MICROCAPITAL STORY: Morocco and Millennium Challenge Corporation (MCC) sign $697.5m Compact, JAIDA and Other Microfinance Programs to Receive $46.2m

Morocco and the Millennium Challenge Corporation (MCC), a US government corporation designed to reduce poverty in the world’s poorest countries, have signed a five-year USD 697.5 million Millennium Challenge Compact to encourage sustainable economic growth in the Kingdom of Morocco. The compact, which officially began August 9th, is the largest of its kind to date. MCC will supply USD 118 million per year for five years to various initiatives spanning multiple sectors in the country. As part of the compact, USD 46.2 million will be given to the Financial Services Project, a program intended to increase the supply and decrease the costs of financial services, particularly for microfinance institutions.

The funds will also support four other initiatives. The Fruit Tree Productivity Project, designed to stimulate growth and increase stability in the agricultural sector, will receive the largest portion of the funds with USD 300.9 million. USD 116.17 million will go to the Small-Scale Fisheries Project. USD 111.87 million will be given to the Artisan and Fez Medina Project, an initiative aimed at connecting the craft sector with the tourism industry in the Fez Medina. The Enterprise Support Project will receive USD 33.85 million to support two existing government programs which seek to reduce high unemployment among young graduates and encourage a more entrepreneurial culture.

The Financial Services Project is designed to increase access to loans for more Moroccans, as well as creating new products and services. Specifically, much of the MCC’s contribution will be given to JAIDA, a non-bank financial institution which provides debt funding to Moroccan microfinance institutions. JAIDA was established in 2006 (see press release) by KfW Entwicklungsbank, a branch of Fortune 500-listed commercial bank KfW Bankengruppe, acting on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and in conjunction with the Moroccan Caisse de Dépôt et de Gestion (CDG), the Agence Française de Développement (AFD) and the French Caisse de Dépôt et de Consignation (CDC). KfW Entwicklungsbank finances investments and accompanying consulting services in developing countries.

The Financial Services Project will also focus on increasing efficiency and transparency in the financial sector by investing in technical assistance initiatives. These investments dedicated to improving efficiency are expected to lower borrowing costs for micro-enterprises on a sustainable basis. MCC projects that up to 174,000 clients of microfinance institutions will benefit from these efforts.

As of September 2006, MCC had USD 3.95 billion (pg 108) in total assets and USD 7.77 million in total liabilities.

Additional Sources:

PRNewswire.com: “$697.5 Million Grant to Morocco Announced in U.S. By Millennium Challenge Corporation”

Millennium Challenge Corporation

MCC: About MCC

MCC: Morocco

MCC: Annual Report 2006

UNESCO.org: Medina of Fez

International Finance Corporation: Jaida S.A.

KfW Bankengruppe

KfW Entwicklungsbank

KfW Entwicklungsbank: Functions and activities