The European Investment Bank (EIB), the European Union's long-term financing institution, is providing the Moroccan banking sector with ECU 45 million (1) from risk capital resources (2) to assist development of the private sector.

The funds will be deployed towards strengthening the equity base of companies undergoing restructuring and modernisation (upgrading), with the creation of the EU-Morocco free trade area in prospect, in order to furnish them with a more solid capital investment base. The resources from the EIB will go in the first instance to the following financial intermediaries: the Banque Commerciale du Maroc (BCM), Wafabank, Banque Marocaine du Commerce Extérieur (BMCE) and Banque Centrale Populaire (BCP) groups, Banque Nationale pour le Développement Economique (BNDE) and Moussahama. The vehicles used will be modern financial instruments such as ordinary and preference shares, investment certificates and convertible bonds. Part of the EIB financing will be earmarked by the intermediaries for taking direct equity stakes in investment companies and investment funds.

Since 1989, nearly 200 private-sector businesses in Morocco have between them benefited to the tune of ECU 33.2 million from risk capital provided by the EIB. The new operation will boost and diversify the resources available to banks for strengthening the capital base of enterprises. Indirectly, it will also help to tap Morocco's pool of savings and diversify the financial sector.

The EIB is a lead player in implementing the European Union's "Euro-Mediterranean Partnership" and its priority objectives. In this context, a new mandate has been set in place for the period 1997-2000 to provide up to ECU 2 310 million of funding for projects in the 12 non-EU Mediterranean countries that have signed cooperation and/or association agreements with the EU.Since 1991, the EIB has contributed over ECU 600 million towards projects of key importance for the Moroccan economy, such as the EU-Morocco power grid interconnection via the Strait of Gibraltar, high-voltage electricity transmission facilities and power supplies to rural areas, improvements to the trunk and international telephone networks and large-scale water management schemes (sewerage systems in several coastal towns, irrigation of farmland in the Doukkala Plain, etc); the EIB has also promoted small and medium-sized enterprises in the productive and cooperative sectors through global loans to Morocco's Caisse Nationale de Crédit Agricole and 18 commercial banks, intended particularly to pave the way for Moroccan/European joint ventures.

(1) The conversion rates used by the EIB for statistical purposes for the current quarter are those obtaining on 31.03.1998, when ECU 1 = GBP 0.6392, IEP 0.7900, USD 1.0762 and MAD 10.6894.

(2) In addition to loans from its own resources, the EIB also deploys risk capital assistance from EU budgetary funds. A long-term financing instrument (up to 25 years), risk capital is a means of tailoring remuneration and repayment clauses to the performance of the project financed, while at the same time consolidating the promoter's capital base. To date, over ECU 40 million in risk capital (including 25 million which has gone to the Middle East) - principally in the form of global loans to local banks - has been directed towards establishing or underpinning some 180 joint ventures, serving to create around 13 000 jobs and mobilising over ECU 600 million in new investment.