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Mapping The Market: Conditions and Potential for Building an Impact

Investment Market in Morocco

Technical Report · October 2015

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September 2015

MAPPING THE MARKET:

CONDITIONS AND POTENTIAL FOR BUILDING AN
IMPACT INVESTMENT MARKET IN MOROCCO
BY LENA LÜTJENS-SCHILLING AND BARBARA SCHECK
2
1. CONTENT
1. About this report............................................................................................................................ 5
2. Acknowledgments.......................................................................................................................... 7
3. Executive summary......................................................................................................................... 8
Part I: Introduction to the field of impact investing......................................................................... 9
4. Introduction to the field of impact investing................................................................................... 9
5. Impact investing — What are we talking about?............................................................................10
5.1 Distinction from similar concepts.........................................................................................10
5.2 Working definition of impact investing.................................................................................12
5.3 Developments in the field of impact investing......................................................................13
5.4 Outlook and perspectives.....................................................................................................14
5.5 Critics and challenges...........................................................................................................14
6. Impact investing in emerging markets...........................................................................................15
Part II: The impact investing market in Morocco............................................................................17
7. Methodology................................................................................................................................. 17
7.1 Steps of research.................................................................................................................. 17
7.2 Analysis framework..............................................................................................................18
7.3 Data collection.....................................................................................................................19
8. Setting the scene: General conditions for impact investing in Morocco.........................................19
8.1 Political system....................................................................................................................20
8.2 Public policies......................................................................................................................21
8.3 Economic situation...............................................................................................................26
9. Demand side of impact investing in Morocco................................................................................26
9.1 Demand-side market infrastructure in the public sector......................................................27
9.2 Demand-side infrastructure in the private sector.................................................................30
10. Supply side of impact investing in Morocco...................................................................................35
10.1 Investment climate and conditions.......................................................................................35
10.2 Supply-side market structure...............................................................................................37
10.3 Social impact measurement in Morocco...............................................................................42
11. Intermediaries in support of inclusive business and impact investments.......................................42
12. Challenges for building an impact investing market in Morocco.................................................... 44
13. Conclusion.................................................................................................................................... 44
14. About the authors........................................................................................................................ 46
List of tables, figures, and case studies..........................................................................................47
References.................................................................................................................................... 48
Expert interviews...........................................................................................................................55
Endnotes.......................................................................................................................................55

3
4
1. ABOUT THIS REPORT
This publication is a result of the Impact Investing Policy Collaborative (IIPC)
Fellowship in Impact Investing & Policy Innovation, supported by the Rocke-
feller Foundation and awarded in 2012. Authored by Lena Lütjens-Schilling, a
fellow at the IIPC, in cooperation with Professor Dr. Barbara Scheck from the
University of Hamburg, the report presents the findings of a research project
that aims to analyze the potential and building of an impact investing market
in Morocco. By analyzing market conditions and potential policies to raise pri-
vate investments for social and ecological businesses in Morocco, the insights
gained will thus hopefully lead to more investment decisions in Morocco that
follow the impact investment model. By promoting the findings in this report,
we hope to significantly advance the understanding of impact investing among
key stakeholders in and outside Morocco from the public sector, civil society
organizations (CSOs), and academia.

The IIPC strives to grow impact investing markets by building a global network
for policy research and innovation. The IIPC helps its members—investors,
public officials, advocates, researchers, and related communities—to better
identify and support policies that lead to more robust and effective capital
markets with intentional social and environmental benefits. The IIPC achieves
these goals through several activities, including research awards that support
the exploration of new areas—geographies and topics—to cultivate greater
interest in the field and further expand the network of researchers and advo-
cates considering impact investing policy issues.

The IIPC is convened by PCV InSight and the Initiative for Responsible Invest-
ment (IRI) at the Hauser Institute for Civil Society at Harvard University, with ini-
tial support from the Rockefeller Foundation. The IIPC network relies primarily
on its network of partners and practitioners from over 140 countries, including
those from its Global Learning Exchange project, to provide local knowledge and
insights into impact investing policy that are then shared globally.

5
6
2. ACKNOWLEDGMENTS
Many people have contributed to this study. The authors are deeply grate-
ful for their support. We thank the IIPC for their financial support, ongoing
feedback, and guidance and for opening up their broad network to us. Special
thanks go to Tonusree Basu (Associate Director, Pacific Community Ventures),
Colby Daily (former Director of Policy and Research at Pacific Community Ven-
tures), and Sarah Ritter (former Community Manager and Project Coordinator
at Pacific Community Ventures).

As part of our research project, we had the chance to conduct in-depth in-
terviews with many experts in the field. We would like to express our sincere
thanks for sharing their knowledge and advice with us to Brahim El Jaï (Senior
Partner and Managing Director of Africinvest Morocco), Markus Geibel (Senior
Investment Manager at Deutsche Entwicklungsgesellschaft (DEG)), Mayada
El Zoughbi (Senior Financial Sector Specialist at Consultative Group to Assist
the Poor (CGAP)), Milena Bertram (Co-Head of the SANAD Fund at Finance in
Motion), Silke Stadtmann (former Country Director at Kredit Anstalt für Wie-
deraufbau (KfW), Morocco), Adnane Addoui (founder and CEO of the Moroc-
can Center for Social Entrepreneurship (MCISE)), Latifa Zitane (Chef de Pôle
Communication, Coordination Nationale de l’Initiative Nationale du Dévelop-
pement Humain (INDH), Ministère de l’Intérieur), Mohamed Medouar (Senior
Rural Development Specialist, World Bank), Stéphanie Druguet (Délégation de
l’Union européenne au Maroc, Coopération – Secteur développement, social,
et rural), Abdellahm Talib (Directeur de la Communication et du Développe-
ment Durable, Lydec), Saïd Chadli (Directeur de Lydec/INMAE), Abderrafih
Lahlou Abid (former Senior Project Manager, KfW), Leyth Zniber (Founder and
CEO of Eiréné4Impact) and Manal Elattir (founder and CEO of Anarouz). While
we attempted to verify all content with these individuals, we assume respon-
sibility for any errors.

For their helpful feedback and advice we thank Jan Schilling and Anja-Nadine
König. For proofreading and editing we thank Diana Lixandru, and Elizabeth
MacDonald. And we thank Martina Pezallotti for the layout of the report.

7
3. EXECUTIVE SUMMARY
Impact investments are investments made with the intention of generating a social and environmental impact along-
side a financial return. The outstanding attention that impact investing is receiving nowadays represents a window of
opportunity: Never before have so many high-ranking politicians been aware of impact investing and willing to foster
its development. However, despite a general increase in impact investments in emerging markets, the whole Middle
East and North Africa (MENA) region1 seems to be almost excluded from this trend.

This report analyzes the conditions and potential for building an impact investing market in Morocco. It thus provides
a comprehensive overview of the impact investing ecosystem in this North African country. Derived from an analysis
of the general political and socioeconomic situation, it illustrates the present and potential demand and supply side of
impact investments and describes the intermediaries’ landscape. In addition, several case studies provide helpful in-
sights on the market landscape. The research is based on a thorough literature review and several in-depth interviews
with Moroccan and international experts from the public, civil, and private sectors.

Our analysis shows great potential for Morocco to act as a testing ground to build market based solutions and deploy
them in the region. Promising developments in the public, private, and civil society sectors include:
•• The Moroccan government has prepared and adopted an important portfolio of incentives aimed at encourag-
ing private investment for public-private-partnerships (PPPs) in several impact sectors.
•• If certain barriers, such as a lack of transparency in corporate governance or missing regulatory frameworks for
social investing, were eliminated, experts point out that there is tremendous potential for microfinance, classic
equity capital, mezzanine funds, and leasing products for impact investments in Morocco.
•• If cooperatives in Morocco succeed in improving their business skills, reducing corruptive structures and es-
tablishing innovative ways to attract external growth capital in the form of debt and equity, they will become a
very interesting opportunity for future impact investors.
•• Social entrepreneurship and inclusive businesses are gaining increasing attention from civil society actors, uni-
versities, and political stakeholders.
•• The large group of Moroccan emigrants that invest in their home country could play an additional important
role in facilitating the emergence of an impact investment market in Morocco.

Nevertheless, several barriers still hinder the market development for impact investing in Morocco. For instance, no
stable pipeline of investable projects for impact investments in Morocco exists yet and social businesses face several
barriers with regard to finance and technical advisory. On the other hand, potential impact investors describe the lack
of transparency in corporate governance as a major problem. Especially for interested foreign investors, this leads to
high transaction costs for elaborate due diligence processes and technical assistance throughout the investment pro-
cess. Furthermore, specific local knowledge, expertise, and networks seem mandatory. However, a lack of specialized
local consultants, asset managers, and attorneys additionally impedes the growth of international investments.

The results of the study indicate that governmental support is needed to create general market conditions, counter-
balance market failures, and thus promote the building of an impact investing market. Options for policy interventions
range from direct interventions to enabling actions including (co-)financing, legal regulations, building market infra-
structure, and changes in public procurement or tax incentives.

The report addresses different actors interested in contributing to the building of an impact investing market:
•• For politicians, the report may serve as the foundation for their decisions on the most appropriate policy mea-
sures to support impact investing.
•• For impact investors, the report may serve as part of a more detailed analysis of investment options to explore
new markets.
•• For social entrepreneurs who want to launch or replicate their business model, the report may help to thor-
oughly evaluate the business environment.
•• For interested stakeholders from either civil society or the private sector, the report may help to learn more
about how to contribute as intermediaries to the building of an impact investing market.
•• For researchers in the field, the report may serve as the basis for a comparative study of ecosystems for impact
investing in different countries.

The information presented serves as a first step toward a better understanding of the emerging impact investing market in
Morocco. For a more profound comprehension of specific sectors or aspects, however, further research is strongly needed.

8
PART I: INTRODUCTION TO THE FIELD OF IMPACT INVESTING
4. INTRODUCTION
In recent years, impact investing has garnered increasing attention from investors, policy makers, and potential invest-
ees (see Figure 1)2. The Monitor Institute estimates that the global impact investing market could grow up to USD 500
billion over the next five to 10 years3. However, a survey by JP Morgan and the Global Impact Investing Network (GIIN)
published in 2015 indicated that, despite a general increase in impact investments in emerging markets, the whole
MENA region seems to be excluded from this trend4. Whatever the reason, if countries in the region want to profit from
the international growth of impact investing market, they need to attract international and domestic impact investors
to finance sustainable market-based solutions to social problems.

Figure 1: Impact Investors around the Globe

Source: Rockefeller Foundation and Jackson (2012).

According to the World Bank, the MENA region encompasses all Middle Eastern and North African states, amounting
to 14 countries5. Although they share similarities, they differ with regard to many relevant aspects, such as political sys-
tems, state of development, oil import versus oil export and cultural and historical background. It is thus impossible to
find a universal explanation for the lack of impact investments in all these countries. Consequently, this report focuses
on one country as an example for the region: Morocco. Often considered a role model for the region, this North African
kingdom was chosen as an example for the following three reasons.

1. Political stability
Since its independence from France in 1956, Morocco has been a monarchy that has been gradually evolving toward
democracy under the current king, Mohammed VI. The Arab Spring in 2011 in Morocco took place relatively calmly
compared to the riots elsewhere in the Arab world. New elections and constitutional changes have been realized as a
result. Nevertheless, the king still retains much of the political power.

2. Economic development
Morocco has exhibited a relatively stable gross domestic product (GDP) growth for many years, is equipped with sus-
tainable institutions in the financial and economic sectors, and has become an important financial hub for the region,
connecting Africa and Europe.

3. Pressing social challenges

Even with its relatively stable political system and economic development, Morocco is facing pressing socioeconomic is-
sues, such as high unemployment, one of the highest rates of illiteracy in the Arab world, a weak education system, very
high income disparity among its population, and, especially, high inequality between female and male achievements6.

9
Impact investing could thus help boost the revitalization of inclusive and green economic development. However,
deciding on appropriate policy measures to attract more impact investments requires knowledge about a country’s
specific conditions.

The remainder of this report is divided into two main sections: The first part of the report introduces the concept of
impact investing by explaining its origin, recent developments, and critical aspects. Furthermore, it explains the poten-
tial of impact investments for emerging market countries. The second part of the report provides an overview of the
impact investment landscape in Morocco. In a first step, we present relevant information on the political and welfare
system, the socioeconomic situation, current social policies, and specific social pressure points where market-based
solutions have great potential in Morocco. In a second step, the report analyzes the demand and supply sides of impact
investments. Case studies and examples of relevant actors provide additional insights. In a final step, we summarize the
most important findings by listing challenges and chances for impact investing in Morocco and present a collection of
possible policy measures to facilitate market building.

The report aims to provide a general overview of aspects of interest to relevant public and private actors in the impact
investing field. However, the information presented serves as a first step to a better understanding of the emerging
impact investing market in Morocco. For a deeper understanding of specific sectors or aspects, further research is
strongly needed.

5. IMPACT INVESTING — WHAT ARE WE TALKING ABOUT?

In past years, a multitude of global initiatives have been created with the aim of orienting the economy toward greater
social responsibility and sustainability. While, in the past, the focus has mainly been on social business approaches
(such as social business, social entrepreneurship, or inclusive businesses7), today the introduction of new social and
ecological metrics to the financial system and the provision of tailor-made financial products for social businesses has
gained momentum. The growing attention to impact investing confirms this trend.

5.1 DISTINCTION FROM SIMILAR CONCEPTS

Although the term impact investing was not used much in the past, the approach is not new. Impact investments
“which help address social and/or environmental problems while also turning a profit”8 continue a long tradition, but
the exact term has risen to prominence only recently. Contrary to socially responsible investments (SRI) that describe
attempts to “a portfolio construction process that attempts to avoid investments in certain stocks or industries through
negative screening according to defined ethical guidelines,”9 impact investing proactively focuses on investments that
are considered to have a positive social and/or ecological impact.
The attention that impact investing is receiving today can be seen as the result of a discourse that emerged some
decades ago;10 it is based on the awareness that there does not have to be a trade-off between financial and social
returns. Furthermore, a growing number of people are convinced that, under specific conditions, investments can
do more good more effectively than pure donations. The following two terms in particular that focus on the expan-
sion of the return dimensions of investments have paved the way for ongoing examination: The concept of the triple
bottom line11 of investments amends the double bottom line approach by adding an ecological return. The term was
coined by John Elkington in 199412 and was one of the early approaches to consider the social and ecological impacts
of financial transactions besides financial return. The Triple Bottom Line Investing group, founded in 1998, has been
advocating for the inclusion of criteria regarding the impact of investments on people, planet, and profit into reporting
ever since.13 The term blended value also refers to the evaluation of investments into nongovernmental organizations
(NGOs) and businesses based on their ability to generate a blend of social, environmental, and financial value. The term
is sometimes used interchangeably with triple bottom line and is attributed to Jed Emerson.14 Besides the term impact
investing, there are several similar labels that address slightly different aspects, but most overlap each other. Table 1
provides a brief overview of current concepts.

10
 Table 1: Overview of terms similar to impact investing
Term
Mission investing
Community interest investing Investment destination Community interest investments are made
Ecological, social and gover- Reporting criteria
nance (ESG) investing
Integral investing
Sustainable and responsible
investing (SRI)
Microfinance
Source: Own research
Focus Description
Type of investor Mission investments are investments made by
foundations and other mission-based organiza-
tions to further their philanthropic goals. Missi-
on investments cover two distinct categories of
investment: Market-rate mission investments,
also known as mission-related investments, are
part of a foundation's endowment and have a
positive social impact while contributing to the
foundation’s long-term financial stability and
growth. Below-market mission investments,
also known as program-related investments, are
designed to achieve specific program objectives
while potentially earning a below-market financi-
al return.
directly in low-income or disadvantaged com-
munities through channels such as community
development banks, credit unions, loan funds,
and microfinance institutions. Community inves-
ting focuses on economically improving run-
down communities by offering banking services
and small loans to fund businesses, non-profit
groups, and affordable housing initiatives.
ESG investments use ESG criteria to screen and
monitor investments. This term is mainly used in
the context of the capital market.
Reporting criteria Based on Ken Wilber’s integral model, integral
investments are investments that consider finan-
cial, social, ecological, moral, and psychological
criteria in their due diligence process.
Selection criteria SRI is an investment discipline that considers ESG
criteria for the selection of investment possibili-
ties to generate long-term competitive financial
returns and a positive societal impact.
Type of investee and The term microfinance was once associated
investment product almost exclusively with small-value loans to the
poor and is now increasingly used to refer to a
broad array of products (including payments,
savings, and insurance) tailored to meet the par-
ticular needs of low-income individuals.
11
To date, no one coherent definition of impact investing exists and several terms are used to describe similar approach-
es. Nevertheless, what unites all the approaches is that investments are made with the aim of gaining a social or eco-
logical impact alongside financial returns.
Generally, impact investors can be classified based on their primary objective, ranging from impact-first investors to
financial-first investors (see Figure 2).

Figure 2: Segments of Impact Investors

HIGH
FINANCIAL FIRST
INVESTORS
Optimize financial returns
Solely with an impact floor
Profit-Maximizing IMPACT FIRST
Target Financial Return

Investing INVESTORS
Optimize social or
environmantal impact
with a financial floor

FINANCIAL FLOOR
IMPACT FLOOR
“YIN-YANG“ DEALS

Philanthropy
NONE
NONE Target Social and/or Environmental Impact HIGH

Source: Monitor Institute (2009).

Impact-first investors primarily focus on the social or ecological returns of investment. They are therefore likely willing
to receive lower financial returns or even to receive just the invested principal back. Examples of impact-first investors
include mainly foundations and development organizations. On the other end of the spectrum, finance-first investors
are keen to receive a market rate of financial return, but with a floor for social and environmental impact. Finance-first
investors are mostly commercial investors who also consider social and environmental criteria in their investment
decisions. They mainly focus on specific sectors that aim to achieve some social or environmental good, such as social
housing or green technologies.15 To date, only a few (scientific) contributions clarify current theoretical approaches to
impact investing and explain their interaction with similar concepts.16
According to a survey among self-designated impact investors who are members of the GIIN, over 55% of the 146
respondents target “competitive, market rate returns,” while only 27% target “below market rate returns” and about
18% aim to merely “preserve their capital.”17

5.2 WORKING DEFINITION OF IMPACT INVESTING

For this report, we use the following definition coined by the GIIN that seems to be generally accepted by most actors
in the field:

Impact investments are investments made into companies, organizations, and funds with the intention
to generate social and environmental impact alongside a financial return. Impact investments can be
made in both emerging and developed markets, and target a range of returns from below market to mar-
ket rate, depending upon the circumstances.18

This rather broad definition allows us to consider a wide range of relevant aspects in our market analysis.

12
The conditions for impact investing in a country depend on several factors that build an impact investing ecosystem.
In Part II of this report, we shed light on the impact investing ecosystem in Morocco, that is the specific conditions and
actors in a country that influence and determine the building of an impact investing market.

Figure 3 provides an overview of existing actors in the market field.

Figure 3: Actors in the impact investing ecosystem

Regulatory environment Cultural & socioeconomic conditions

Financial return, social/ecological impact

Impact investors Product providers Impact investees

Retail Investors With banking license Public
• (U)NHWIs & families • Value Banks • Social-infrastructure
• Smaller retail investors • Commercial Banks projects
• Development Banks

Institutional Investors Without Public-Private Partnerships

• Government & public banking license

authorities • Specialized Asset
• Foundations managers
• Churches & religious Funds • Development-, micro-
organizations and community finance
• Pension funds & institutions
Insurance companies Exchange
• NGOs & NPOs intermediaries
• Private business entities • Investment advisors
• Social stock exchanges
• Crowdfunding platforms
• Investor networks &
special events
Ultimate beneficiaries
Private
• Inclusive businesses
Funds Impact
• Social enterprises
• Fair trade companies
• Cooperatives
Hybrid Organizations
Civil
• Non-profit organizations

Information & advice Information & advice Information & advice

Information professional & services provider

• Accountants, auditors& rating agencies • Universitys, research institutes
• Attorneys & consultants • Lobby organizations
(e.g. strategy & HR) • Social incubators & accelerators

Source: Adapted version based on Höchstädter and Scheck (2014).

5.3 DEVELOPMENTS IN THE FIELD OF IMPACT INVESTING

It is said that the term impact investing—as it is used today by the majority of actors—was first coined in 2007 at a con-
ference in Bellagio, Italy, organized by the Rockefeller Foundation.19 Just one year later, in 2008, the Monitor Institute
identified an emerging impact investing industry that had moved from a stage of “uncoordinated innovation” to one of
“marketplace building.” 20 Today, more than 300 funds claim to be impact investing funds. They are run by traditional
financial institutions (e.g., Deutsche Bank, JP Morgan) or specialized asset managers (e.g., Finance in Motion, Triodos)
and operate in both developed and emerging markets. Furthermore, a long list of intermediaries aims to facilitate the
market’s further growth. Several foundations, such as the Rockefeller Foundation, the Omidyar Network, and the Bill
& Melinda Gates Foundation, encourage research and conferences on this topic. The IIPC combines the findings of
an international scientific network with the practical experience of high-ranking politicians to develop applicable and
effective policy recommendations and its Global Learning Exchange for Social Impact Investing project brings together
actors from across the impact investing ecosystem to exchange best practices. The GIIN represents the majority of

13
existing investors, tracks market development, and provides metrics to measure the social and ecological outcomes of
investments. Respected universities offer specific modules and courses on impact investing.
Attracted by the idea of directing private capital toward specific social pressure points, increasing numbers of po-
litical actors are willing to evaluate the applicability of impact investing in their own national contexts. Under the
United Kingdom‘s G8 presidency in 2013, the Social Impact Investment Taskforce, chaired by Sir Ronald Cohen, was
established. Based on the findings of the national advisory boards of the G8 member countries, the Organisation for
Economic Co-operation and Development (OECD) recently released a report that describes the conditions for impact
investments and illustrates potential policy measures to foster impact investing in the G8 countries (excluding Russia)
and Australia.21
The outstanding attention that impact investing is receiving nowadays represents a window of opportunity. Never be-
fore have so many high-ranking politicians been aware of impact investing and willing to foster its development. This
opens the potential to attract and involve even those governmental actors who were not interested before.

5.4 OUTLOOK AND PERSPECTIVES

The constant growth of the impact investing market has been predicted by different sources. However, the projected
growth rates vary. In a report published in 2012, the Boston Consulting Group estimated that the demand for impact
investments could increase from USD 270 million (£165 million) in 2011 to USD 1.2 billion (£750 million) in 2015 and to
USD 1.6 billion (£1billion) by 201622. Based on this estimate, the growth in demand for impact investments will be, on
average, 38% per year until 2016. A report released by the Monitor Institute the same year estimates that the global
impact investing market could even grow to USD 500 billion over the next five to 10 years.23 According to a survey
of 146 self-designated impact investors conducted by JP Morgan and the GIIN in 2014, the respondents reported a
10% growth in capital committed between 2012 and 2013 and a 20% growth in the number of deals executed. The 63
impact investors who participated in two surveys in 2012 and 2014 intended to invest an extra 19% in total, approxi-
mately USD 12.7 billion in 2014. Furthermore, the survey states that a growing number of institutional investors joined
the field, which reflects the improvement of conditions and ease of access to the market.24 In summary, impact invest-
ments are on the rise and have lately received increasing attention. Whether it will become mainstream by evolving
into an additional asset class, as predicted by some actors, is to be proven in the future.

5.5 CRITICS AND CHALLENGES

Despite commendable efforts to grow the impact investment market and broad enthusiasm and support for the con-
cept, impact investment has also attracted criticism. Critics address the following issues, among others.

Common understanding of the term impact investing

Höchstädter and Scheck show that the definition of impact investing still faces critical issues.25 They argue that, besides
a common ground, there is still a need for clarification to advance the field. This seems to particularly apply to the defi-
nition of impact investees and whether they need to be social mission organizations or not.

Private money for governmental tasks

An argument that arises in countries with a government-driven welfare system (e.g., Germany) focuses on the concept
of raising private money to finance primarily governmental tasks. Critics point out that the privatization of social tasks,
which should normally be addressed by the welfare state, deprives the government of its responsibility and could
prove counterproductive in the long run.26

Need for philanthropic capital

Experts from the microfinance sector criticize the low percentage of impact-first investors in the field. A study by JP
Morgan and the GIIN shows that 65% of survey attendants define themselves as finance-first impact investors (see
the distinction between finance- and impact-first investors above).27 Critics argue that findings from the microfinance
sector show, especially in the first stage of market development, a great need for philanthropic capital provided by
impact-first investors that allows for learning from mistakes and slowly developing best market criteria. Furthermore,
very few social businesses and organizations address the needs of the very poor while receiving a high (or any) financial
return.28

14
Missing pipeline
Other critics indicate that the prominence and attention that impact investing is currently receiving is not linked to its
actual stage of development. They point to a missing pipeline of impact investing deals and argue that numerous in-
vestable social businesses and capable intermediary institutions must emerge first. Drawing on the experiences of the
microfinance and venture capital markets, they advise actors in the field to concentrate first on building an enabling
market ecosystem. The CGAP, for example, describes the “shortage of high quality investment opportunities with track
record” as one of the most limiting characteristics of the impact investing market today.29

Impact measurement criteria

By definition, impact investors seek to receive a financial as well as a social return on investment. Consequently, there
is a need for applicable and transparent criteria to measure social impact to compare and assess different investment
possibilities and to distinguish them from traditional venture capital or private equity investments. While the field of
impact measurement is developing quickly, no single set of criteria exists yet that is used and accepted by all actors
in the field.30 Different actors have taken steps toward developing a framework for the measurement of investment
impact. Particularly significant in this context is the Impact Reporting and Investment Standard, developed by the GIIN,
which provides a catalog of performance metrics.31 Although the Impact Reporting and Investment Standard (IRIS)
seems to be a promising achievement, it must be adopted by more impact investors to reach critical mass.

6. IMPACT INVESTING IN EMERGING MARKETS

Impact investors invest in industrialized as well as in developing and emerging market countries. As in traditional in-
vestment, the conditions and procedures differ from each other, depending on the development phase of the country’s
investment ecosystem. In this section, we briefly highlight the main elements that are specific for impact investments
in emerging market countries, present some of the advantages, and introduce the structure of a development impact
bond (DIB) as an example of a specific constellation of actors.
Morocco has been labeled an emerging market economy by several institutions.32 The definitions and distinctions of
emerging market economies and developing countries vary and are sometimes even used interchangeably. The World
Bank defines developing countries as countries with a low gross national income (USD 1,005 per capita or less) to a low-
er-middle income (USD 1,006 to USD 3,975 gross national income per capita)33, while the International Monetary Fund
uses one coherent definition.34 Generally, the definitions of developing countries focus solely on the amount of nation-
al income. In the context of our report, it seems more useful to choose a country classification that uses additional
criteria. For the purpose of our research on Morocco, we prefer a definition that considers the process of development
and comprises more details on different aspects. We will therefore adhere to the term emerging market country and
its widely accepted definition, namely,

As a society transitioning from a dictatorship to a free-market-oriented economy with increasing economic

freedom, gradual integration within the global marketplace, an expanding middle class, improving standards of
living, and social stability and tolerance, as well as an increase in cooperation with multilateral institutions.35

Generally, traditional and impact investors face greater risk if they tend to invest in emerging market countries. Typ-
ically, these do not enjoy the level of market efficiency or strict standards in accounting and security regulations that
advanced markets (such as in the United States, Japan, or Europe) have but they do have a physical financial infra-
structure, which includes banks, a stock exchange, and a unified currency.36 Frequent challenges that investors face
in emerging market countries include political instability, a lack of relevant data, regulatory hurdles, or corruption.
Nevertheless, a survey conducted by JP Morgan in 2014 shows that many self-designated impact investors invest in
emerging markets.37 Even though the higher risk for investments in emerging market countries cannot be neglected,
there are many persuasive arguments for impact investors to invest in emerging market countries that seem to apply
even for different types of impact investors ranging across the impact-first to finance-first spectrum.38
Arguments to invest in emerging market countries for impact-first impact investors include the following.
•• The absence of a functioning welfare system in most emerging market countries leaves room for impact inves-
tors to invest in (innovative) social service provision.
•• The poorest socioeconomic groups live in emerging market countries. The so-called base of the economic pyr-
amid (BoP) includes about 4 billion people who live on less than USD 2.50 per day.39 Impact investors who seek
to gain the greatest social return would normally focus on emerging market countries, where they can address
the needs of the very poor.

15
 •• High-impact sectors provide investment opportunities in emerging markets. The five sectors that are said to
provide the most impact are social housing, nutrition, healthcare, environment, education, infrastructure, and
microfinance.40 Usually, these sectors lack sources of finance and investments in emerging market countries.

Arguments to invest in emerging market countries for finance-first impact investors include the following.
•• Most emerging market countries show stable macroeconomic development, even during financial crises else-
where.
•• Impact investments in emerging markets can profit from the BoP opportunity. Because of its massive pur-
chasing power with significant unfulfilled needs for goods and services, the BoP has been characterized as an
untapped and potentially highly profitable market segment.41
•• Indicators from similar industries show great potential for impact investing. Impact investments share many
characteristics with venture capital and private equity activities, which have grown considerably in emerging
markets in recent years.42

The considerations listed for impact- and finance-first investors clearly show impact investments in emerging mar-
kets countries have several advantages. However, despite these alleged positive perspectives, some world regions still
seem to fail to profit from this opportunity. However, this may change as several donors have started to apply inno-
vative finance vehicles even in those developing countries where impact investing has not been much tested yet.

Development Impact Bonds (DIBs) are such an innovative and promising impact investing vehicle that has not yet been
applied in many emerging market countries. DIBs provide upfront funding for social service provision or development
programs by private investors, who are remunerated by donors or host country governments—and earn a return—
depending on the pre-agreed outcomes achieved. DIBs typically integrate private, public, and civil society actors and
acknowledge the most effective supply of social service provision. 43 Figure 4 provides an overview of the ideal actors’
constellation in the DIB structure.

Figure 4: Potential Structure of a Development Impact Bond (DIB)

Private Investor

Money in Return depends on success

Development Impact
Government Outcome Funders
Partnership
Payment based on
improved outcomes

Local NGO/ Local NGO/ Local NGO/

Auditor
Private provider Private provider Private provider

Target population/final beneficiaries

Source: Based on Social Finance, 2014

16
PART II: THE IMPACT INVESTING MARKET IN MOROCCO
7. METHODOLOGY
7.1 STEPS OF RESEARCH
To assess the conditions and potential of an impact investment market in Morocco, the research was conducted in
three steps, following the principles of a classical market analysis. It entails a descriptive part, which provides relevant
details of the existing ecosystem and actors; an analytical section, which presents existing opportunities and challeng-
es; and a final evaluation of the situation, including examples of potential support measures and a call to action to build
an impact investing market in Morocco (see Figure 5).

Figure 5: Steps of the market analysis

• General socio-economic and political conditions

• Mapping of relevant actors
Description • Case studies

• Chances for impact investing

Analysis

• Potential policy measures

Assessment • Recommendations

Source: Own illustration

17
7.2 ANALYSIS FRAMEWORK
Our use of the term impact investing ecosystem refers to the specific conditions and actors in a country that influence
and determine the building of an impact investing market. These conditions comprise economic, political, and legal
preconditions, besides cultural and institutional requisites. Furthermore, an impact investing ecosystem incorporates
those actors from the public, private, and civil society sectors that are attached to impact investing in any way. The
ecosystems for impact investments that determine their specific conditions vary significantly in different countries. The
analysis of the specific local ecosystem seems to be a crucial first step to better understand the market, its opportuni-
ties, and challenges.
We developed an analysis framework that takes these considerations into account and aims to provide and evaluate
relevant market information for potential investors and interested politicians alike (see Figure 6).

Figure 6: Analysis framework for impact investing ecosystems

• Political system: history and recent developments

General Conditions • Public policies: social challenges and policy reactions
• Economic situation: performance, sectors, reforms

• Impact investing in the public sector: conditions and actors

Demand Side • Impact investing in the private sector: conditions and actors
• Impact investing in the civil sector: conditions and actors

• Investment climate
Supply Side • Actors: current and potential impact investors
• Impact measurement

• Relevance of intermediaries
Intermediaries • Actors: current and potential intermediaries
• Future developments

Source: Own illustration

General conditions
In this first section of the analysis, we briefly introduce the Kingdom of Morocco as the object of study. In a first step,
we describe the political system, its recent history, and developments. In a second step, we highlight current social
challenges and public policy reactions. In a last step, we describe the country’s economic situation, including key per-
formance indicators, relevant sectors, and recent policy reforms of interest.

Analysis of the demand side of impact investments

To provide an overview of the demand side of impact investing in Morocco, we analyze the conditions and actors ac-
cording to their sector affiliation. The first step of the analysis of the demand side of impact investing in Morocco pres-
ents the context of impact investing in the public sector. A description of recent regulatory changes, policy schemes,
and current actors provides detailed insights. An additional case study on green investments serves as a practical exam-
ple. The second paragraph in this section offers an extensive characterization of the conditions for impact investments
in the private sector in Morocco. It introduces challenges and opportunities and describes potential business models
and current actors. The third step focuses on the civil society sector as an impact investing destination in Morocco.

Analysis of the supply side of impact investments

The mapping of the supply side of impact investing in Morocco is introduced by a description of the investment climate
and an evaluation of the country’s attractiveness for investments in general. Furthermore, we provide several exam-
ples of impact investors and their activities in Morocco. Related subjects that are illustrated for a better understanding

18
of the market include corporate impact investing activities and diaspora impact investing. A case study of an active
impact investing fund in Morocco serves as an example and helps to deepen the understanding of the market.

Analysis of impact investing intermediaries

In this section, in a first step, we define in more detail the different fields of engagement for intermediaries. In a second
step, we provide an overview of current activities and potential for further engagement.

7.3 DATA COLLECTION

The information provided in this report was collected in different steps to allow for a deeper analysis of the market. We
employed a bibliographic approach to gain a general overview of the status quo and generate discussion of the topic.
Desk research along with expert interviews enabled the validation of relevant market data (the economic system and
conditions, political and welfare system, etc.). Next, we mapped relevant actors in the field. To begin, we listed those
actors who publicly consider and present themselves in the context of impact investing, social entrepreneurship, or
social or solidarity enterprises and clustered them accordingly. Equipped with this list, we conducted expert interviews
using a comprehensive questionnaire related to the specific conditions of impact investing in Morocco. Asking our in-
terview partners for other relevant actors in the field enabled us to continually extend our mapping.
For the purpose of our research, we connected and discussed the topic of impact investing in Morocco with over
30 individuals, including Moroccans and those of other nationalities alike. In addition, 12 in-depth interviews were
conducted with selected experts from the public, civil, and private sectors. A list of expert interview partners is
provided in the annex.

Although the information presented in this report is the result of a thorough analysis, it makes no claims of complete-
ness. However, to our knowledge, this is the first publication that coherently addresses the field of impact investing in
Morocco. This report can thus serve as a basic information resource for further research.

8. SETTING THE SCENE: GENERAL CONDITIONS FOR IMPACT INVESTING IN MOROCCO

In this section, we describe the general context for impact investing in Morocco. For this purpose, we introduce its
political system, pressing social issues, the landscape of public policies, and the economic situation (see Table 2).

Table 2: Morocco in brief

Capital Rabat
Casablanca, Rabat-Salé, Fes, Marrakesh, Tan-
Main cities
gier, Meknes, Oujda, Agadir
Government Constitutional monarchy

Administrative division 12 regions

Location Northern Africa, 14 km south of Europe

Time Zone GMT+1 Wintertime, GMT Summertime

Official languages Arabic, Berber

Other spoken languages French, Spanish

Population About 34 million inhabitant

Currency Moroccan dirham

Source: Own research

Located in the western-most region of North Africa, the Kingdom of Morocco is home to a variety of cultures and is

19
influenced by its African neighbors, its affiliation with the Muslim world, and its close ties with Europe.
Although Morocco has been Islamic since very early in history, it has never been fully Arabic but also Berber and Jew-
ish. More than half of the population is culturally Berber. Situated mainly in rural areas, the Berbers have their own
traditions and languages, including several dialects that differ massively from each other. Nowadays, heritage of the
Berber culture and language has acquired constitutional status. The majority of the Moroccan population speaks Dar-
ija, the Moroccan public dialect, which differs greatly from standard Arabic and includes elements of French, Berber,
and Spanish. A Jewish minority, which has had much cultural influence in the past, has been diminished to only about
3,000 people today.

8.1 POLITICAL SYSTEM

Morocco defines itself officially as a constitutional monarchy. The current king, Mohammed VI, came to the throne in
1999, following the death of his father, Hassan II. Mohammed VI continued the gradual political reforms started by his
father (which resulted in the establishment of a bicameral legislature in 1997) and is gradually leading Morocco from
being a strongly centralized monarchy to a parliamentary system. In 2004, King Mohammed VI implemented a truth
commission that aimed to reappraise human right violations that had taken place under the legislation of his ancestors
and introduced a new family law to strengthen women’s rights. Furthermore, he successfully realized comprehensive
infrastructure projects and social programs (e.g., electrification, sanitation, and health).44

The year 2011 was one of political change for Morocco. Alongside the rest of the MENA region, Morocco experienced
sudden and unexpected riots, now known as the Arab Spring and the February 20th Movement in Morocco. The
relatively calm manner in which the protests took place in Morocco stand in stark contrast to the violence and riots
elsewhere in the Arab world. The resulting democratization process included new elections and constitutional changes
such as a gentle reduction of the monarchy’s power and an increase in power for the democratically elected prime min-
ister and parliament. To date, however, the king still retains much of the power as the religious, political, and military
head of state. Strong oligarchic and paternalistic structures, beneficial especially to powerful and wealthy elites with
close ties to the royal family,45 additionally impede systemic changes.

In November 2011, the moderate Islamic party (Party for Justice and Development) won the elections for the first time.
In the spirit of a new constitution, public expectations ran high and a new coalition was built in January 2012 under
Prime Minister Benkirane. Since the new government failed to agree on relevant strategic reforms, one of the major
coalition partners, the Istiqlal Party, resigned from the coalition. The discrepancies led to the government’s premature
dissolution and to the formation of a new coalition in October 2013. To date, the government coalition has been built
by the Justice and Development Party, the National Rally of Independents (RNI), the Progress and Socialism Party, and
the Popular Movement. The new government has an ambitious agenda ahead and is expected to deliver on key eco-
nomic reforms such as subsidy cuts, job creation, educational reforms, socioeconomic development, and at least 20
“organic laws” 46 in this parliamentary legislature.

20
8.2 PUBLIC POLICIES
Social security system
In theory, Morocco is equipped with a wide range of social insurance schemes based on legal codes equal to those in
OECD nations. These social security programs range from covering maternity and sick leave to the provision of pen-
sions for widows, orphans, and pensioners. However, it is important to note that even though these regimes exist, the
level of support provided is very low considering the costs of living. The social security system consists of several dif-
ferent schemes, the two most important being the Caisse Nationale de Sécurité Sociale for the private sector and the
Caisse Nationale des Organismes de Prévoyance Sociale for the public sector. Employers contribute approximately 6%
of the company payroll to social security, while employees’ contributions are about 3% of earnings. However, since only
45% of the population of working age is employed and only one-third of this group falls under the elective criteria, the
majority of the population is not covered by social security programs. It is said that 75% of Moroccan workers do not
have access to pension systems and 85% of men and women lack health insurance.47 Missing tax income because of a
large informal market and the past mismanagement of pension funds dramatize the situation even more. Until today,
the most vulnerable (e.g., the elderly or sick and single mothers) often depend solely on the support of their families.48
However, especially in the healthcare sector, a great deal has been accomplished in recent years to secure access to
medical treatment, even for the poorest. The scheme Régime d‘Assistance Médicale was launched in December 2011
to improve access to care by providing social health insurance coverage through sliding insurance premium contribu-
tions. Some 8.5 million people (30% of the population) now have access to the scheme. Still, corruption, paternalistic
structures, and the great discrepancy between urban and rural areas hinder these efforts.

Pressing social issues

According to a 2009 report by Morocco’s High Planning Commission (Haut Commissariat au Plan), the informal econo-
my in Morocco accounts for roughly 40% of employment and generates about MAD 280 billion (about USD 33 billion)
a year and continues to grow. The official unemployment rate has remained at 9%, in general, while youth unemploy-
ment in the urban regions is up to 35.4%.49 However, critics argue that due to methodological issues the official unem-
ployment rate might be highly underestimated. As in the whole MENA region, Morocco faces demographic challenges.
As the World Bank report from 2012 points out, about 70% of the Moroccan population is aged 15–24 years. Until
recently, Morocco has not managed to profit from the potential of this youth bubble and young people are overrepre-
sented among the poor50 As a result of the high percentage of young people, the working population is booming but,
because of the poor quality of the education system and the very weak private sector, employment possibilities are
missing. Nearly 10 million young people between the ages of 15 and 25 are unemployed. Female participation in the
labor market is 26.2%, compared to 74.7% for men. In contrast to other developing countries, the high concentration
of unemployed youth with an academic certificate in Morocco is exceptional.51

Despite Morocco’s stable economic performance, its human development and poverty indicators are improving only
slowly. Morocco has one of the highest rates of illiteracy in the Arab world, with approximately 44% of adults being
illiterate.52 Morocco’s level of income disparity is one of the greatest worldwide and inequality between female and
male achievements seems to be increasing. The Moroccan government launched several policies in the last few years
that are meant to tackle pressing social issues. Table 3 briefly highlights some examples.

21
 Table 3: Public policy examples

Impact Area Policy Example Investment Details

Agriculture The Plan Maroc Vert seeks to ensure that It seeks to generate €885 million per year in
agriculture acts as a driver of economic private investments.
growth and, in the country´s poorer and http://www.fao.org/fileadmin/user_upload/
less developed rural areas, as a tool to FAO-countries/Maroc/plan_maroc_vert.pdf
combat the problem of rural poverty.
Housing and The National Cities without Slums project Received €2.1 billion in state funding, with a
community facilities aimed to produce large numbers of further subsidy of €890 million. So far, about 43
decent housing and to eradicate slums. towns have been redeveloped
It was launched in 2004 and officially http://www.mhu.gov.ma/Pages/Habitat/Pro-
ended in 2012. gramme%20Villes%20sans%20bidonvilles.
aspx
Financial service The Moroccan microfinance law, which Ceilings on loan sizes are set at about USD 3,000.
was signed into law in January 2000, MFIs are prohibited from lending for other than
allows micro-credit to be provided by productive activities but have broad permission
essentially nonprofit micro finance com- to innovate in both mobilizing capital and len-
panies (MFIs). ding. The law is currently under revision.
http://www.cm6-microfinance.ma/fr/index.
aspx
Health Regime d’Assistance Médical aux Econo- 8.5 million people will be given medical co-
miquement Démunis (Medical Assistance verage for the first time. Costs will increase by
Program for the Economically Disadvan- €221.3 million per year, 75% funded by the state,
taged). 6% by local government, and 19% by clients.
https://www.ramed.ma/
Environment Programme National des Déchets Ména- The PNDM aims for a 100% collection rate of
gers (PNDM), a 15-year national waste domestic waste by 2020, the closure and reha-
management program. bilitation of all unregulated dumps, and 20%
of waste recycled by 2015. The PNDM will cost
about €3.5 billion.
http://www.environnement.gov.ma/fr/de-
chets?id=226
Energy National Energy Strategy 2009 sets goals The target is for renewables to account for 42%
for electricity fuel mix, renewable energy of all energy in 2020, with 2 GW of wind and 2
sources, energy efficiency, foreign inves- GW of solar and a 2-GW increase in hydropower
tment in the energy sector, and regional capacity.
integration. h t t p : // w w w . m a s e n . o r g . m a / i n d e x .
php?Id=12&lang=fr#/_
Water Programme National d´Assainissement The PNA aims to achieve a 90% rate of connec-
Liquide et d´Épuration des Eaux Usées, tion to the sanitation network and 100% reuse
(PNA), the 2005 national program for of all collected wastewater by 2030. Total costs
liquid sanitation and wastewater treat- until 2020 are estimated at €4.47 billion.
ment. ht t p://w w w.e nv ir o nn e m e nt . gov.m a/f r/
eau?id=207

Source: Own research (April 2014)

22
With the National Initiative for Human Development (NIHD), the Moroccan government launched a huge development
program in 2005 to address the most vulnerable groups in Morocco (see Case study 1). It aims to create several small
income-generating projects and thus very small inclusive businesses.

Case study 1: National Initiative for Human Development (NIHD)

Problem definition and agenda setting

Morocco is classified as a low-income economy by the World Bank.53 In contrast to Morocco’s relatively stable eco-
nomic development, its human development indicators are low and large parts of the population (in rural and urban
areas) suffer from poverty and vulnerability. The absence of an effective public welfare system and the lack of basic
(service) infrastructure lead to high income inequality and illiteracy rates. At the beginning of the millennium, over
50% of Moroccan public spending was invested in programs to fight poverty, but the policy theolicy measures were
top–down and poorly targeted. Coordination and cooperation between programs and ministries were weak.

In response to these challenges, King Mohamed VI called out for a bottom–up policy program that would enable the
most vulnerable groups to define their needs, help them to implement projects, and strengthen inclusive business
solutions to address them.

Policy formulation and adoption

In May 18, 2005, King Mohammed VI announced the NIHD and emphasized its relevance as a long-term national
strategy by calling it a “building site of his reign.” The king’s strong commitment and continued presence throughout
the implementation process is seen as one of the most important success factors of the NIHD.

King Mohammed VI assigned the prime minister with the elaboration of the concept. Three month later, former Prime
Minister Idriss Jetou presented the strategic approach and target groups of NIHD‘s interventions. The approach was
based on in-depth empirical research and analysis. A total of 403 rural communes and 264 urban neighborhoods
with especially high concentrations of poor and vulnerable people were selected as primary target groups.
Based on this outline, the king assigned the Ministry of Interior with further planning and the coordination of the
initiative´s implementation. The Ministry of Interior has the power to mobilize administrative actors at the local
level because the heads of regional and provincial administration are appointed by the king and have to report to
the ministry. The delegation of the policy coordination to the powerful Ministry of Interior unequivocally underlines
the high priority of the program and ensures its implementation in all regions. Morocco is equipped with many co-
operative associations and mutual societies that are perceived as critical to poverty reduction and socioeconomic
development and play an important role in the implementation of the NIHD.

The design of the NIHD involved several ministries and its concrete operationalization was closely assisted by the
World Bank and other donors.

23
Implementation
After half a year of a planning phase in 2005, the NIHD officially began operation in 2006.
The first phase of the NIHD (2006–2010) was implemented through two geographically targeted programs (an urban
program and a rural program) and two countrywide programs (a transversal program and a program against pre-
carious living conditions). The four programs co-finance sub-projects to which municipalities, NGOs, associations,
interest groups, cooperatives, and decentralized executing agencies can apply. Typically, two different types of proj-
ects are supported. The first type of project focuses on building social infrastructure (construction, rehabilitation,
extension, or improvement of road and street infrastructure; electricity or water supply; sanitation or solid waste
services; schools, local health centers, or community centers; public gardens, sports, or other public facilities, etc.).
The second type of project aims to support the development of local inclusive businesses with regard to improving
their organization, product quality, marketing, or business training. This type of project includes activities that inte-
grate the NIHD’s target population in infrastructure or service projects (e.g., local household waste collection, water
management, and recycling management) to generate revenues for local communities. Mainly municipalities and
decentralized executing agencies apply for the first type of project. Cooperatives, NGOs, associations, and interest
groups apply for the second type. Applicants must submit a business plan and a feasibility study to underline the
practicality and sustainability of their project. After a project has been approved its concrete implementation is
clarified and officially legalized in a contract between all parties involved. The applicants must contribute financially
to the project’s realization (10% in the urban and rural programs and 30% in countrywide programs) with the aim of
strengthening project ownership and success. Additionally, the NIHD covers 20% of the project’s cost, while the local
authorities assume the remaining amount.

NIDH Governance Structure

Prime Minister

Strategic Committee for

Human Development

Steering Committee
Ministry of
Prime Ministry of Ministry of Ministry Solidarity, Water and
Ministry of Ministry of
Ministers Economy Economy of Inerior Woman, Fam- Electricity
Education Health
Office and Finance and Finance (Chair) ily and Social Office
Development

National Coordination of the National

Chaired by:
Initiative for Human Development

Regional Committees for

Wali
Human Development
Network of experts

Provincial Committees for

Governor
Human Development

Divisions for Local Committees for President of the

Social Action Human Development Commune

Animation Teams for neightborhoods

and municipality

24
The institutional governance structure of the NIHD encompasses strong inter-ministerial coordination and extends
from the national to the local level. The implementation of programs and the selection of proposed projects are
monitored by 700 newly established committees at all governmental levels, including about 11,000 elected author-
ities, members of public administration, and civil society actors. Depending on the individual decisions of the heads
of committees, private sector actors participate in some of the newly established committees for human devel-
opment but have no formal role in the governance structure. Since a lack of business skills and market knowledge
was evaluated as a major challenge throughout the policy implementation, explicit integration of the private sector
could be considered in the future.

A special unit associated with the Ministry of Interior called the National Coordination of the NIHD is responsible for
the operationalization and administration of the NIHD. Animation teams staffed with local professionals act at the
local level by facilitating project application in municipalities and neighborhoods and providing advice to applicants.
With the help of these animation teams, the NIHD empowers the poorest and most vulnerable groups in Morocco
to define their needs and implement inclusive business solutions to address them.

The NIHD’s aspiration of high transparency is put into practice on its website, which contains presentations and
explanations of all steps of implementation, all projects, press releases, public evaluations, and so forth.54

The total estimated costs of the first implementation phase of the NIHD sum up to MDH 10 billion (USD 1.2 billion)
over five years (2006–2010). This was financed by the central government (60%), local governments (20%), and in-
ternational donors (20%). For the second phase (2011–2015), Morocco received the biggest loan in its history, with
the World Bank contributing a loan of MDH 300 billion (USD 34.7 billion). Other donors include the European Union
(EU) and Saudi Arabia.

Evaluation
Throughout the first phase of the implementation process, the NIHD was evaluated several times by the government
itself, as well as by private companies commissioned by the Moroccan government and international donors. By
2010, over 20,000 development projects had been implemented, reaching out to about 5 million beneficiaries.

NIHD has shown that innovative and participatory approaches can be rapidly implemented , even in a country with a
top–down, centralistic policy tradition. Nevertheless, it seems clear that new policy programs need time to fully un-
lock their potential. Since the NIHD is a complex policy program involving more than 400 actors, its processes have
to be perfected over time, drawing on findings throughout its implementation. In the second phase of the NIHD,
which began in 2011, findings from the first phase were considered and implemented

Overall, all the main actors involved in the NIHD seem generally satisfied with the achievements of the first phase.
Nevertheless, to fully unleash the NIHD’s potential to support inclusive businesses in Morocco, strengthening the
consultation process and formal integration of the private sector throughout all phases of the policy process seem
advisable.

Source: Tewes-Gradl et al. (2013).

25
In conclusion, poverty in Morocco can be stated to have decreased considerably over the past decades, mainly because
of greater growth and specific policy actions. Due to increased spending in areas such as health and sanitation, progress
has been greater than in other oil-importing countries. However, many challenges remain in supporting greater and
more inclusive growth. In its country report from February 2015, the International Monetary Fund (IMF) states, that

Poverty persists, particularly in rural areas, and inequalities have slightly increased. Despite the efforts
already made, more is needed to reduce structural unemployment, increase female labor force partici-
pation and reduce the gender gap, improve healthcare, and reduce regional inequalities. Shortcomings in
the quality of education are also widely recognized as a key impediment to improving social and economic
indicators. Improvements in those areas are crucial to achieving more inclusive growth and reaching a
higher potential output.55

The level of integration of the private sector in the provision of social services for the poor and most vulnerable is still
low in Morocco and far behind potential. Generally, the provision of social services has been seen as the role of reli-
gious charity and the state, to assure a minimum level of social services for the most disadvantaged. This approach has
been shown to be limited in quality and quantity.

For the future, an effective social protection system will depend on economic growth due to higher levels of
employment and thereby a stable and higher inflow of money to insurance schemes. Furthermore, the rights and
obligations of contributors, beneficiaries, and service providers must be harmonized to guarantee an even level
of service provision.

8.3 ECONOMIC SITUATION

Morocco’s economy has been performing relatively well, with an average growth rate of 4.1% from 2009 to 2013,
despite successive external shocks, due notably to the Eurozone crisis and a highly volatile global market. Further-
more, Morocco‘s budget deficit was set to narrow down to 4.5% in 2015 from 5% in 2014. Experts expect Morocco‘s
total debt to dip to 63.5% of the GDP by the end of 2015, from 64.3% at the end of 2014.56 The most important
impulses come from the rural sector, which accounts for 85% of the GDP. However, the Moroccan economy’s high
dependence on the rural sector makes it vulnerable to weather-related crop failure. Bad weather cut Morocco‘s
grain output to 6.7 million tons in 2014, down from 9.7 million in 2013, but production is expected to rise again in
2015 after improved rainfall.57

Next to phosphate, Morocco’s only natural resource, the tourism, transportation, and communication sectors have
provided stable growth in recent years. Currently, the greater than 50% drop in global oil prices has boosted Morocco‘s
economy, since it is the largest energy importer in the region. The informal sector in Morocco accounts for an estimat-
ed 40–80% of nonagricultural employment.

According to the IMF, Morocco’s economy is expected to grow 4.5% in 2015, as non-agricultural sectors continue to im-
prove and the agricultural sector returns to a normal trend after crop failures in the last years. Given its political stability
and the long list of planned economic reforms, Morocco’s economic growth outlook therefore seems very promising.

9. DEMAND SIDE OF IMPACT INVESTING IN MOROCCO

To analyze the current and potential market for impact investments in Morocco, we begin with a closer look at exist-
ing actors on the demand side, that is, the potential recipients of impact investing funds in Morocco. Actors on the
demand side of impact investments are organizations that generate measurable social or ecological impact based on
a profitable business model. A review of the relevant literature reveals several lists of key characteristics for impact
investees, who differ depending on whether they focus more on social sector organizations or private enterprises. For
our purpose, the first screening of a market, it seemed advisable to choose a broad perspective that would allow us to
include different legal forms and business organization models (such as non-profit organizations and private entities).
Impact investees can be categorized by societal sector, grouping them into private, public, or civil sector organizations.
We therefore start mapping the demand side of impact investing in Morocco accordingly.

26
9.1 DEMAND-SIDE MARKET INFRASTRUCTURE IN THE PUBLIC SECTOR
Governmental actors as investees for impact investments can comprise governmental programs, initiatives, funds, or
organizations seeking to achieve social benefits by including private investments.

Morocco faces several pressing socioeconomic challenges and large parts of the population suffer from poor public
service coverage. Furthermore, the extent of coverage of public services varies significantly between regions and relies
on the existence and quality of supportive infrastructure. Major investments are needed in the near future to boost
inclusive economic growth and promote economic deregulation. As many other countries that operate within serious
fiscal constraints, the Moroccan government faces critical funding gaps to realize important investments. The Moroc-
can government has therefore decided to allocate more private resources and to promote Public Private Partnership
(PPP) in several fields. PPPs in Morocco are officially defined as

"A form of cooperation in which public contracting authorities (i.e., the state, regional authorities, public
institutions, public enterprises, and other legal persons governed by public law) via a fixed-term admin-
istrative contract assign to a private partner the responsibility to design, finance all or part, construct or
rehabilitate, maintain and/or operate an infrastructure required to provide a public service.58

With this objective in mind, a specialized PPP unit was founded that is meant to coordinate, monitor, and promote all
PPP activities. It was established as a special department of the Ministry of Finance. In addition, in 2014 , the Moroc-
can government adopted a new bill that defines a consolidated and sound framework to develop PPPs in Morocco on
behalf of the state, local authorities, and public bodies that can be applied to different sectors."59

A number of PPP projects have been successfully realized in recent years in the fields of transportation, water and elec-
tricity distribution, drainage, and education. Examples include the first irrigation PPP in the region, which was launched
in 2005 and achieved a 100% connection rate by 2009, benefiting about 100,000 farmers.60 Furthermore, the govern-
ment of Morocco has prepared and adopted an important portfolio of incentives aimed at encouraging investment in
the sector of renewable energies and energy efficiency. Case Study 2 shows a successful example of a PPP project that
attracted green investments and which is supposed to be copied in the future.

27
Case Study 2: Green investments in solar energy in Morocco
This case study outlines the key role of the Moroccan Agency for Solar Energy (MASEN) in enabling the country to
attract private impact investment for its first large concentrated solar power installation.

Context
Not endowed with fossil fuels, Morocco has to import 95% of its energy, providing subsidies on these fuels at a cost
between USD 1 billion to USD 4 billion per year. Morocco has a growing population and is subject to increasing power
demand from private households and industries. Therefore, Morocco’s political leaders decided on an energy and in-
dustrial development strategy that includes the increase and diversification of the energy supply. Wind, hydropower,
and solar renewables could reduce dependence on imports while generating employment and cutting greenhouse gas
emission; they also create the potential for future green electricity exports to Europe.61 However, renewable energy
plants, particularly solar power plants, require more financing than fossil power plants because of much higher invest-
ment costs. Furthermore, installing and operating a relatively new solar technology such as concentrated solar power
involves risks that are difficult to bear for a state not yet experienced with the technology in question.

Objectives
The government set a goal of 42% of installed capacity (or 6,000 MW) from renewable energy (hydropower, wind,
and solar) by 2020 while doubling overall capacity. Through the Morocco Solar Plan, the government aims to install
2,000 MW of solar capacity by 2020, contributing around 14% of the energy mix in the country’s electricity supply.
The plan calls for the construction of five solar complexes and requires an estimated investment of USD 9 billion.62

The first PPP (called NOOR I 63), realized near the southern Moroccan city of Ouarzazate, tested a new business mod-
el. The goal was to attract private investors bringing in capital and technical know-how to install concentrated solar
power on the largest scale worldwide.

Approach
The idea was to implement a project structure with a financing architecture that was new to the Moroccan solar
sector and which would blend private and public funding from international financial instruments while effectively
aligning the risks between public and private sector partners. The government established MASEN64 in 2010 as the
vehicle for mobilizing and blending resources and allocating risks to key players. It is a limited company that is 25%
owned by the government of Morocco, the National Office for Electricity (Office National de l‘Electricité), the Hassan
II Fund for Economic and Social Development,65 and the Société d‘Investissements Energétiques (SIE), respectively.66
MASEN is responsible for the feasibility assessment, design, and development and the mobilization of financing for
solar projects in Morocco, along with contributing to expertise and research in the solar industry. Its aims are both
to facilitate the use of solar energy in Morocco and to support the development of a new industrial sector in Moroc-
co through training, capacity building, as well as research and development.

MASEN’s contribution to the realization of the first solar power plant, NOOR I, was essential. It was responsible for
the following:
•• Identification and provision of the project site, based on several studies regarding solar radiation measure-
ments and the necessity of building the infrastructure.
•• Organization and monitoring of international public tender to find an appropriate investor who was willing
and qualified to build, own, operate, and transfer the solar power plant.
•• Elaboration of the PPP structure, including the drafting of relevant project documents (e.g., the power pur-
chase agreement, the shareholder agreement for the project company to be founded), to implement a proj-
ect design that attracts debt funding from public international financial institutions (e.g., KfW, African Devel-
opment Bank, World Bank) and private equity investors while effectively aligning risks between public and
private sector partners.67

Results
Project NOOR I passed from idea to financial close between 2009 and 2013. The solar plant has a 160 WM capacity
and will be commissioned in October 2015. Multiple private companies have bid for the project and a Spanish–
Saudi consortium won at USD 0.184/kWh. This tariff offered by the winning bidder was 25% lower than initial cost
projections. Even accounting for concessional funding, electricity produced by the plant is globally one of the least
expensive tariffs contracted with concentrated solar power projects to date. The lower than expected power tariff
reduces the required annual revenue subsidy for the Moroccan government from the USD 60 million forecast to
USD 20 million.68

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 One major reason for the surprisingly low tariff offer by the private investor was apparently the well-designed
distribution of risks between public and private financiers and investors in the project structure. Generally, 85% of
the investment financing was provided by public financiers and investors, including the equity of the public entity
MASEN and international finance institutions, and 15% by private equity investors. Nevertheless, the private in-
vestor assumed most of the risks during project development, construction, and operation. Public investors were
thereby relieved of a large share of the risk, which was borne by the private investor, who is considered to be better
equipped to do so (e.g., due to experience with the specific technology in other countries). On the other hand, the
public actors took over the risks (e.g., political risks, land acquisition) for which they were considered better pre-
pared to bear. This and further “de-risking” measures (e.g., minority shareholding of MASEN in the project company)
presumably incentivized more potential private investors to bring in private equity at lower cost , with a decreased
expected rate of return. The de-risking was a major reason for the low power tariff prices.69

Lessons
The key lesson from Morocco’s approach to green private financing at favorable terms has been the critical role of
MASEN.

Jan Schilling, the responsible project manager at the German development bank KfW, emphasizes two main contri-
butions of MASEN:70
1. MASEN’s de-risking approach
MASEN conducted a risk analysis beforehand that allowed for optimal risk diversification between the public and
private partners of the PPP. It was structured along the different phases of the project (development, design, con-
struction, operation), as well as different risk categories. The fact that the public partners took over some risks that
were difficult for private investors to bear led to greater competition among interested private partners. On the
other hand, the public entities were exempt from risks that were difficult for them to bear.
2. MASEN’s professionalism
The way MASEN prepared, tendered, and accompanied the project inspired confidence from the private actors’
side. Investors were attracted by MASEN’s credibility, trustworthiness, and efficiency. This eliminated, among other
things, the fear of “sunk costs” for the tender phase and of costly delays and thus also allowed investors to expect a
lower rate of return and thereby offer lower prices.

As the first concentrated solar power project in Morocco, NOOR I is considered a success. The international finance
institutions involved already committed to finance the subsequent projects NOOR II and NOOR III. For example, Ger-
man investor KfW provided €829 million in total debt (for NOOR I through III) and is thus the largest financier, with
almost 40% of the total cost for the three power plants. The tariffs offered by private investors for projects NOOR II
and III are about 15% lower than for NOOR I, even.

The success factors noted helped attract more private investors, led to greater competition among them, and al-
lowed them to decrease their return expectations and thereby offer low electricity prices. In the end, it is the Mo-
roccan population who will profit from lower energy tariffs in the future.

Source: Own research, based on Whitley and Granoff (2013).

The examples presented and political efforts illustrated in this section show that PPPs offer great potential for impact
investors in Morocco. In the field of renewable energies, health, or education, this could be especially true, perhaps
exclusively for institutional investors.

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9.2 DEMAND-SIDE INFRASTRUCTURE IN THE PRIVATE SECTOR
Business models of impact investees in the private sector
Private sector impact investees could generally be different types of enterprises that are at the same time commer-
cially viable and scalable and provide positive ecological output or benefits to people at the BoP. These benefits of
inclusive businesses can be delivered in two ways:
1. By supplying innovative and affordable goods and services previously unavailable.
2. By integrating people into its value chain as producers or business partners and providing capacity development
and employment opportunities in the process.

Table 4 presents concrete examples of business models in both types of inclusive business.

Table 4: Practical examples of different types of inclusive businesses 1/2

Model 1: Supply of innovative and affordable goods and services previously unavailable

Model Details Examples

Basic professional Highly standardized and limited set of typically Institute Edu-fix training
training service-industry qualifications to low-income school (South Africa)
leavers or job seekers, often complemented by job
placement services.
Last-mile Community-level last mile infrastructure directly IBECA Micro hydropower systems
infrastructure addressing infrastructure provision shortfall by (Philippines), HUSK Power Systems
providing end-users with access to a fixed utility (India), LYDEC (Morocco)
asset (e.g., micro-grid electricity, water, sanitation).
Mobile-enabled Leveraging low-income ownership in order to provide DataDyne (Kenya / Chile)
non-financial essential information or transactions to low-income
services customers, e.g. in health or agriculture.
Pay-per-use Consumers pay lower costs for a single-use product Shramik, sanitation in urban slums
receiving better value than buying a household asset. (India)
No frills Pared-down products or services that meet the Sustaintech-, Fuel-efficient wood
basic needs of the poor at ultra-low prices and still burning stoves (India), Ecofiltro –
generate positive cash flow and profits through high water filters (Guatemala)
volume, high asset utilization, service specialization.
Online platform More cost-efficient scaling of solution or creation of Kiva.org (international)
online marketplaces.
Microfinance Mobile money, microcredit, microsavings or Grameen Bank (Bangladesh),
microinsurance to enable access to financial services. Agrofinanzas (Mexico),
Al Amana (Morocco)
Source: Lütjens-Schilling and Scheck (2013)

30
 Table 5: Practical examples of different types of inclusive businesses 2/2
Model 2: Integration of people at the BoP into entrepreneurial value chain as producer or business partners

Model Details Examples

Shared distributionDistribution networks that reach into remote markets by FinComún (Mexico)
channels piggybacking products and services through existing sales
platforms.
Distribution Recruitment and training of local agents reaching deep into GrameenDanone (Bangladesh),
through dedicated communities to sell and distribute goods, bypassing shops HindustanLever “Shakti” (India)
direct sales force and other channels.
Smallholder farmer Aggregators collecting cash crops from smallholder farmers Sustainbale Harvest Coffee
aggregations to supply large buyers. Additional services such as credit, Company (South America)
storage or transport are often provided too.
Fair trade Payment of a higher price to exporters as well as higher Muzunga Sisters (International)
social and environmental standards (via certification),
focusing in particular on exports from developing countries
to developed countries, most notably handicrafts, coffee,
cocoa, sugar, tea, bananas, honey, cotton or wine.
Employment of Providing training and employment for marginalized Dialogue in the dark (Germany),
marginalized groups otherwise unemployed thus empowering them and Ben & Jerry’s (USA)
groups strengthen their capacity to escape poverty.
Source: Lütjens-Schilling and Scheck (2013)

Entrepreneurship in Morocco
The annual Ease of Doing Business Survey71 conducted by the World Bank Group ranks countries based on conditions
for starting a business, financial approachability, tax payments, contract enforcement, and insolvency procedures. In
the Doing Business Index of 2015, Morocco ranks 71 out of 189 countries, which constitutes a very good result com-
pared to the average of rank 106 for the whole Middle East and Northern Africa region. In more detail, the survey
shows that, in terms of conditions for starting a business, Morocco achieved a very good rank of 54, which helped
boost its overall standing. In contrast, businesses in Morocco obviously face big constraints in relation to the protec-
tion of minority investors (rank 122), the registration of property (rank 115), the resolution of insolvency (rank 113),
and the ability to access credit (rank 105). With regard to all possible legal forms of social enterprise, Morocco offers
10 different forms of corporations (entreprise commerciale), ranging from limited liability companies to joint ventures.
Nevertheless, no specific legal form for social enterprises has existed until now.
A survey published in 2009 by Silatech and Gallup revealed that, “while young Moroccans have positive attitudes about
the business climate for entrepreneurs in their country, their views about the steps that are necessary to turn a busi-
ness idea into a reality is among the lowest in the region” 72 It seemed that, because most families rely on the income of
their male members, the risk of insolvency without any sort of security net makes starting one’s own business seem un-
appealing for many. Furthermore, the king and his institutions (military, public administration73) are held in high regard,
leading many jobseekers to look for work in public institutions.74 In the past, the rules did not seem to encourage the
creation of new ventures but, rather, to protect established insiders. As a World Bank report states, only six companies
were created per 10,000 working-age persons in the region, on average, compared to 20 across 91 developing nations,
40 in Chile, and 80 in Bulgaria. The report further shows that

"Policies in MENA have often been captured by a few politically connected firms and that this has led to a
policy environment that created privileges rather than a level playing field, undermining competition, the
ability of all entrepreneurs to pursue opportunities on an equal footing, and job creation."75

Nevertheless, entrepreneurship has received a lot of attention lately. The two main reasons might have been the Fifth
Global Entrepreneurship Summit, which took place in Marrakesh in November 2014, and the king’s strong commit-
ment to the topic.76 However, a growing number of Moroccans are attracted by the prospects of self-employment.
The current government promotes self-employment as a key to tackling unemployment and the head of government,
Abdelilah Benkirane, declared that young people should not count on employment in the public sector but should,
instead, try to start their own businesses. Consequently, several policy programs have been implemented (e.g., the

31
program Moukawalati 77 or the national agency for the promotion of SMEs (L‘Agence Nationale pour la Promotion de
la Petite et Moyenne Entreprise)) to ease the status of self-employment with the aim of fighting unemployment, espe-
cially among young graduates. In addition, a growing number of competitions invite entrepreneurs to pitch their ideas
and receive starting support, whether technical or financial.

In summary, although entrepreneurship has long been out of favor among people in working age in Morocco, it seems
as if governmental interaction, necessity, and a shift in the mindset of the younger generation can lead toward a higher
appreciation of entrepreneurship. According to experts, the main barriers that still hinder such endeavors seem to be
a lack of seed money and little access to networks and business skills.78

Small and medium enterprises (SMEs) in Morocco

Research shows a strong correlation between the number of SMEs in a country, GDP growth, and the rate of job cre-
ation.79 On average, in low-income countries, SMEs account for about 30% of employment and 17% of the GDP, while
in high-income countries they account for 50% of the GDP and 60% of employment.

The economic fabric in Morocco is dominated by micro-entities, of which the informal sector makes up a significant
part. According to Bertelsmann Stiftung,80 the informal sector includes around 45,000 people, 75% of whom are wom-
en. The sector operates in external trade, through smuggling practices, underinvoicing, the fraudulent use of customs
procedures, and so forth. However, SMEs in Morocco account for 90–95% of all legal enterprises and provide over 50%
of all private employment. Although SMEs present the bulk of the country’s economic fabric, they face critical hurdles
in their development. This seems especially true with regard to access to finance. According to some of the experts
interviewed, the reasons for this finance gap have two main sources.

1. The structure of the banking sector

A major issue for SMEs’ access to finance is due to the structure of the banking sector. In the whole region, banks dom-
inate the financial sector, while non-bank financial institutions have hardly developed. The Moroccan banking branch
adopted the Basel II standards in 2007 and a new capital market code entered into force on March 1, 2012. However,
nepotism and the unwillingness of financial regulatory bodies to clamp down on irregularities committed by well-con-
nected institutions remain concerns. Bank performance is generally very positive, according to measures of financial
depth. However, the lending products they offer are mainly concentrated in large corporates. SMEs remain deprived of
credit. According to a World Bank report,81 SME loans account for only 13% of all loans in the whole Maghreb region,
compared to an average of 16% for middle-income countries.82

Traditional long-term bank financing is almost inaccessible to SMEs in Morocco because of the high transaction costs
for due diligence combined with a lack of collateral requirements that would serve as security for assessing credit.
Since 2011, concessional funding and grants with limited conditions that mainly finance infrastructure and power proj-
ects have been widely available. Since all funds are raised and managed centrally, experts fear that the private sector
is being crowded out and regional development will be hampered.

Experts point out that lease financing for capital goods and equipment could be an alternative, especially for SMEs that
cannot convince traditional investors with their credit history or collateral.83 Leasing institutions could therefor play a
crucial role in complementing banks by providing services for SMEs in Morocco.

2. Corporate governance issues

The second problem that leads to the lack of finance for SMEs, is corporate governance issues. Interested investors jointly
complain about a lack of transparency in corporate governance in Morocco. As a result of corruption and informal labour
nepotism, many businesses seem to have an official balance sheet and an actual one. For interested investors, this leads to
high transaction costs for elaborate due diligence processes and technical assistance throughout the investment process. In
addition to that, investors complain about a lack of professionalism as many corporations, small and large, do tend to limit
hiring and salaries in key support functions such as finance, HR, and general control that are key for improved corporate
performance. Furthermore, specific local knowledge, expertise, and networks seem obligatory. Interested foreign investors
consequently depend on strong local partners to realize sophisticated investment decisions. However, a lack of specialized
local consultants, asset managers, and attorneys additionally impedes the growth of international investments.

In addition, family-led SMEs accounting for about 90% of the Moroccan private economy often want to mature but
face cultural or familial issues with opening up to external shareholding. Experiences from other emerging countries
(e.g., Latin America) show that mezzanine financing and quasi-equity may be a solution. Experts talk of tremendous
opportunities for mezzanine funds that have not yet been discovered in Morocco.

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Cooperatives in Morocco
In response to worsening societal problems as well as a reaction against neo-liberal principles and individualist ideolo-
gies, a so-called économie social et solidaire (social and solidary economy) developed in the 1970s in Southern Europe
and some of the Maghreb states, such as Morocco. The objective of the solidary economy is to reintegrate ideas of
social justice back into the economy by mobilizing economic resources in the goal of satisfying human needs.84

This is meant to be achieved through organizations that are collectively organized and act autonomously. The econom-
ic activities of these entities are not aimed at the distribution of profits (as in the business sector) but, rather, at the
satisfaction of collective purposes.

A cooperative is a corporation that provides non-profit services to its members or shareholders, who collectively own
and control it. In Morocco, cooperatives play an important role in socioeconomic development and are strongly sup-
ported by the government through special institutions and programs that provide capacity building and funding.

Nevertheless, existing cooperatives rely heavily on subsidies and governmental funds and find it hard to access growth
capital. The accumulation of external capital remains difficult for many cooperatives because of their set of typical
principles (such as “one member, one vote” and “limited return on capital”) and the often lacking business skills of their
leaders. However, if cooperatives in Morocco succeed in establishing innovative ways to attract external growth capital
in the form of debt and equity, they could become an interesting opportunity for future impact investors.

Inclusive businesses in Morocco

In Morocco, examples of companies with inclusive business strategies already exist. It is striking, however, that quite a
few of the social entrepreneurship success stories that have received a great deal of attention lately seem to still be in
the pilot phase. The coming years will show whether their business models are sustainable and scalable.

One example of a Moroccan inclusive business is Looly’s. Looly’s was founded by Lamiaa Bounahmidi in November
2013. The company offers unprocessed premium couscous produced by rural women close to the small town of Sidi
Kacem in Morocco. The company is reinventing ancestral food to make it trendy to sell it in the UK and US markets.
Around 40% of its revenue goes to a social action fund for its employees and their community.85

Another example is Temasol, a business cooperative providing energy access to remote rural households. Temasol was
founded in 2002 as a joint venture between three partners: EDF (32.2%), Total (32.2 percent), and Tenesol (35.6%). Temasol
won a governmental tender and has already supplied 16,000 rural homes in four provinces with photovoltaic electricity.86

33
Table 6 briefly introduces examples of organizations that identify themselves as social businesses in Morocco.

Table 6: Examples of inclusive businesses in Morocco

Groupe AMH The “Moroccan Friends of the Handicapped“ (AMH) are a http://groupeamh.org/
group of social enterprises that offer jobs to handicaped
people.
The Anou Online Trader that enables and trains producers of local http://www.theanou.com
products to directly sell on the Internet without costs of
middlemen.
Anarouz Anarouz is a social business that empowers rural women, http://www.anarouz.org
helping them to create marketable products in order to
get access to the international market.
Abury Abury brings together designers with traditional artisans http://abury.net/
from remote and inspiring cultures to create luxury
products for the international market.
Looly’s Loolys rebrands local farmer products to adapt them to http://www.loolys.com/
the international market and offers training and support
to local communities.
Association Docteur Promotion of environmental protection while empowe- http://www.adf-global.org
Fatiha (Ifassen) ring women through work and access to education.
Elkarti Morocco Ethical fashion line that designs luxury accessories that are http://elkarti.com
handcrafted by master artisans in Morocco.

Source: own research

9.3 DEMAND-SIDE INFRASTRUCTURE IN THE CIVIL SECTOR

Third-sector organizations worldwide are increasingly turning to impact investments as an additional funding source to
supplement funds raised through traditional fundraising and grant methods. Depending on their business model and ob-
jectives, third-sector organizations could use different impact investment instruments based on outcome-oriented con-
tracts or aiming at financial returns. Consequently, some third-sector organizations are potential impact investees. In the
following, we provide a brief overview of the emergence and development of third-sector organizations in Morocco.

The first human rights organization was officially established in the 1970s in Morocco and civil society activities have a
long and rich tradition in the North African kingdom. Accompanying the democratization process, a diverse network of
Civil Society Organization (CSO) (associations) have developed in Morocco over the last 15 years. CSO tasks are broad
and address economic, political, social, and environmental issues. CSO have especially flourished since the 1990s and
were partly encouraged by the regime.87 According to a 2011 publication of the Haut Commissariat du Plan au Maroc
(based on statistics from 2007), there were 44,614 non-profit organizations in Morocco at the time. The report points
out that eight out of 10 associations were founded after 1997 and four out of 10 after the launch of the NIHD, a huge
development program that funds social projects.88

Although the role of civil society has gained significance as part of the country’s recent political and societal develop-
ment, funding for CSOs is still not widely available. Akesbi points out in a report that

"Funding seems limited to closed circles, with half of CSOs not receiving any state support and over 90%
not receiving funding from foreign donors. Expenditure seems to be rising faster than income, and the
search for funding is skewing CSOs missions and objectives. The granting of the public utility status re-
quired to receive state funding is opaque and liable to favoritism."89

34
It seems as if only pro-regime NGOs have received public funding and critical NGOs must fear prohibition. The majority
of CSOs depend on their members’ fees as their only source of funding. Access to public and foreign funding (interna-
tional donors, etc.) is limited to only 9.6% of all CSOs.

The legal form of an association is the most frequent type of non-profit organization in Morocco. It is worth noting
that Morocco passed important amendments to the decree on the right to establish associations in 2002, which made
it easier to found an association, especially with regard to the use of foreign funding. The International Center for Not-
for-Profit Law even concludes that, “if implemented properly, Morocco‘s legal framework for NGOs could be consid-
ered among the most enabling for civil society in the entire Arab world.” 90

According to expert interviews, actors aiming to achieve social or ecologic benefits by using a sustainable business
model are still rare in Morocco, but the concept of social entrepreneurship has gained attention over the last few
years: In May 2009, social entrepreneurship was promoted at a conference of the Moroccan General Confederation of
Enterprises and the Ministry for Social Development by highlighting 10 successful examples. In March 2012, the US De-
partment of State, through the Study of US Institutes , organized Social Entrepreneurship Training Days in Morocco.

In the past, foreign institutions such as the Embassy of the United States in Morocco or the German Friedrich Naumann
Foundation, drove the discourse on social entrepreneurship. This is not surprising, since the label social entrepreneur
in English or entrepreneur social in French was not widely known. Hence, today, a growing number of civil and public
institutions are paying attention to social entrepreneurship as a valuable concept for Morocco. Additionally, at the
academic level, conferences and a growing number of upcoming studies on social entrepreneurship confirm increasing
attention to the topic.

10. SUPPLY SIDE OF IMPACT INVESTING

In this section, we provide an overview of the supply side of impact investing in Morocco. To begin, we briefly describe
the country’s investment climate. Next, we introduce some of the potential and existing actors on the supply side of
impact investing in Morocco and present a case study of a local impact investment and financial services company.

10.1 INVESTMENT CLIMATE AND CONDITIONS

In recent years, Morocco has worked hard to conduct painful reforms (required by international lenders, especially the
International Monetary Fund) to curb deficits, such as ending fuel subsidies and freezing public sector hiring. Still, the
government controls the prices of wheat, sugar, and cooking gas. Furthermore, under the current king, Mohammed
VI, Morocco has realized several policy measures to modernize and liberalize the economy. The promotion of inter-
national market inclusion through increased export, further foreign direct investment (FDI) , and the import of new
technologies are some examples. Morocco has already more than two dozen free trade agreements, including with the
European Free Trade Association countries (2000), Jordan and Tunisia (2004), Turkey (2006), the United States (2006),
and the EU (2012).

In April 2014, Morocco’s government presented its new strategy for industrial development for 2014–2020. The plan
contains 10 points of intervention, such as the building of new technology parks, the launch of a specific fund for the
support of SMEs, and support for new start-ups through micro-credits and technical assistance. The plan aims to create
500,000 new jobs by 2020.

Furthermore, the government of Morocco has made great efforts regarding macroeconomic policies, trade liberaliza-
tion, and structural reforms to improve the country’s investment climate in recent years. Consequently, it was awarded
"Most Improved Economy" by the World Bank.91 The Moroccan government highlights cost competitiveness (low tax-
es and wages), stable macroeconomic development, access to a wide range of customers through several free trade
agreements, a good infrastructure, and stable economic growth as locational advantages. An investment charter that
came into effect in 1996 seeks to encourage private sector investment, both domestic and foreign, by offering system-
atic access to all available benefits, as well as by simplifying administrative procedures. Furthermore, one-stop invest-
ment agencies have been established to assist investors during all phases of the investment process. To ensure the
effective promotion of investments in Morocco initiated by both local and foreign institutions, Invest in Morocco (the
Moroccan Investment Promotion Agency) has created a projects/opportunities bank to facilitate contacts between
project sponsors and their future partners.92

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In addition, the Moroccan government is currently focusing on liberalizing capital markets; it is currently turning Casa-
blanca into a regional financial center and introducing new financing instruments. Although Morocco was slightly af-
fected by the European financial crisis, forecast studies show great potential for a growing number of future invest-
ments in Morocco.93

Implementation of the National Pact for Industrial Emergence 2009–2015, which was adopted by both the public and
private sectors, aims to create 220,000 jobs and attract DHM 50 billion (USD 5.8 billion) in private investments.94 As
part of this agreement, the Moroccan Investment Development Agency was created in 2009. Its objective is to improve
investment promotion, provide guidance to interested investors, and to complement and strengthen the existing net-
work of regional Investment centers, special development zones, and sector development agencies.

A study by Ernst & Young95 published in May 2015 lists Morocco as the third biggest recipient of FDIs in Africa, after
South Africa and Egypt. The study lists 67 FDI projects that have were realized in 2014 in Morocco. According to Ernst &
Young, Morocco is the only North African country that has experienced solid growth in FDI inflows, at +24% (see Table
6). Foreign investors are attracted by Morocco’s stable political situation, its proactive FDI policy, the national privat-
ization program, and relatively low wages.

Table 7: Foreign direct investments

Incoming FDI USD 3.4 Billion (2013)

Industries 52.0%
Real Estate 14.0%

Main Sectors Energy and Mining 8.0%

(cumulative 2001-2011) Tourism 4.0%
Transports 3.0%
Banking, Financial Services 2.0%
France 43.0%
Singapore 10.0%
United Arab Emirates 10.0%
Great Britan 8.0%

Main Investors Switzerland 3.0%

(cumulative 2001-2011) Saudi Arabia 6.0%
United States of America 2.0%
Spain 2.0%
Germany 2.0%
Belgium 1.0%
Source: World Bank (2015).

In May 2014, Standard & Poor’s announced an upgrade of its Moroccan assessment, changing from negative to stable.
Standard & Poor’s justified its decision with relevant reforms conducted by the Moroccan government that would lead
to the reduction of budget deficits.96

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10.2 SUPPLY-SIDE MARKET STRUCTURE
A survey by JP Morgan and the GIIN published in 2014 and repeated in 2015 indicates that, despite a general increase
in impact investments in emerging markets, the entire MENA region seems to be excluded from this trend.97 This seems
currently true for Morocco as well, with only a very few private impact investors entering the market. However, there is
more evidence for institutional impact investing from development finance institutions (DFIs). The following introduces
different groups of actors on the supply side that could determine the development of an impact investing market in
Morocco in upcoming years.

Development Finance Institutions (DFIs)

DFIs play an important role in the international impact investment ecosystem, since they provide catalytic capital in
markets where private sector investment is weak. Additionally, they adopt environmental and social standards for
their investments and can help leverage partnerships between public and private sector stakeholders for larger-scale
investments. According to an IIPC report on the role of DFIs in impact investing,98 DFIs make four main contributions to
support the building of an impact investing market:
•• As a market-catalyst. DFIs can be first movers and play an important role in opening markets to other types of
investors.
•• As an institution builder. DFIs focus on geographies and market segments that may lack intermediary or end-user
capacity for impact investment.
•• As an anchor investor. DFIs have the capacity to mobilize other investors, whether through market signaling and
development, risk mitigation, and information sharing or otherwise.
•• As a deal generator. DFIs are well suited to find and generate investable opportunities at the deal level.99

In Morocco, it is the DFIs that have played the main role in impact investing so far. According to the OECD, official devel-
opment aid (ODA) in Morocco increased from USD 993 million in 2010 to USD 1.480 billion in 2012 (see Figure 8).100

Figure 8: Development Finance in Morocco

Receipts 2010 2011 2012 Top Ten Donors of gross
(USD m)
ODA (2011-12 average)
Net ODA (USD million) 993 1456 1480 1 France 648
Bilateral share (gross ODA) 67% 64% 64% 2 EU Institutions 463
Net ODA/GNI 1.1% 1.5% 1.6% 3 Arab Fund (AFESD) 202

Net Private flows (USD milion) 2136 2812 2420 4 United States 181
5 Japan 123
6 Germany 102
7 Spain 51
For reference 2010 2011 2012
8 Kuwait (KFAED) 38
Population (milion) 31.6 32.1 32.5 9 United Arab Emirates 30
GNI per capita (Atlas USD) 2870 2940 2950 10 Portugal 29

Bilateral ODA by Sector (2011-2012)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Education Production
Economic Infrastructure & Services Action relating to Debt
Programme Assistance Other social sectors
Other & Unallocated/Unspecified Multisector
Health and population Humanitarian Aid

Sources: OECD - DAC, World Bank; oecd.org/dac/stats

Source: OECD (2014).
37
Certainly not all of the ODA can be labeled as impact investments.101 DFIs differ greatly in the extent to which they define
projects in their portfolio as impact investments. Nevertheless, to date, it is the DFIs that are acting as drivers of impact
investing in Morocco. Examples include PPPs in the energy sector (described in detail in Case Study 2 in Section 7) or the
exploration of DIBs (see Section 6) as a new investment vehicle for employability.102

Private impact investors in Morocco

Not accounting for international DFIs, to date, there exist less than a handful of specialized local product providers that in-
clude impact investments in their portfolio in Morocco. Eiréné4Impact is one of the very rare examples (see Case Study 3).

Case study 3: Eiréné4Impact

Introduction
Eiréné4Impact is a structured innovation and entrepreneurship platform, designed to empower and
provide holistic support to high impact and responsible entrepreneurs and their ecosystems. It is built
around an incubator/accelerator and an impact first seed investment company (the first of their kind
in the country). Currently based in Casablanca, Morocco, Eiréné4Impact aims to develop its activity in
North and West Africa within the next 2 years.

Context
The GES held in Marrakech in November 2014 and king Mohamed VI’s speech on the necessity to support entrepre-
neurship started a strong entrepreneurial dynamic in Morocco, mainly driven by the youth’s motivation to take on
the challenge. Thanks to this greater dynamic, many entrepreneurial support initiatives have been launched in Mo-
rocco. However, most of these initiatives are focused on building visibility and awareness with little to no qualitative
technical support for entrepreneurs.
In this context Morocco still suffers from structural weaknesses in its entrepreneurial ecosystem with:
•• A cultural gap:
ͳͳ A risk averse culture with a negative view of entrepreneurs
ͳͳ A legal environment that is not conducive and supportive enough for entrepreneurs and investors
(low fiscal incentives, no bankruptcy protection, etc.)
•• An expertise gap:
ͳͳ An inadequate level of entrepreneurial/ management soft skills of entrepreneurs
ͳͳ A lack of access to qualitative expertise due to prohibitive costs
•• A financing gap:
ͳͳ A difficult access to seed and early stage investments, loans, etc.
ͳͳ A conservative corporate culture, rarely investing in innovation or giving market access to startups
ͳͳ A lack of efficient intermediation resulting in high transaction costs for investments

Activities
Eiréné4Impact aims to build and reinforce high impact and responsible entrepreneurship through a holistic ap-
proach of both the entrepreneurial value chain and its global ecosystem. Specifically the program aims to:

Objective At the Entrepreneur Level: At the Entrepreneur Level:

Raise awareness of key stake- • Build community based awareness

holders as to the importance
and role of entrepreneurs and
the necessity to support them
Ensure entrepreneur access
to the necessary expertise to
build and grow their startups
Provide seed and early stage
investment through traditio-
nal investor engagement
• Reinforce entrepreneur skills
• Reinforce access to support and
expertise internally and externally
• Provide seed funding to finance
scalable pilots
and engagement for high impact
and responsible entrepreneurship
• Engage grass top influencers to
create a better legal environment
• Improve entrepreneurs/ corporates
collaboration
• Build an investor ecosystem to
improve access to capital and
growth investment deal-flow

38
To achieve these goals, Eiréné is organized in 4 interdependent programs: 1 - Impact Way to build awareness and entre-
preneur capacity; 2- Eiréné Advisory to incubate and accelerate entrepreneurs and provide innovation services; 3- Eiréné
Invest to seed finance startups and 4- Eiréné Advocacy to promote a supportive legal and fiscal environment for impact
entrepreneurship. Together these programs aim at creating a self-sustaining entrepreneurship and innovation community
to facilitate long-term collaboration between aspiring entrepreneurs, intrapreneurs and their key stakeholders.

CULTURAL GAP EXPERTISE GAP

Impact Challenge Open Innovation Advisory
Conf. & Trainings Mentor Training Program
Impact Camp Incubation
p le
Peo

M
ar
FINANCIAL GAP

ke
EXPERTISE GAP

s t
e

Impact Eiréné
tur

Corporate Network
Impact Lab Way Advisory
Cul

Eiréné Eiréné

t
p or
Advisory Invest EXPERTISE GAP

Sup
Financial Experts Network
Po
CULTURAL GAP li c y e
anc
F in
Media Program FINANCIAL GAP
Legal Framework
Seed Funding
Business Angels Network

Impact
Impact Way, Eiréné Advisory and Eiréné Invest have been launched in early 2015. As of today:
• 3 pre-incubation and 2 incubation classes have been recruited and 40 entrepreneurs have been or are being
supported
• 1 entrepreneurship bootcamp has been organized and has allowed to train over 54 aspiring entrepreneurs
• 1 investment has been engaged
• 1 entrepreneurship support organization has been trained on our capacity building methods and 2 other orga-
nizations are being prepared for dissemination
• 2 university partnerships have been signed to provide learning opportunities to students on impact projects

39
 Learnings

Challenges: Success Stories (good surprises)

• High level of distrust: For our first Impact Challenge,
which was entirely online, we had more than 12000
visits over 2-3 days but only one contribution. Our sub-
sequent focus groups taught us that people didn’t want
to share their ideas as they feared that someone else
would capitalize on them. That is why we changed our
model to workshops, allowing participants to meet each
other and build trust, and made it a prerequisite to be
on the online platform.
• Access to qualified HR: Once a startup is off the ground,
it becomes quickly necessary to have access to good
quality HR with proven experience at a reasonable
salary. The few qualified HR often demand very high sa-
laries as larger corporations, facing the same issue, keep
raising the salaries to attract talent.
• Low availability of capital risk investment: VC and PE
have an overall poor profitability reputation in the
country and being a business angel is not yet perceived
as sexy. Though for now the number of quality start-up
is low, access to financing will quickly become a problem
as we start producing more good quality projects.
• As the first professional incubator with recognized busi-
ness leadership, wealthy individuals are starting to reach
out to learn more about investment opportunities. This
shows promise in terms of creating a BA community
• The best potential entrepreneurs are young professio-
nals working in best-in-class corporations, a population
traditionally uninterested in entrepreneurship. We
organized a master class on entrepreneurship with our
partner the ESSEC Business School of Paris. Even though
we only published it on our Facebook page (around
500 likes at the time), we reached in less than a week
over 300,000 people and received 5 000 attendance
requests, mostly from young professionals already em-
ployed. This shows promise for future start-up founders,
especially if we can demonstrate that there is a strong
support ecosystem to facilitate success.
• The quality of the projects and the entrepreneurs
applying for the incubation/acceleration has improved
significantly from our first classes; an important number
of these entrepreneurs had been trained during our last
bootcamp. This shows not only that there is a fertile
environment to generate entrepreneurs but that we
established a strong credibility that attracts committed
entrepreneurs.

Outlook
Our goal this coming year is to disseminate our training and awareness model nationally, stabilize the rest of our
activities to prepare for international growth in 2017 and better engage with corporates and non-profit organiza-
tions on innovation and entrepreneurship.
Our main needs at this stage are access to financial capital to grow our activities and seed our increasing number
of startups and access to expertise to help support our growing startups in their development.

Contact details
www.eirene4impact.org
Source: Eiréné4Impact

Moroccan emigrants as potential impact investors

There are currently around 4.5 million Moroccan emigrants living abroad, 85% of whom live in the EU, specifically in
France, Spain, and Italy. Remittances contributed an estimated USD 7.081 million to the local economy in 2011 and an
estimated USD 6.2 million in 2012. Today the remittances account for about 8% of the country’s GDP.103 Since emigrants
represent about 10% of the total population, the government has its own Ministry for Moroccans Residing Abroad and
Moroccan authorities are highly committed to channeling their potential through the transfer of skills, investments,
or co-development in the most effective ways for the country. To date, investments from emigrants have been mainly
provided in the traditional sectors of real estate (83.7%), agriculture (7.5%), and commerce (4.9%).104 Since Moroccans
abroad are often characterized as entrepreneurial and innovative and given their large numbers and assumed interest
in the development of their home country, this large group could play an important role in facilitating the emergence
of an impact investment market in Morocco. The promotion of more regional funds, for example, that intend to have
a measurable social impact alongside a financial return could encourage Moroccan emigrants to realize impact invest-
ments in their communities of origin.

40
Corporate impact investing
As of today, little is known about corporate impact investing and there are few best practice examples. However, cor-
porates can act as impact investors as well when they want to go beyond traditional corporate social responsibility
(CSR) and turn to social outcome-based investments instead.
Today, CSR in the form of impact investing is still a rarity. However, even “classical philanthropic CSR” is not yet wide-
spread in Morocco. Today, it is mainly multinationals that pass on their group values through subsidiaries in the region.
In 2012, eight companies in Morocco were rated and awarded for their CSR approaches and engagement by Vigeo,
an international consulting firm for ESG investing and sustainability rating. Vigeo stated that these eight firms that are
listed on the Moroccan stock market would “concern the cohesion of human capital and respect for human rights,
protection of the environment, responsible governance, business ethics, and contribution to the economic and social
development of the surrounding communities.” The firms were the BMCE Bank, BMCI, Centrale Laitière, Cosumar, La-
farge Ciments, Lydec, Managem, and Maroc Telecom.105

An interesting example of a CSR activity is the Moroccan BMCE Bank’s foundation for education and environment. It
was founded in 1995 and receives 3–4% of the gross operating income of the BMCE Bank on a yearly basis. In 1995, the
foundation started the education program The Medersat.com.106 The program focuses on quality pre-school and prima-
ry education. It has outlined as objectives the development of an innovative educational and pedagogical project that
will enable schools to provide students with the knowledge, social skills, and preparation needed for a successful school
career and to promote the genuine equality of opportunities. In the context of the program, over 60 schools in rural Mo-
roccan areas are supported. The program guarantees a year of pre-school education followed by a six-year curriculum
leading to a certificate of primary education. Over 420 Medersat.com teachers are overseen by 12 educational supervi-
sors. Education monitoring and real-time management of the school network are facilitated by an information system.
The pedagogical design is based on a modern pre-school and is open to children aged four and a half and up.107

In summary, although most of the companies listed above have not yet used their CSR approaches to realize classical
impact investing, they could be interested in doing so in the future, provided a pipeline of potential investees ex-
ists. Hypothetically, the approach of corporate impact investing could reach Morocco through multinationals that will
transfer their experiences from other countries to Morocco.

Microfinance
The story of microfinance in Morocco has had its ups and downs. Morocco was considered a microfinance champion until
2007. Prior to 2007, the sector was experiencing one of the most extraordinary growths in microfinance history. According
to MIX Market,108 client outreach was multiplied by a factor of four and MFI loans by a factor of 11 from 2003 to 2007.109

The following different actors have enabled the microfinance sector in Morocco to grow.
The Moroccan government:
ͳͳ The Microfinance Law of 1999 provides a clear framework for the development of the industry.
ͳͳ The government fund Hassan II Fund for Economic and Social Development provided financial support and
helped to capitalize the first MFIs.
ͳͳ The Ministry of Finance ensured close monitoring and the Central Bank, Bank Al-Maghrib, took over supervision in 2007.
International donor organizations:
ͳͳ The number of international donor organizations is growing. In the beginning it was mainly USAID and the Euro-
pean Commission, whereas now it is the IFC and KfW, and so forth.
Local banks:
ͳͳ Commercial banks created two of the largest MFIs and funded 85% of the sector’s assets in 2008.
However, the rapid growth of the microfinance sector proved unsustainable and it faced a big crisis in 2009. Credit risk
rose to 14% and even to 38% for one of the country's largest microfinance institutions.

Today, the microfinance sector in Morocco is relatively diversified, represented by 13 associations (microcredit asso-
ciations):
•• Four large microcredit associationss with national outreach: Al Amana, FONDEP, Fondation Attouafiq, and ARDI.
•• Four large microcredit associations with national outreach: AMSSF, INMAA, Al Karama, and Bab Rizk Jameel.
•• Five microcredit associationswith local outreach: Fondation du Nord, ATIL, Ismaïlia, Tawada, and AMOS.
Although a variety of actors exist, international experts estimate that they still serve only about 10–20% of the target
population and that additional outreach to about 3.2 million beneficiaries is possible.110 However, recent changes in the
legal framework for MFIs could smooth the way for new impact investors to enter the field.
Table 8 introduces a selection of current impact investors from different sectors in Morocco.

41
 Table 8: Examples of impact investors in Morocco
Internat. NGO Oxfam Novib In April 2013, the Oxfam Novib Fund managed by http://www.triplejump.eu/fund/ox-
Triple Jump, a responsible investment manager fam-novib/
based in the Netherlands, approved a senior
loan facility of €300,000 to Institution Marocaine
d’Appui à la Micro-entreprise (INMAA).
Public Caisse de Dépôt et CDG is a state-owned financial institution which http://www.cdg.ma/fr/
institution de Gestion (CDG) manages long-term savings in Morocco. It also
acts as a large impact investor, for example, in
the infrastructure and housing sectors.
Development KfW German Development Bank which invests in https://www.kfw-entwicklungsbank.de/
finance the energy and water sectors and in sustainable International-financing/KfW-Develop-
institution economic development in Morocco ment-Bank/Local-presence/North-Africa-
(see Case Study 2). and-Middle-East/Morocco/
Microfinance Al Amana One of the biggest MFIs in Morocco: by the end http://www.alamana.org.ma/rub.as-
institution of 2013, Al Amana served 3,47,289 loans for a px?id=76&SELCT=
total amount of about DHM 25 billions, serving
1,354,839 clients.
Product pro- AfriqueInvest/ Finance-first impact investor with USD 1BN http://www.africinvest.com/
vider MarocInvest assets under management, over 110 portfolio
investments in 22 African countries.
Incubator Eiréné 4 impact Venture philanthropy organization that enables http://www.eirene4impact.org
preincubation, incubation, seed money, and
networks for inclusive business entrepreneurs.
Corporate BMCE Bank Due to its foundation, the BMCE Bank invests http://www.fondationbmce.org/
impact in education and environmental projects on a
investor long-term perspective (e.g., Medersat.com).

Source: Own research

10.3 SOCIAL IMPACT MEASUREMENT IN MOROCCO

Impact investments seek to gain social or ecological impact alongside a financial return. Consequently, the social and
ecological impact of an investment must be frequently measured. Furthermore, an integrated impact measurement
approach allows inclusive businesses to monitor and promote their achievements on a regular basis. In contrast to oth-
er countries, social impact measurement is not yet a topic of broad discussion in Morocco. Every organization seems to
apply its own approach, if any. Most of the applied measurement systems originate in development cooperation and
need to be applied by organizations seeking to receive donor funding. Nevertheless, some initiatives might indicate a
change of the status quo.
Since 2005, Vigeo, has measured the performance and risks of companies in six domains of CSR.111 Furthermore, so-
cial returns on investment approaches have been applied to Moroccan investees and programs, including Fair Trade
Certification, Ecological Footprint, and Out of Poverty Index. Particular researchers in the field have tried to gain an
overview of applied approaches and to develop common standards adapted to the Moroccan context. As of now, no
legal specification of social impact measurement exists yet.

11. INTERMEDIARIES IN SUPPORT OF INCLUSIVE BUSINESS AND IMPACT INVESTMENTS

Current studies show that an intermediary infrastructure is critical for the development of an impact investment mar-
ket and the implementation of inclusive businesses in emerging markets.112

42
The list of possible intermediaries includes NGOs or social enterprises that offer the following:
•• Information platforms and research.
•• Performance or impact measurement.
•• Accreditation.
•• Validation.
•• Philanthropic advisory or portfolio planning.
•• (Online) advice, brokerage, share dealing.
•• Entrepreneurship fellowship support.
•• Information sharing and networking.
•• Business support services (advisory services, technical capacity support).
•• Education and training.

In Morocco, only a few actors provide advice, expertise, education, and other services to social investors or inclusive
businesses. However, as in the whole region, some business accelerator, incubators, and competitions have been cre-
ated, mainly in the region of Casablanca and Rabat, to help new business ventures.113 Furthermore, there is a growing
amount of research that covers the approaches of social entrepreneurship and social investments in Morocco. Already
in 2013, the University of Fes organized a conference regarding social entrepreneurship and Alahkwein University in
Ifrane offers summer courses. However, initial research leads to the assumption that a lack of intermediaries still exists,
which could be one of the key factors holding back the development of the impact investment market in Morocco. It
seems obvious that, especially on the supply side of impact investing, intermediaries are lacking that offer advice and
support to investors interested in obtaining a social and/or ecological impact alongside financial returns.

Table 9 lists some examples of existing intermediaries in Morocco that focus on serving the demand side of impact
investing in Morocco.

Table 9: Examples of intermediaries in Morocco

Incubator Dare Inc. Dare Inc. is an incubator that aims to ignite the http://dareinc.org/index.php
social entrepreneurship ecosystem in Moroc-
co and develop a strong deal flow of invest-
ment-ready projects at international standards.
Academic Centre Marocain The CMERES realizes research on social http://asmaediani.wix.com/cmeres
d’Etudes et de Recherch- entrepreneurship and offers scientific evaluation
es sur l’Entrepreneuriat of social entrepreneurship projects.
Social (CMERES)
Network Chercheurs en Entrepre- The Chercheurs en Entrepreneuriat Social au Ma- The group is organized as a group on
neuriat Social au Maroc roc is a network that unites researchers on social facebook
entrepreneurship from all over Morocco. Regular
meetings enable participants to exchange and
discuss the topic.
Education Moroccan CISE MCISE raises awareness for social entrepreneur- http://www.mcise.org/welcom/tes-
ship mainly in schools and universities. The or- te/notre-approche/
ganization aims to enable young people on their
way to becoming a social entrepreneur.
Lobbying Olea Institute OLEA institute is a think tank, research and lobby oleainstitute@gmail.com
organization that aims to raise awareness for
social entrepreneurship in Morocco.

Source: Own research

43
12. CHALLENGES FOR BUILDING AN IMPACT INVESTING MARKET IN MOROCCO
Expert interviews and a literature review lead us to the conclusion that three sets of barriers hinder the building of an
impact investing market in Morocco today, as follows.

1. Awareness and knowledge of the concept of impact investing

Since the discussions around impact investing have only currently emerged in an Anglophone context, not surprisingly,
the exact term is not yet widespread in Morocco and knowledge about it among the population and relevant stake-
holders is limited. Therefore, there are no lobbying organizations, interest groups, or associations for impact investing
in Morocco today. In addition, the lack of intermediaries that provide advice, expertise, education, and other services
to social investors or inclusive businesses hinders the emergence of the impact investing market in Morocco. Further-
more, in the media, only very few success stories prominently highlight current social businesses or impact investors
and research on impact investing in Morocco and the Maghreb region is quasi-inexistent.

2. Legal and regulatory frameworks

Today, in Morocco there does not exist a legal framework that recognizes impact investing as such. And even for tradi-
tional individual investors, such as business angels the current fiscal framework makes it very costly to invest. Interest-
ed investors complain about a lack of incentives for private capital to finance inclusive businesses (fiscal reliefs, tax in-
centives, etc.). Another barrier they describe is the lack of regulations for more transparency in corporate governance.
This seems to be true for the assessment and reporting of social impact as well. Social entrepreneurs on the demand
side of impact investing cite a lack of specific legal forms for social enterprises as limiting the emergence of actors in
the field. In addition there is no protection for associations' assets under Moroccan law.

3. Access to finance for investees

Interviewees describe the “missing middle” phenomenon of financing requirements between microfinance and com-
mercial finance, especially for seed capital, as a major challenge for upcoming social businesses. In addition, cultural
issues seem to hinder the evolvement of equity capital in family-owned businesses. As of today, tailored financing
instruments (e.g., social impact bonds, regional funds) for impact investing are still rare.

13. CONCLUSION
According to the very few existing statistics on impact investments worldwide, the MENA region does not seem to be on
the screen of many investors yet. This report provides a detailed analysis of the conditions for impact investing in Moroc-
co, using the North African kingdom as an example to highlight the great potential of impact investments in the region.

Despite and, in fact, bolstered by its present political climate, Morocco provides several conditions favorable to the
creation of a viable market for impact investing, including
•• A stable emerging economy with well-established institutions and close ties to Europe and the United States.
•• Demand for innovative approaches to solving social issues.
•• A government that is eager to tackle social problems.
Our market analysis for impact investments shows great potential for impact investments in the public, private, and
civil society sectors in Morocco. PPPs, social businesses, and even some NGOs offer a wide range of investment options
along all impact sectors, such as healthcare, agriculture, education, and renewable energies.
Promising developments include the following.
•• The Moroccan government has prepared and adopted an important portfolio of incentives aimed at encourag-
ing private investment for PPPs in several impact sectors.
•• If certain barriers are eliminated, experts point out that there is tremendous potential for microfinance, classic
equity capital, mezzanine funds, and leasing products for impact investments in Morocco.
•• If cooperatives in Morocco succeed in establishing innovative ways to attract external growth capital in the
form of debt and equity, they will become a very interesting opportunity for future impact investors.
•• Social entrepreneurship and inclusive business have gained increasing attention from civil society actors, uni-
versities, and political stakeholders.
•• The large group of Moroccan emigrants who invest in their home country could play an important role in facil-
itating the emergence of an impact investment market in Morocco.

Nevertheless, today, several barriers still hinder the market development for impact investing in Morocco. The main
issue could be the fact that a stable pipeline of investable projects for impact investments in Morocco does not yet

44
exist. Social businesses face various barriers with regard to finance and technical advisory. On the other hand, potential
impact investors describe the lack of transparency in corporate governance as a major problem. For interested inves-
tors, this leads to high transaction costs for elaborate due diligence processes and technical assistance throughout the
investment process. Furthermore, specific local knowledge, expertise, and networks seem obligatory. Interested for-
eign investors consequently depend on strong local partners to realize sophisticated investment decisions. However,
a lack of specialized local consultants, asset managers, and attorneys additionally impedes the growth of international
investments. Expert interviews and literature reviews lead us to conclude that there exist three groups of barriers that
hinder the building of an impact investing market in Morocco today. Table 10 illustrates the challenges identified divid-
ed into the demand and supply sides.

Table 10: Challenges for building an impact investing market in Morocco

Legal and regulatory frameworks Access to finance Awareness and knowledge

Lack of legal form for social
enterprises
Demand
Side
Lack of standards for assessing and
reporting social impact
Lack of incentives for private capi-
tal to finance inclusive businesses
(fiscal relief, tax incentives, etc.)
Supply Lack of transparency of corporate
side governance
Lack of standards for assessing and
reporting social impact
Missing middle of financing requirements • Lack of lobby organizations
between microfinance and commercial
finance, especially for seed capital.
Cultural issues that hinder the
evolvement of equity capital
Lack of tailored financing instruments
(e.g., social impact bonds, regional
funds)
and interest groups
• Lack of intermediaries provid-
ing advice, expertise, educa-
tion
• Lack of success stories high-
lighting existing social busi-
nesses and impact investors
• Lack of research on impact
investing in the region
• Limited knowledge among
population and relevant
stakeholders

Source: Own research

Governmental support is needed to create general market conditions, counterbalance market failures, and thus pro-
mote the building of an impact investing market. Possible options for policy interventions range from direct interven-
tions to enabling actions, including (co)financing, legal regulations, building market infrastructure, and public procure-
ment or tax incentives, as shown in Table 11.

Table 11: Policy interventions for impact investing

Supply development Directing capital Demand development

Government influence Investment rules and Tax subsidies Enabling “corporate” structures
requirements
Government direct Co-investment Procurement Capacity building
participation

Source: Thornley et al. (2012)

In Morocco, the market for impact investing is still in a very early stage. Consequently, policy decisions must foster mar-
ket creation. In addition to their efforts in strengthening PPPs, politicians could focus on the promotion and creation
of social businesses to build a pipeline for further impact investments. Best practices from around the world show a
variety of options for policy measures. An interesting option in this context could be a government-backed fund dedi-
cated to building the impact investing ecosystem by supporting potential investees and intermediaries in the field.

Our research shows that impact investments in Morocco have a chance to flourish and strongly contribute to socio-
economic development if public, private, and civil actors actively collaborate to create a conducive ecosystem. With
our report, we hope to provide a basis for deciding which actions to prioritize. Nevertheless, further research on the
requirements of social enterprises and impact investors in Morocco is strongly needed.

45
 14. ABOUT THE AUTHORS
Lena Lütjens-Schilling works as a consultant for international development co-
operation and is currently a PhD student in affiliation with the Department of
Socioeconomics at the University of Hamburg, Germany. Residing in Rabat (Mo-
rocco), Lena does research on impact investment and inclusive business strat-
egies and holds a fellowship for Impact Investing and Policy Innovation from
the Rockefeller Foundation. Since 2009, Lena has been employed at Nordlicht
Management Consultants, focusing on strategy and management consulting
with public sector institutions and political NGOs. After completing her master’s
degree in sociology and politics, Lena worked at the German United Nations
Millennium Campaign and the Gesellschaft für Internationale Zusammenarbeit
(GIZ) and as a consultant at Ashoka, Germany. She is an associate expert at en-
deva and has been working in projects with Bertelsmann Foundation, Caritas
Morocco, the German national advisory board on impact investing established
by the G8, UNDP and the G20.

Barbara Scheck is an assistant professor for social investment at the Universi-

ty of Hamburg. Her research focuses on the financing of social enterprises, im-
pact and mission-related investing, and impact measurement. Barbara holds a
Diplôme de Grande Ecole and M.Sc. from the European School of Management,
where she studied International Business Administration in Paris, Oxford, and
Berlin, and a Ph.D. from the Technical University of Munich. Barbara started her
career in the German diplomatic service before co-founding and heading a fi-
nancial literacy project established by Allianz, McKinsey & Company, KPMG, and
Grey. During her Ph.D., she developed the Social Reporting Standard, guidelines
for impact-oriented investments. Other significant experiences include consult-
ing for a social venture capital fund and projects for development cooperation
agencies in social entrepreneurship. Barbara furthermore supports the Social
Entrepreneurship Akademie (SEA) in Munich in developing novel education pro-
grams for societal change. She is a member of the EU’s “Groupe d‘experts de
la Commission sur l‘entrepreneuriat social” subgroup on impact measurement
in social enterprise and the Impact Measurement Working Group of the Social
Impact Investment Task Force established by the G8 and serves on the board of
the My Finance Coach Foundation.

46
LIST OF TABLES, FIGURES, AND CASE STUDIES
Tables
Table 1: Overview of terms similar to impact investing 11
Table 2: Morocco in brief 19
Table 3: Public policy examples 22
Table 4: Practical examples of different types of inclusive businesses 1/2 30
Table 5: Practical examples of different types of inclusive businesses 2/2 31
Table 6: Examples of inclusive businesses in Morocco 34
Table 7: Foreign direct investments 36
Table 8: Examples of impact investors in Morocco 42
Table 9: Examples of intermediaries in Morocco 43
Table 10: Challenges for building an impact investing market in Morocco 45
Table 11: Policy interventions for impact investing 45

Figures
Figure 1: Impact investors around the globe. 9
Figure 2: Segments of impact investors. 12
Figure 3: Actors in the impact investing ecosystem. 13
Figure 4: Structure of a DIB model. 16
Figure 5: Steps of the market analysis. 17
Figure 6: Analysis framework for impact investing ecosystems. 18
Figure 7: Examples of inclusive business models. 36
Figure 8: Structure of ODA in Morocco. 37

Case studies
Case study 1: National Intitiative for Human Development (NIHD) 23
Case Study 2: Green investments in solar energy in Morocco 28
Case study 3: Eiréné4Impact 38

47
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EXPERT INTERVIEWS
Brahim El Jaï (Senior Partner and MD of AfricInvest, Morocco)
Markus Geibel (Senior Investment Manager at Deutsche Entwicklungsgesellschaft, DEG)
Mayada El Zoughbi (Senior Financial Sector Specialist at GCAP)
Milena Bertram (Co-Head SANAD Fund at Finance in Motion)
Silke Stadtmann (former Country Director at KfW, Morocco)
Adnane Addoui (founder and CEO of the Moroccan Center for Social Entrepreneurship)
Latifa Zitane (Chef de Pôle Communication, Coordination Nationale de l’INDH, Ministère de l’Intérieur)
Jan Schilling (Senior Project Manager KfW, Morocco)
Mohamed Medouar (Senior Rural Development Specialist, World Bank)
Stéphanie Druguet (Délégation de l’Union européenne au Maroc, Coopération – Secteur développement social et rural)
Abdellahm Talib (Directeur de la Communication et du Développement Durable, Lydec)
Saïd Chadli (Directeur de Lydec/INMAE)
Abderrafih Lahlou Abid (former Senior Project Manager, KfW)
Manal Elattir (founder and CEO of Anarouz)
Leyth Zniber (Founder and CEO of Eiréné4Impact)

ENDNOTES
1
MENA includes the following countries: Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Yemen, United Arab
Emirates, Libya, Morocco, Palestine, Oman, Qatar, Saudi Arabia, Syria, Tunisia, and Algeria.
2
Kohler et al. (2011).
3
Monitor Institute (2012).
4
Saltuk et al. (2015).
5
For a description of the MENA region, see http://www.worldbank.org/en/region/mena/overview.
6
For more information, see Section 8 of this report.
7
Borzaga and Defourny (2001).
8
http://www.rockefellerfoundation.org/our-work/current-work/impact-investing/.
9
Commonfund (2013).
10
Emerson et al. (2003).
11
The triple bottom line adds an ecological dimension to the double bottom line approach. For more information, see
the RISE Double Bottom Line Investor Directory (http://www.riseproject.org/).
12
Elkington (1994).
13
The Triple Bottom Line Investing group was founded in 1998 by Robert J. Rubinstein.
14
Emerson (2003, 2013).
15
Freireich and Fulton (2009).
16
Höchstädter and Scheck (2014).
17
Saltuk et al. (2014).
18
The definition was drawn from the GIIN website, at http://www.thegiin.org/impact-investing/
19
Jackson and the Rockefeller Foundation (2012).
20
Monitor Institute (2009).
21
OECD (2015).
22
Boston Consulting Group (2013).
23
Monitor Institute (2012).
24
Saltuk et al. (2015).
25
Höchstädter and Scheck (2014).
26
For example, in Germany this critique was greatly discussed in the context of the National Advisory Board on

55
 Impact Investing to the G8
27
Saltuk et al. (2011).
28
Ehlbeck (2013).
29
CGAP (2013).
30
Ehlbeck (2013).
31
GIIN (2013a).
32
World Bank (2013).
33
World Bank (2014).
34
Kvint (2008).
35
Investopedia, http://www.investopedia.com/terms/e/emergingmarketeconomy.asp.
36
Henisz and Zelner (2010).
37
Saltuk et al. (2014).
38
Daragh and Amman (2012)
39
Prahalad (2004).
40
GIIN (2015)
41
Arosio (2011).
42
Arosio (2011).
43
http://www.cgdev.org/working-group/development-impact-bond-working-group.
44
Bertelsmann (2014).
45
Known as the makhzen.
46
“The fundamental law, or constitution, of a state or nation, written or unwritten; that law or system of laws or
principles which defines and establishes the organization of its government” (Law Dictionary, available at
http://thelawdictionary.org/organic-law/).
47
ILO (2015).
48
Achi (2013).
49
Haute Commissariat du Plan au Maroc (2015).
50
World Bank (2012).
51
World Bank (2012).
52
United Nations Development Programme, or UNDP (2014).
53
World Bank (2014).
54
INDH (2011a).
55
IMF (2015).
56
Oxford Business Group (2014).
57
Oxford Business Group (2014).
58
Ministère de l’Economie et des Finances (2013).
59
Ministère de l’Economie et des Finances (2013).
60
Public-Private Infrastructure Advisory Facility (2011)
61
Falconer and Frisari (2012)
62
For more information about the project from KfW, see https://www.kfw.de/KfW-Group/Newsroom/Aktuelles/
Pressemitteilungen/Pressemitteilungen-Details_253888.html.
63
Noor means light in Arabic.
64
MASEN (2014).
65
The Hassan II Fund for Economic and Social Development is a government-backed fund that grants financial
assistance for investment projects in some industrial sectors.
66
The SIE is a state company that was founded in 2010 with an initial capital of DHM 1 billion. The SIE is a financial
investor operator in the energy sector, particularly in the field of renewable energy and energy efficiency. For more
information, see http://www.siem.ma/index.php/en/sie-2.
67
For more information about the KfW project, see https://www.kfw.de/KfW-Group/Newsroom/Aktuelles/
Pressemitteilungen/Pressemitteilungen-Details_253888.html.
68
Expert interview with Jan Schilling, project manager at KfW, Morocco.
69
For more information, see http://www.masen.org.ma/index.php?Id=undefined&lang=en#/___home.
70
Expert interview with Jan Schilling, project manager at KfW, Morocco.
71
World Bank Group (2015).
72
Silatech and Gallup (2009).
73
The king is the commander in chief of the Moroccan army and announces the Walis and governors who represent
the devolved administration in Morocco at the regional and provincial levels.
74
Btedinni (2013).
75
World Bank (2013).

56
76
See http://www.gesmarrakech2014.org/en/home.
77
For more information, see http://www.moukawalati.ma/.
78
Source: expert interviews.
79
World Bank (2013).
80
Bertelsmann Stiftung (2014).
81
World Bank (2013).
82
European Institute of the Mediterranean (2015).
83
Source: Expert interviews. For more information on this topic, see Nasr (n.d.).
84
Moulaert and Oana (2005).
85
For more information, see http://loolys.com/.
86
UNDP (2011).
87
In 2010, the CSOs with the highest membership rates were, in decreasing order, sport organizations (8.3%),
educational and/or cultural organizations (6.8%), and development organizations (4.8%) (Akesbi, 2011).
88
Haute Commissariat du Plan au Maroc (2011).
89
Akesbi (2011).
90
International Center for Not-for-Profit Law (2005).
91
International Finance Corporation, or IFC (2012).
92
http://www.invest.gov.ma/index.php?Id=1&lang=en.
93
Oxford Business Group, 2014
94
For more information on the Moroccan National Pact for Industrial Emergence, see
http://www.emergence.gov.ma/en/Pacte/Pages/LePacte.aspx.
95
Ernst & Young (2014).
96
Morocco World News (2014).
97
Saltuk et al. (2014).
98
Garmendia and Olszewski (2014).
99
Garmendia and Olszewski (2014, p. 15).
100
OECD (2014).
101
Garmendia and Olszewski (2014).
102
Lately some FDIs realize feasibility studies to estimate the chances for the establishment of the first DBI in Morocco.
103
See http://www.iom.int/cms/morocco.
104
Oxford Business Group (2014).
105
For more information, see http://www.vigeo.com/csr-rating-agency/images/PDF/Communiquepresse/English/
20120131_results_csr_awards_morocco_en.pdf.
106
http://www.fondationbmce.org/en/medersat-vision-educative-pedagogique.php.
107
http://www.wise-qatar.org/medersat-morocco.
108
MIX Market (www.mixmarket.org) is a data hub where MFIs and supporting organizations share institutional data
to increase transparency and market insight.
109
http://www.microfinancegateway.org/fr/pays/maroc.
110
Reille (2009).
111
http://www.vigeo.com/csr-rating-agency/en/3-1-investisseurs-et-gestionnaires-d-actifs.
112
Calvert Foundation (2012).
113
See, for example, http://www.leseco.ma/business/31935-entrepreneuriat-social-un-nouvel-incubateur-
lance-au-maroc.html. A list of incubators in Morocco is provided via the Wamda portal at
http://www.wamda.com/2010/09/morocco-sme-incubators.

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