groups

among women entrepreneurs be

encouraged;

• A system for collecting sex-

disaggregated data and statistics be

implemented in the context of the

establishment of an SME observatory;

• Labor flexibility be enabled to provide

more opportunities for women;

• Initiatives be promoted that seek to

rebalance responsibilities within the

family to provide women with more

autonomy to develop their enterprises;

• A system of national dialogue be

created on the issue of women

entrepreneurship, to include the public

and private sectors and civil society, for

the purpose of sharing strategies on

how to respond more appropriately to

the needs of women entrepreneurs;

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• A national structure and framework for

monitoring support policies for women’s

entrepreneurship be established; and

• A dedicated fund be created that

would enable the deployment of

more support programs for women

entrepreneurs in all regions of

Morocco, including further roll-out of

the EntreElles program.

Overall lessons learned

The ANPME example may be a good

model for improving the gender

inclusiveness of SME upgrading and

modernization programs of other

government SME agencies in the Deauville

Partnership countries. Insights from

lessons learned include the following:

• It is important that governments

collect sex-disaggregated data on the

beneficiaries of their MSME support

programs to enable tracking of their

gender-inclusion performance. This

information can form the basis for

remedial actions to increase the

participation of women-owned

enterprises.

• Implementing developmental programs

specifically targeting women entrepreneurs

can be effective in improving their rate

of participation in the mainstream

program offerings.

• An approach that offers both capacity-

building training for women entrepreneurs

and coaching over a designated period

of time is effective in upgrading

women’s enterprises, but needs to be

monitored carefully to ensure that the

women entrepreneurs can participate

fully in all components.

• Networks of women entrepreneurs

are effective vehicles for promoting

experience exchange, enabling women

to learn from each other by contrasting

and comparing approaches to solving

problems and providing mutual

support.

• Infusing a gender approach throughout

the SME ministry or agency, including

by providing the appropriate gender

training, is critical for sensitizing senior

managers and program officers to the

particular needs of women entrepreneurs

and how best to respond to these

needs.

• External trainers and coaches involved

in delivering support programs to

women entrepreneurs can also benefit

from specific orientation.

• To deliver programs for women

entrepreneurs in local regions, it is

important to identify local organizations

both able and willing to partner with the

program and support its promotional

activities. In more rural areas, this will

likely require attention to reinforcing

the capacity and resources of

local organizations to support

the development of women’s

entrepreneurship.

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Development of micro, small and

medium enterprises (MSMEs) is

increasingly becoming a high priority for

policymakers in the Deauville Partnership

transition countries, given that the MSME

sector constitutes the backbone of their

economies and is the major source of

employment in these countries. Structural

deficiencies, both on the supply and

demand side, need to be resolved in order

to create both the quantity and quality

of jobs needed, and put the countries

on a pathway to an innovation-driven

knowledge economy.

Learning from and adapting good

practices of institutions and projects with

a track record from within the region,

which spark a stronger entrepreneurship

culture, support the business creation

process (with a particular emphasis on

targeting young entrepreneurs), improve

access to bank and lease financing for

MSMEs, strengthen business development

support (BDS) services, and enhance the

development of women’s entrepreneurship,

is of increased interest for policymakers

and affiliated agencies.

With transition countries making MSME

development a priority area since 2011, a

number of new initiatives have emerged,

some supported by international financial

institutions and donors, and others by

Deauville Partnership governments and the

private sector. These include projects to

increase the availability of early-stage

venture capital and angel investment to

address the equity gap faced by promising

new and growth-oriented enterprises,

strengthen the capacity of BDS providers,

foster entrepreneurship and business

creation among young people and

women, promote equality of economic

opportunity in disparate regions, and assist

governments in improving the business

environment for private sector growth.

Particularly noteworthy is the new

dynamism in entrepreneurship among

young people. There has been a significant

rise in the number of initiatives geared to

promoting entrepreneurship, such as

through Global Entrepreneurship Week

activities, the emergence of Start-up

Weekends, and the launch of start-up

accelerators to foster more innovative and

growth-potential enterprises. At the present

time, a great deal of experimentation is

taking place to determine the most

effective approaches to stimulating and

strengthening entrepreneurial capacity

in Deauville Partnership countries. some

emerging good practice models have been

featured in this volume. Efforts should be

made to monitor these developments in

6. Concluding Remarks

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order to identify the good practice models

from which all Deauville Partnership

countries and partners can benefit. This

also holds true for other new initiatives,

such as those of the Endeavor

organization, to increase the growth

and innovation potential of existing

MSMEs.

Conducting formal impact evaluations has

not been a standard practice for many of

the initiatives in Deauville Partnership

countries. To advance learning about what

works best, more focus be placed on

performing impact evaluations and sharing

the results broadly among Deauville

Partnership partners.

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AfDB (African Development Bank) (2011), “Financial Sector Development Support

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AfDB (2012), “Souk At-Tanmia Partnership”, Tunis: AfDB.

AfDB (2014a), “Catalyzing Job Creation and Growth through MSME Development in the

Deauville Partnership Countries: A Gap Analysis of Policy and Program Support in Morocco

and Tunisia”, Tunis, AfDB.

AfDB (2014b), “Souk At-Tanmia Mid-Term Evaluation Report”, Tunis: AfDB.

Al-Sugheyer, B., and M. Sultanov (2010), “Leasing in the Middle East and Northern Africa

(MENA) Region: A Preliminary Assessment”, October, Washington, DC: World Bank and

International Finance Corporation.

Aziz, T.A. (2013), “Supporting access to finance for micro, small and medium enterprises

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Chamlou, N. (2008), The Environment for Women’s Entrepreneurship in the Middle East and

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