Development of Local Capital Markets and SME Finance in Morocco

Program Development Objective ( PDO )

The objective of this technical assistance program is to support the strategy of the government of Morocco to broaden and deepen local capital markets in order to enhance their role in financing the economy, including fostering new solutions for small and medium enterprises (SMEs), while building the capacity of supervisors to ensure continued financial stability.


Morocco’s financial system is the largest in the Middle East and North Africa region. However, high levels of savings and investment have not delivered higher economic growth compared to Morocco’s peers. The government has adopted a three-pronged approach to help the financial system deliver higher growth: (a) new financial products and practices, (b) revamping of market infrastructures while strengthening risk-based regulation, and (c) greater support to small enterprises and new projects. 


Component 1: New capital market products and support of regulatory and market infrastructure
This component will enable a broad list of new and existing products, including exchange traded funds, derivatives, sukuk (Islamic Finance), real estate investment trusts, government bonds, nongovernment debt markets, and undertakings for collective investment in transferable securities. 
Component 2: Building of supervisory capacity of financial sector agencies
This component will train the staff of the newly independent capital markets authority (Autorité Marocaine du Marché des Capitaux, or Moroccan Authority for Capital Markets), the Central Counter Party (CCP) supervisors and overseers, and the staff of the Ministry of Economy and Finance and the Department of Treasury and External Finance. It will also increase the capacity for risk-based supervision through a review of data-reporting requirements. 
Component 3: Fostering of new financing solutions for SMEs
This component will review regulations for the Casablanca Stock Exchange. It will also help reform the private equity and venture capital regulatory framework and explore options for increasing the supply of risk capital to firms, including SMEs. These efforts also include designing and implementing public–private early-stage financing solutions and designing incentives to encourage long-term saving and the supply of risk capital. 

Expected Outcomes

The expected outcomes of the project are as follows:
New capital market products and support of regulatory and market infrastructure
    1.    Enacting regulations
    2.    Creating an enabling environment for a number of new products, including exchange
           traded funds, (interest rate) derivatives, sukuk (Islamic Finance), and  real estate
           investment trusts
    3.    Implementing an action plan to stimulate foreign investor participation in government bonds
    4.    Implementing a strategy to promote the nongovernment debt market
Building of supervisory capacity of financial sector agencies
    1.    Improving capacity to supervise and oversee capital markets at both the Autorité Marocaine
           du Marché des Capitaux and the Bank Al-Maghrib, including appropriate collaboration
           arrangements, financial market infrastructures, and the use of new capital market products
           by regulated entities 
    2.    Improving capacity to identify and monitor behaviors that pose risks to financial stability 
           and market integrity by (a) improving reporting requirements that capture the new
           instruments and (b) improving surveillance and capacity-strengthening exercises
New financing solutions for SMEs
    1.    Enacting a law concerning the stock exchange and of regulations
    2.    Creating an enabling environment for increased SME listings on the stock exchange, which
           involves market-ready SMEs at the end of the pipeline
    3.    Increasing private equity and venture capital 
    4.    Implementing public–private early-stage financing solutions 
    5.    Offering incentives to encourage long-term saving and the supply of risk capital
           (including SMEs)