1. Blended Finance Good Practices
Tunisia case study
Final Report
October 7th
, 2020
Author: Mondher Khanfir

2. Table of Contents
Executive summary 4
Assignment objective 5
Project background 5
Scope of work and methodology 5
Overview on economic conditions in Tunisia 6
International support to Arab Spring countries 10
The heavy cost of the transition to Democracy 10
Impact of the COVID19 12
Development Finance (DF) in Tunisia 13
MDBs/DFIS engagement in Tunisia 14
Compact with Africa agenda 16
The landscape of MDBs/DFIs interventions in Tunisia 16
Blended Finance (BF) Value Chain and Practices Pattern 17
Development Finance taxonomy 18
German cooperation with Tunisia 19
Linking DF instruments to BF approach 22
Screening selected examples through the BF practice patterns 24
Example 1/2 from the quadrant #3: Anava Fund 25
Example 2/2 from the quadrant #3: TunInvest Croissance 27
Example from the quadrant #1: SANAD for MSMEs 28
Example from the quadrant #4: Green for Growth Fund 29
Example from quadrant #2: Banque des Régions Error! Bookmark not defined.
In conclusion: How to make BF as a good option for DF: Challenges & issues Error! Bookmark not defined.
Recommendations to consolidate BF as a privileged development aid practice 32
Annexes 34
Annex 1: CwA Engagement Matrix 34
Annex 2: KfW portfolio in Tunisia Error! Bookmark not defined.
Bibliography 41

3. Acronyms
ACET African Center for Economic Transformation
AFD Agence Française de Développement
AfDB African Development Bank
CBT Central Bank of Tunisia
BF Blended Finance
BPI France Banque Publique d’Investissement - France
CwA Compact with Africa
DAC Development Assistance Committee
DF Development Finance
DFI Development finance institution
DEG Deutsche Investitions- und Entwicklungsgesellschaft
EBRD European Bank for Reconstruction and Development
EDFI European Development Finance Institutions
ECDPM European Centre for Development Policy Management
EFSD European Fund for Sustainable Development
EIB European Investment Bank
EIP External Investment Plan
EU European Union
FoF Fund of Fund
GoT Government of Tunisia
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH
IFC International Finance Corporation
ITCEQ Institut Tunisien de la Compétitivité et des Etudes Quantitatives
ITES Institut Tunisien des Etudes Stratégiques
JICA Japanese International Cooperation Agency
KfW Kreditanstalt für Wiederaufbau
MBD Multilateral development bank
MENA Middle East and North Africa
MSME Micro, small and medium-sized enterprise
M.TND Million Tunisian TND
NGO Non-governmental organization
ODA Official Development Assistance
OECD Organization for Economic Co-operation and Development
SDG Sustainable development goal
TND Tunisian TND
YoY Year on Year

4. Executive summary
The Compact with Africa (CwA) agenda was established by the G20 countries in 2017 when German presidency took place for a
period of 5 years. It framed and conditioned financial aid to developing countries, to achieve Sustainable Development Goals
(SDGs) on one hand, and to enhance investment climate on one other hand.
Blending finance to make Development Finance (DF) more anchored in the local context in beneficiary countries raised the
interest of institutional observers like the Organisation for Economic Cooperation and Development (OECD). Some reports have
defined and described Blended Finance (BF) as a practice that mobilizes additional finance towards sustainable development
in developing countries (OECD 2018). As BF continues to spread over the DF practices, it becomes more and more sophisticated
and has reached the weight of US$ 1.2 billion in 2017 according to European Development Finance Institutions, which represents
13,6% of the total annual volume of financed projects by Development Finance Institutions.
Tunisia, as all countries benefiting from Development Aid would gain in adopting BF approach, to better monitor the investment
projects undertaken by the Multilateral Development Banks (MDBs) and Development Financial Institutions (DFIs), and to learn
how to generate additional impact with local dimension.
International cooperation is highly active in Tunisia, such as with Germany who acts on many development aid projects,
targeting financial inclusion, modernization of the administration, renewable energies, transportation, etc. Even if BF is not
explicitly presented as part of its business model, many projects funded by the KfW, the German Development Bank, are obeying
to the principles enacted by the OECD Development Assistance Committee1
(DAC).
Crossed with field observations and the recommendations highlighted during the peer learning event2
organized in september
2019 by the African Center for Economic Transformation (ACET), the OECD DAC principles are materialized by a Blended Finance
Value Chain deployed through a series of practice patterns revealed in this report. The patterns consist of 12 generic practices
that aim to anchor the local dimension in development aid projects, since the investment opportunity identification to
implementation and impact evaluation. This supposes that BF is a practical approach rather than an asset class.
A selection of DF instruments provided by the KfW has been screened and assessed through the practice patterns to
demonstrate the relevance of the local dimension. Even if it is not formally promoted as a business model, many KfW
interventions are producing impact under a perspective of the BF value chain.
Consequently, the more a development aid project is anchored to the local dimension the most BF practice patterns it covers.
This obviously adds complexity in implementing financial instruments, but this will be compensated by better success conditions
with higher local impact in the long run.
Moreover, BF practice patterns could serve as a framework for risk anticipation and contingency plan. Hence the interest of
familiarizing all stakeholders with BF good practices and, when appropriate, using them to co-develop fundable initiatives
around this referential.
At the end, the challenge remains how to manage the coordination with local partners and to know when to hand over so as not
to distort the market or subsidize the private sector. In a few words, the challenge for MDBs/DFIS once using BF is to make the
investment “pie” bigger when related risk is high and to exit when it becomes acceptable for Commercial Finance actors.
1
http://www.oecd.org/development/financing-sustainable-development/blended-finance-principles/
2
“Strengthening the Local Dimension of Blended Finance: a review of local approaches and instruments employed by DFOS”.
ACET, 2019.

5. 1. Assignment objective
a) Project background
The African Center for Economic Transformation (ACET) supports the G20 Compact with Africa (CwA) initiative with
analysis, research, peer learning, peer review and advocacy. In 2019, ACET led a body of work starting with a desk
review of approaches and instruments of multilateral development banks and development finance institutions in
CwA countries, as well as programs at the government/provider country level, particularly looking at how those
institutions included local conditions and contexts in their investment decisions. This analysis reviewed some of the
approaches that blended finance from MDBs/DFIs have followed to crowd in local private finance and consider local
dimensions of investment. Specific attention was given to approaches that seek development impact beyond a
specific project, in terms of innovation, capital market development, policy framework, institutional strengthening,
and demonstration effects. Likewise, the analysis identified cases where DFIs have supported investments that had
strong demonstration effects for other projects and investors.
As a follow-on activity, ACET conducted three additional country case studies to identify good practices by DFIs. One
in Tunisia with a focus on the work of KfW, one in Senegal with a focus on the work of AFD, and one in Ethiopia with
a focus on the work of AfDB.
b) Scope of work and methodology
Writing a case study on Blended Finance practices illustrated by the KfW interventions in Tunisia. The case study
includes the overall Compact with Africa approach supported by the German cooperation in Tunisia, i.e. strategy,
initiatives with government and stakeholders, engagement with local institutions, completed by specific approaches
and actions led by the KfW in regard to the recommendations outlined in the African Center for Economic
Transformation (ACET) report entitled “Strengthening the Local Dimension of Blended Finance: A review of the local
approaches and instruments employed by Development Finance Organizations”3
.
As Blended Finance is not officially recognized by Tunisian counterpart, and even not promoted as part of its business
model by the KfW in Tunisia, the exercise consisted on identifying examples of instruments that are partially or
totally respecting the OECD DAC principles, namely:
Principle 1: Anchor BF use to a development rationale
Principle 2: Design BF to increase the mobilization of commercial finance
Principle 3: Tailor BF to local context
Principle 4: Focus on effective partnering for BF
Principle 5: Monitor BF for transparency and results
Then analyzing the instruments under the perspective of defined practice patterns that anchor the local dimension
and needs. From there, recommendations are advanced on means that leverage impact investing along with financial
and non financial additionality.
The methodology for writing the case study covered 3 axes of work as following:
● a first axis on the local economic context in Tunisia,
● a second axis on development finance and the perspectives that Blended Finance is offering in Tunisia
● and a third axis on practices analysis through concrete examples picked from KfW investment portfolio.
3
https://acetforafrica.org/highlights/strengthening-the-local-dimension-of-blended-finance/

6. The overall work was articulated around 3 phases, i.e. collection of information via web research and interviews,
structuring the global picture and zooming on the Tunisian case, and finally direct exchanges and a focus group on
Blended Finance with local stakeholders to elaborate factual conclusions and recommendations.
The research faced several constraints, including the atomization of data on public funding and on BF particularly.
Moreover, BF is not only uncovered by local public policies, it is not even envisioned as a business model by the KfW
office in Tunisia. As a result, instead of showing BF good practices as projected initially, the study approach pivoted
to focus on practical examples of DF interventions obeying partially or totally to the OECD DAC principles in order to
identify some levers that could make BF a serious option for DF in Tunisia. This approach culminated with a focus
group that was organized with the support of the Tunisian Ministry of Finance and the KfW to reposition the BF as a
strategic approach of the CwA agenda deployment and to exchange on good practices with a large public of
stakeholders including public and private sector.
2. Overview on economic conditions in Tunisia
According to the World Bank, Tunisia's growth rate has not taken off since the sudden drop of 2011 and remains on
average below 2%, with a peak observed between 2012 and 2014 that compensate the negative growth rate of 2011
(see exhibit 1). The economic performance recorded over the last decade is insufficient to absorb unemployment
rate and adequately fill the State treasury needs. A slight improvement has been observed in 2018, mainly driven by
the relatively good growth of the services sector in parallel with an increase in olive oil production and a good cereal
harvest. This partly compensated for a decline in the value added of non-manufacturing industries, particularly in the
hydrocarbons and mining sectors, and the deterioration of tourism activity due to security instability and a series of
terrorist attacks that hit the country in 2015. Nonetheless, Tourism recovered significantly in 2018 with international
arrivals rising to 8.3 million resulting in an 18% year-on-year (YoY) increase according to the Ministry of Tourism but
fell again in 2020 in the aftermath of the COVID19 crisis.
Source: Database of
World Development
Indicators (2019)
Exhibit 1: Tunisia - inflation rate and GDP Exhibit 2:
Tunisia - Unemployment rate
Inflation soared to 7.3% in 2018 and 6.7 in 2019 (see Exhibit 1) because of both rise in consumer prices and
depreciation of the Tunisian dinar. The CBT adopted an anti-inflation policy to cope with this situation and decided to
elevate the interest rate to reach 7% for monetary market rate in 2019, contributing to the slowdown of investment
flows.
Otherwise, unemployment remains a main issue for post-revolutionary Tunisia. After a peak of 18.3 % in 2011, the
unemployment rate decreased slightly and stabilized around 15.5% from 2016 onwards (see exhibit 2). Despite the
Exhibit SEQ Exhibit * ARABIC 1: Tunisia economic growth and
Exhibit SEQ Exhibit * ARABIC 2: Tunisia unemployment rate

7. government's attempts to alleviate the unemployed, especially those with higher education qualifications, by
granting them financial aid and committing funds to encourage them to set up their own businesses along with the
implementation of a vocational training reform project in Tunisia, the problem of unemployment is far from being
solved. The successive governments (more than 10 cabinets in 10 years) struggled to find a solution ensuring jobs for
youth in all parts of the country.
The latest note of the Central Bank of Tunisia (CBT) dated August 2020, on economic and monetary developments
and the mid-term prospects, sums up the economic situation as following:
- a sharp drop of economic activity in Q2-2020, with an expected annual growth rate between -12% and -10%.
- an inflation rate of 5.7% (year-on-year in July 2020) against 6.5% one year earlier.
- a reduction of the current deficit to TND 4.525 Billion (or 4% of GDP), at the end of June 2020, after TND 6.361
Billion (or 5.6% of GDP) a year earlier.
- a reduction of the trade balance (FOB-FOB) to TND -5.237 Billion against TND -7.983 Billion at the end of June 2019.
- a foreign currency reserves amounted, as of July 23, 2020, to USD 7.474 Billion (or 135 days of importation), up
7.5% compared to the end of 2019 (USD 6.955 Billion or 111 days of importation).
- a slowdown in the growth rate of monetary deposits.
- a widening of the budget deficit to TND -3.847 Billion, at the end of June 2020, against TND -2.464 Billion a year
earlier, under the effect of the significant drop in State revenue combined with an increase in operating expenses.
According to the same note, State spending, excluding debt service, stood at TND 16.1 billion at the end of June 2020
(down slightly by -1.2% from compared to the achievements of a year ago). This decrease hides, however, a mixed
evolution of the components. On the one hand, operating expenses recorded a marked increase (+ 11.5%, yoy)
mainly due to the increase in the wage bill (+ 14%, yoy) and interventions and transfers (+5.4%, yoy). On the other
hand, a sharp contraction in capital expenditure (-20.3%, yoy) is observed. The significant drop in capital spending is
likely to hamper the recovery during the post-Covid phase, which is likely to impact the pace of resumption of
activity and employment.
• A weakened financial System
With 21 banks and net total assets of approximately 100% percent of GDP, the Tunisian banking system is small and
fragmented. The revolution which overthrew in 2011 the dictatorship has put the banking sector under pressure
either in terms of liquidity or credit risks. The deteriorating financial and economic environment is likely to be
aggravated with the COVID19 pandemic, with an expected negative impact on MSMEs finance which represent the
large majority of the economy in Tunisia. The banking sector is entering a stage of high vulnerabilities as liquidities
are decreasing, pushing the Central Bank of Tunisia (CBT) to inject enough liquidity in the system and to take
emergency measures to support the economy during the lockdown.
The difficulties faced by MSMEs are already being felt by local finance institutions whose unpaid loan ratios jumped.
Some emergency measures have been adopted to relieve MSMEs which took out bank loans before the crisis.
Suddenly, those who do not have access to bank financing are twice wronged. They do not have neither access to
loans nor to government support. In the coming months, banks loans portfolios are expected to deteriorate even
more due notably to the accumulation of crisis and the political instability.
From the Tunisian MSMEs perspective, access to capital remains very challenging due to a poor offering and an
unstructured market. Banks complain about the lack of information on MSMEs as well as the difficulty to obtain
credit risk rating and reliable financial statements. On the supply side, banks are increasingly facing funding
constraints and they also lack innovative products and financial technologies that would reduce the cost of lending
on this segment. Banks rely mostly on the ability of MSMEs to provide tangible assets as collateral and on the

8. borrowers’ reputation. This strategy excludes many potentially credit worthy SMEs with a good payment record and
sustainable cash flows, which are unable to provide adequate collateral or cannot present a reliable financial track
record.
• Tunisia’s reforms pillars
Tunisia was already struggling with reforms long before the revolution but was content with an average growth of
between 4% and 5% for many years under dictatorship. A performance that ranked the country among the “best in
class performers” in the region. The revolution came as a resounding reminder that achieving growth does not
necessarily mean development, and that regional disparities cannot be reduced without good governance and public
policies assumed by all and designed to achieve sustainable and inclusive development.
After 2011, Tunisia saw an influx of donors and sponsors interested in supporting the economic transition and
consolidating the achievements of Democracy. As a result, the reforms have become, more than ever, a recurring
subject, but often cacophonous given the interference of several partners. The political instability, with its corollary
of incessant changes of governments made the decision-making process uncertain and finally, even if several reforms
have been initiated, few have been totally implemented or have brought their benefits since the Revolution.
To cope with recurrent financial gaps, a reforms agenda is engaged by the successive GoT despite the political
instability and the complexity of the decision making process in Tunisia. Dialogue between political parties, civil
society and international institutions remains a major asset for the success of the economic transition. According to
IMF country review4
, the country succeeded to achieve some significant progress, summarized in table 1.
4
IMF Country Report No. 19/223. July 2019

9. Table 1: The major reforms in Tunisia undertaken under the IMF auspices
Nevertheless, many impediments are still facing the setting up of the required transformational reforms, involving a
deep frustration among the local and international stakeholders, and a penalizing delay notably in implementing the
following public policies :
- Simplification of procedures to improve business environment
- Reshaping State owned enterprises governance to cope with restructuring plan
- Digital transformation to enhance public services
- Enabling the capital investment code to attract foreign investors to boost the capital market
- Establishing infrastructure projects under the new law on PPP
This was behind the idea to complete the regulatory arsenal with a “transversal Law”5
that give more freedom to
foreign investors and sanitize the business climate with very audacious measures, namely:
● Abolition of the authorization of the Superior Commission of Investment (49 activities) for foreigners,
● Reduction in the number of authorizations and revision of the specifications,
● Definition of time limits for each authorization and requirement to provide the reasons for refusal, failing a
response within the deadline, the authorization is deemed to have been granted,
● Total freedom of foreign participation in the capital for offshore companies,
● Freedom of access to land ownership for the realization of investment,
● Freedom to transfer funds (profits, dividends and assets) abroad.
5
http://www.investintunisia.tn/En/attractive-regulation_11_131

10. a) International support to Arab Spring countries
Met in Davos in February 2011, then in Deauville in May of the same year, the G8 countries and donors unanimously
have welcomed the end of the dictatorship in the MENA region and have committed themselves to support the Arab
Spring countries, to their head Tunisia, under the title of “Deauville Partnership”.
This was the context that led Tunisian interim Government at that moment to draft the Jasmine plan for economic
recovery, requesting for a financial support envelope of US $ 125 billion. The latter was discussed and approved in
general terms after a follow-up meeting in September 2011 in Marseille.
Since that date, only a few funds have been released under the Deauville Partnership, such as the MENA transition
Fund with US$ 200 million, or the 1 billion Euros that have been allocated to the EBRD to support the private sector.
The Jasmine plan for Tunisia has not been concretized and this is for several reasons. First, the lack of a logical
framework for the design and implementation of strategic projects in coordination of local actors. Secondly, the
drafting of this plan took place during the transitional period, when the government in place was not elected, and
therefore it lacked political legitimacy to contract loans. Therefore, the Jasmine Plan remained an indicative
document that has never been debated, so attracted many suspicions from political parties that led it to be stillborn.
b) The heavy cost of the transition to Democracy
A decade after the Jasmine Revolution incepted in December 2010, which raised many hopes in Tunisia and the
world, the fruits of the transition to democracy are still not ready to be picked. Of course, the 'revolutionary'
constitution issued in 2014 led to major advances in the social field and lifted restrictions on civil society activities,
which strengthened individual liberty and the exercise of citizenship. However, many economic policy issues,
including those related to governance, restructuring State owned companies, regional development…, have not been
achieved yet, leaving the post-revolutionary economy in limbo and uncertainty.
Source: Public Finance Indicator, Ministry of Finance, Tunisia.
With the COVID19 crisis and the recent change at the head of the GoT, the Tunisian economy finds itself in an even
more uncomfortable position, presenting higher vulnerabilities. The devastating effects, in the short and mid-term,
of the vertiginous drop in growth, combined with the investments’ freeze, the widening of the trade deficit and the
deterioration of the Tunisian Dinar, are endangering the stability of the country, along with the increased terrorist
threats.
Exhibit SEQ Exhibit * ARABIC 3: Budget deficit in % of GDP

11. Source: Public Finance Indicator - Ministry of Finance, Tunisia
According to a national economic observatory ITCEQ, State expenditures increased the line of wages and salaries up
to 13.6% between 2018 and 2019, as well as the line of debt services from 7.9 billion TND in 2018 to 9.5 billion TND
in 2019.
Source: ITCEQ 2020
Tunisian Public debt has been worsening since 2010, rising from 40% to more than 72% of GDP in 2019. this debt is
mainly represented by external debts, which represent 75% of the total debt, whereas in 2010 it represented only
60% of the debt. This is a somewhat risky evolution of the structure especially in the current context of Tunisia
characterized by the volatility of the dinar which increases the cost of the debt and weighs heavily on the state
budget. In addition, Tunisia is in the spiral of getting into debt to get out of old debts as 93% of new external debt
was contracted in 2019 to pay off old ones. And this without counting again the effect of COVID 19 on public finances.
Exhibit SEQ Exhibit * ARABIC 4 Tunisia – Public Debt in % of GDP
Exhibit SEQ Exhibit * ARABIC 5: percentage of new external debt contracted to pay off old debt

12. Exhibit 6: Tunisia - External Public Debt Service
Source: Public Finance Indicator - Ministry of Finance, Republic of Tunisia
It’s in that context, that the Tunisian Ministry of Development and International Cooperation (MDIC) has planned to
nearly double the investment amount for the period 2021-2025 with TND 223 billion in comparison with the period
2016-2020 -see table 2. Only 35% of the investments are directed to interior regions. The objective being to reach an
average investment rate of 27.4 % of GDP in 2025 with a 35% of public investment and 65% of private investment,
including 51 billion TND in FDI (around 15% of the Tunisian GDP).
Table 2 : Tunisia – National Investment Plan (2020)
in million TND 2016 2020 2025 2016-2020 2021-2025 2016-2025
Total investment 17791 30645 55640 120295 223052 343347
public investment 6227 10725 19474 40948 76914 117862
private investment 11564 19920 37835 76050 149435 225485
Total investment in regions 6005 10343 20309 39487 80210 119697
public investment in regions 3114 5363 8958 20474 35380 55854
private investment in regions 2891 4980 11351 19013 44830 63843
Source: Institut Tunisien des Etudes Stratégiques6
c) Impact of the COVID19
Tunisia reacted very quickly to face the first wave of the COVID19. A lockdown and a curfew were decreed in March
2020 by the GoT, along with a set of financial and fiscal measures to deal with the repercussions of the pandemic and
6
« La Tunisie en 2025. Les fondements de la croissance et du développement économique.» ITES 2020

13. the resulting drastic drop in economic activity. An emergency plan with an envelope of TND 2.500 Billion has been
announced, including TND 500 million in guarantee funds. This budget is very consequent given the state of the
country's treasury. This emergency plan included additional measures to compensate for the temporary stoppage of
activity, like imposing restrictions on commercial banks to freeze interest rate and to postpone loans payment
deadlines.
Except the direct financial assistance part paid in wages compensation for the partial unemployment, and which
represents TND 450 million, the rest of the budget could have been the subject of an innovative financial package.
Before the pandemic, the GoT was counting to reach a collection of tax revenues of TND 32 Billion and loan
resources of TND 11.4 Billion in 2020, according to the national economic observatory ITCEQ. This performance was
aiming to reduce the public deficit from 6% to 3% of GDP in 2020 (see exhibit 3) and to limit the public debt to 74%
of GDP in 2020 (see exhibit 4).
However, the slowdown in the national economy due to the pandemic makes this assumption out of reach. Thus, the
budget estimations will have to be completely revised. Moreover, the Government of Tunisia (GoT) must try to get
out of the trap of negative growth to replace its resort to debt with more sustained domestic resources in order to
achieve the objective of reducing the State's indebtedness and avoid worsening the deficit.
In order to reduce the effects of the evaporation of aid in the form of subsidies and to pave the way for new
practices and development approaches, one could have imagined an innovative use of Blended Finance (BF)
executed under the form of funds or concessional loans focusing on a recovery plan.
With the prospective to obtain a multiplier effect on the economy, blending institutional funds with private capital
could have a highly visible demonstration effect and to induce quick and positive changes in the market.
There is a clear opportunity for GoT to consider BF as a potential recovery instrument, to address emergencies such
as the COVID19. In that case, the decision-making process should be revisited to be adapted for quick launch of a
sustainable project with financial offering in the market. All countries would benefit from considering recourse to BF
during the probable second wave of the pandemic. This could be the subject of a further study to show the interest
anchoring BF to the global sanitary contingencies.
3. Development Finance (DF) in Tunisia
Development finance and international aid in Tunisia has experienced several levels since independence. It
culminated after the Revolution where it reached, according to the World Bank, the amount of US$ 4.866 Billion over
the decade 2010-2020 as detailed in the exhibit 7.
Exhibit 7: Tunisia – Net Official Development Assistance and Official Aid Received in current US$

14. The World Bank defines Net Official Development Assistance (ODA) as “the disbursements of loans made on
concessional terms (net of repayments of principal) and grants by official agencies of the members of the
Development Assistance Committee (DAC), by multilateral institutions, and by non-DAC countries to promote
economic development and welfare in countries and territories in the DAC list of ODA recipients. It includes loans
with a grant element of at least 25 percent (calculated at a rate of discount of 10 percent). Net official aid refers to
aid flows (net of repayments) from official donors to countries and territories in part II of the DAC list of recipients.
Net official development assistance and official aid received (current US$) in Tunisia was reported at US$ 805 million
in 2018”7
a) MDBs/DFIS engagement in Tunisia
Due to the political discontinuity that characterized the transition to Democracy in Tunisia, the country is having
difficulty emerging as a good example in the conduct of reforms and modernization of the administration.
Many partners believe that the country could do much better in terms of investments and improvement of public
services capable of ensuring an economic recovery offering more job opportunities for young people and social
peace and prosperity to establish democracy.
Nevertheless, development expenditures on earmarked external resources are jagged and oscillate between TND
1,261 million in 2010 to TND 2,374 million in 2019 (provisional) with a peak at TND 2,816 million in 2018 (see table 3).
Exhibit 8: Tunisia - Net Bilateral Aid Flows From DAC Donors, Germany
As the country is diving in debt, Tunisia is more and more depending on external loans, development finance and
official aids to make ends meet. In this context, DF is called to play a significant role to support the economic
transition in Tunisia.
The last line of table 3 shows that the portion of Germany in the development expenditure on earmarked external
resources tends to increase and reached a peak of 33.58% in 2017, the year it took the presidency of the G20. This is
confirmed by the wide spectrum of DF interventions undertaken by the German cooperation within the framework
of Compact with Africa (see annex 1) which will be considered in the following chapters as a source for the case
study on Blended Finance.
7
www.tradingeconomics.com

15. Table 3: Tunisia - Development expenditure on earmarked external resources
2010 2011 2012 2013 2014 2015 2016 2017 2018
Prov
Fin.
Law
2019 2020
State Budget
Billion
TND 18.335 19.192 22.935 26.792 28.125 28.900 29.250 32.705 35.851 40.662 47.227
Budget Balance
Billion
TND -0.650 -2.127 -3.853 -5.207 -4.074 -4.069 -5.510 -5.987 -5.055 -4.040 -3.782
% GDP -1.00% -3.30% -5.50% -6.90% -5.00% -4.80% -6.10% -6.10% -4.80% -3.50% -3.00%
Fiscal pressure % GDP 20.10% 21.10% 21.10% 21.70% 23.10% 21.90% 20.80% 21.90% 23.20% 25.30% 25.40%
Public Debt
Billion
TND 25.640 28.780 31.418 34.987 41.054 46.922 55.921 67.830 82.295 82.350 94.068
% GDP 40.70% 44.60% 44.70% 46.60% 50.80% 55.40% 62.40% 70.20% 77.90% 72.20% 74.00%
Development expenditure on
earmarked external resources
Billion
TND 1.261 1.280 0.981 1.128 1.146 0.784 2.808 1.093 2.816 2.374
6.88% 6.67% 4.28% 4.21% 4.07% 2.71% 9.60% 3.34% 7.85% 5.84%
Germany Development Finance
portion
Billion
USD* 24 31 42 68 53 88 125 157 217
Billion
TND 31 44 64 105 87 165 255 367 534
(*) current 2.46% 3.44% 6.52% 9.31% 7.59% 21.05% 9.08% 33.58% 18.96%
Source: Public Finance Indicator - Ministry of Finance, Tunisia
As shown in table 4, many MDBs/DFIs are active in Tunisia and their interventions are depending on their sectoral
focus and mandates.
Table 4: MDBs/DFIs engagements per sector in Tunisia
Source: websites of the MDBs/DFIs

16. b) Compact with Africa agenda
“The G20 Compact with Africa (CwA) was initiated under the German G20 Presidency to promote private investment
in Africa, including in infrastructure. The CwA’s primary objective is to increase the attractiveness of private
investment through substantial improvements of the macro, business and financing frameworks. It brings together
reform-minded African countries, international organizations and bilateral partners from G20 and beyond to
coordinate country-specific reform agendas, support respective policy measures and advertise investment
opportunities to private investors.”
Since its launch in 2017, the CwA has benefited many African countries, to become the spearhead of international
cooperation and development finance. So far, twelve African countries have joined the initiative: Benin, Burkina Faso,
Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia.”
The CwA agenda brought consistency to the International cooperation, at least in the approach adopted by donors.
The Tunisian administration, for its part, has brought together in a unified matrix the list of sustainable development
investment needs (see annex 1) with a monitoring indicator.
As documented in a joint AfDB, IMF and WBG Report8
, at a global level, there are more than 100 pertinent initiatives.
The top contributors in number of projects are France, Germany, Spain, China et Belgium. And in investment amount,
Germany is taking the lead of the peloton with US$ 757 million.
The last Briefing Note of the G20 CwA on “Trends in FDI and Cross-Border Investments in Compact with Africa
Countries”9
highlighted that outbound CBI announcements originating from CwA countries totaled $18.4 billion
across 253 projects, in the period between January 2015 to June 2019. Main outbound CBI source countries were
Morocco ($10.8 billion, 87 projects), followed by Egypt ($6.3 billion; 79 projects), and Ethiopia ($459 million; five
projects). A substantial number of CwA outbound projects originating from Tunisia were also recorded (38 projects)
and Côte d’Ivoire (19 projects).
Outbound investment activity originating from CwA countries (by $ volume) was primarily concentrated in chemicals,
real estate, and energy. The largest number of outbound projects were concentrated in services sectors (financial,
software/IT, business services) accounting for over half of total projects recorded.
c) The landscape of MDBs/DFIs interventions in Tunisia
Development aid initiatives are coping with high complexity when it comes to generating positive spillovers at the
local level along a wider transformation effect at the macroeconomic level. As DF is closely tied to investment
strategy since the development aid project inception to the implementation phase, the success of the financial aid
will rely on the success of the related investment project. What is called a development aid project here could be a
pure support in capital or a mix of financial and non-financial services.
The approaches of anchoring local dimension in DF instrument is well marked as reported in a knowledge brief for
G20 CwA10
. Indeed, the question is what a good practice in an DF initiative and to what extent it could serve as a
benchmark for other cases. How to make the search for good practices in a field as vast as that of DF less subjective?
In the specific case of BF, what is determinant in development aid projects is the value created locally in correlation
with SDGs and at the dynamic driven in the capital market without creating any competition distortion.
8
G20 Finance Ministers and Central Bank Governors Meeting. March 17-18, 2017
9
G20 Compact with Africa Annual Meetings 2019
10
“Strengthening the local dimension of Blended Finance” A brief highlight of a peer learning event. ACET 2019.

17. Table 5: The landscape of MDBs/DFIs interventions in Tunisia
Source: EBRD Tunisia country strategy (2018)
As a BF actor by mandate, the case of the European Bank for Reconstruction and Development (EBRD) is very telling.
In its strategy in Tunisia, EBRD is positioning the interventions of the different MDBs/DFIs in the country and
highlighting their engagement to impact the local policy and to target the local private sector (see table 5). This
mapping of DF initiatives aims to help EBRD to position its own interventions and to select the right partners to
leverage BF capability.
From here came the idea to focus on practice patterns that are materializing the DF instrument design and
implementation to reveal the propensity to integrate a BF approach.
d) Blended Finance (BF) Value Chain and Practices Pattern
Knowing that MDBs/DFIs’ investments are tied by a global logic frame and obey a strict governance mode; the
question is how to leverage local dimensions to catalyze reforms in beneficiary countries and stepping up to the
Blended Finance? What are the determinants that will make the investment project more successful and impactful?
Are there good practices that enable the integration of local contexts and how to make sure they do not jeopardize
the vocation of Development Finance?

18. The different committees gathering MDBs and DFIs under the auspices of the OECD to produce knowledge on DF
proves that they are looking to develop a referential for their activities and to share knowledge on how to improve
the impact investing through a better integration of the local dimension in their BF interventions.
The criteria translating the OECD DAC principles into local dimension determinants are at the same time the
statement of the risk points to be considered when implementing the BF instrument, namely:
- the consistency of the development aid project and its local SDGs scope
- the mobilization of partners for loans syndication
- the additionality and drivers to improve the investment policy and business climate
- the demonstration effect and induced investments through the local capital market
- the transparency and accountability towards local actors
But this is not enough to build up a sound investment tied by BF principles. Hence the recourse to the concept of
value chain (see table 6), which allows to have a comprehensive approach with all the activities to perform from the
design to the implementation of the BF investment project.
Table 6: Development Finance Value Chain
e) Development Finance taxonomy
Some early works defining DF categories have been initiated to introduce a taxonomy for BF11
. One proposed
approach sits on the types of instruments provided by the MDBs/DFS. The first difficulty with this taxonomy
approach is that it does not limit the number of categories and doesn’t reveal a homogeneous set of practices. DF
instruments are often brought together in the same package (an equity fund with a grant or technical assistance for
instance), and this makes this taxonomy confusing and irrelevant for good practices analysis.
What is proposed in this report is to consider a systemic view of DF interventions via generic practices patterns
determining the DF classification. Under this perspective, DF is presented as a series of activities materializing two
main dimensions, i.e the business model and the governance mode.
11
“Blended finance for agriculture Smallholder and Agri-SME Finance and Investment Network”. OECD 2019

19. - The Business model is the way the MDB/DFI intervenes to generate revenues. The generic options for the business
model are loans or equity.
- The Governance mode is defined by the MDB/DFI intention to control the deployment strategy directly or indirectly,
independently from the advisory firm which serves as intermediate to deliver the related financial services to
beneficiaries.
Exhibit 9: Development Finance Taxonomy
Thereby, DF taxonomy breaks the DF interventions into 4 quadrants or categories (see exhibit 3). This provides a
frame for deepening the analysis of each quadrant under the perspective of local dimension practice patterns.
Quadrant 1 includes concessional debt financing instruments or budget support funds, which can be aligned with the
SDGs and produce additionality (financial or non-financial).
Quadrant 2 which concerns the indirect financing method but still in debt, as is the case for the reconversion of
bilateral debt or even concessional lines of credit.
Quadrant 3 concerns the mode of participation by subscription in institutional funds or local VICs. This produces an
asset class that could be transferable once the investment will reach a maturity stage.
Quadrant 4 concerns the mode of direct equity financing generally via funds emanating from the bank and which are
operated according to its strategy, via a fund manager. Operations are close to the market in that category.
4. German cooperation with Tunisia
The German Federal Ministry for Economic Cooperation and Development (BMZ) is in charge of international
cooperation. Its strategy is executed locally by the KfW in each beneficiary country. KfW has large development
projects expertise and credentials in investment policy, that support the German Federal Government in
implementing its cooperation strategy. It can also rely on its subsidiary the Deutsche Investitions- und
Entwicklungsgesellschaft (DEG) which is a Development Finance Institution who offers financing, advice and support
to private sector enterprises operating in developing and emerging-market countries.

20. In addition to that, the GIZ, which has a very active office in Tunisia, is a federal enterprise that provides services and
technical assistance in the field of international cooperation. It works with businesses, civil society actors and
research institutions, fostering successful interaction between development policy and other areas of activity.
The cooperation strategy with Tunisia is correlated with the Economic Recovery Plan, which covers 2 engagement
envelopes of € 300 Million each initiated in 2017. One envelope concerns the Banking and Finance sector. It is
directly monitored by KfW. The second envelope focuses on public services and administration, which is monitored
by a pool of DFIs, including KfW, Japanese International Cooperation Agency (JICA), Agence Française de
Développement (AFD) and the World Bank.
Development investments are supposed to emanate from a formal request for DF expressed in a CwA Matrix
readapted into an official engagement matrix edited by the Tunisian Government (see Annex 1). It seems to not
being the only way to generate initiatives, as some global ones, such as Green for Growth Fund12
, that will be
analyzed later, are crossing the borders to duplicate impact investing without having followed the same process. This
means that some BF projects are generated from an external or standardized approach, duplicating some other
experiences with an adaptation to local context and contingencies.
a) KfW finance instruments
This study focused only on Germany cooperation through KfW, which is managing a large investment portfolio in
Tunisia (see investment portfolio in annex 2). KfW engaged € 315 million in Tunisia in 2020. It mentions in its website
that it has different sources of funding, receiving the main portion of its funds from the federal budget.
KfW endeavors to augment these funds by raising additional money on the capital market. As shown in exhibit 10,
KfW is using around 21% of its own resources to finance projects in Tunisia. It is not referring explicitly to the use of
BF but it is referring to the principle of responsible finance, which means taking into consideration the economic
situation of the partner country concerned, its level of indebtedness, its development status and the conditions in
the sector being promoted when setting the lending terms. The main DF instruments are:
● budget funds only (delivered as grants or low-interest loans)
● loans that comprise a mix of budget funds and KfW funds (development loans)
● loans extended at the going market rate, composed solely of KfW funds (promotional loans).
Mandates are a form of cooperation in which KfW delivers financial contributions on behalf of other bi- or
multilateral donors, on its own responsibility. Under arrangements of this kind KfW has been managing and
supporting development projects for many years on behalf of the European Commission, the Austrian Government
and the Agence Française de Développement (AFD). Funds of other donors are often combined with German
development cooperation funds, so that larger projects then become feasible.
Funds Amount in EUR As %
KfW funds 67,500,000 21.40
Federal budget funds 219,600,000 69.61
Delegated funds 28,360,486 8.99
Exhibit 10: Tunisia - KfW funds sourcing breakdown (2020)
12
https://www.ggf.lu/

21. Source: https://www.kfw-entwicklungsbank.de/International-financing/
With a total engagement of € 315 million in 2020, the financial instruments and their weight in the cooperation with
Tunisia are shown in the exhibit 11. It is noticeable that except the non-repayable financial contributions, all the
remaining engagement could produce BF assets.
Financial instruments 2020
Non-repayable financial contributions 138,600,000
Standard loans 81,000,000
Development loans 27,500,000
of which budget funds 0
of which KfW funds 27,500,000
Promotional loans 40,000,000
Delegated funds 28,360,486
Total 315,460,486
Exhibit 11: Tunisia – Engagement by financial instruments (2020)
Source: https://www.kfw-entwicklungsbank.de/International-financing/
Exhibit 12: Tunisia – Cumulated engaged funds for Development Finance
Source: https://www.kfw-entwicklungsbank.de/International-financing/
From the resource’s perspective, the total funding for Tunisia is increasing except the KfW own funds as shown in
exhibit 12.

22. From a funds allocation perspective, based on the Taxonomy defined earlier, and after having assigned the
investment deals communicated in its portfolio in Tunisia (annex 2), the KfW shows a net penchant for direct loans
that are figured out in the quadrant 1. Followed by the quadrant 2 which weights € 231 million in indirect loans and
debt reconversion. The remaining quadrants 3 and 4 are close in volumes, knowing that the quadrant 4 is
representing inbound financial flows coming from global equity funds (e.g Green for Growth Fund).
Exhibit 13: KfW Tunisia Portfolio including in preparation investments (Source: KfW - August 2020)
a) Linking DF instruments to BF approach
A DF instrument could adopt a blending finance approach when the financial service is completed by a change
project anchoring to the local dimension. This is the propensity to comply with the OECD principles on Blending
Finance, namely:
1. Anchor BF use to a development rationale
2. Design BF to increase the mobilization of commercial finance
3. Tailor BF to local context
4. Focus on effective partnering for BF
5. Monitor BF for transparency and results
The concept of local dimension in DF has been the subject of some previous research studies that demonstrated that
it is the main feature of blended finance13
. Now, local dimension determinants are not systematically expressed in
the DF rationale. Nevertheless, they can be observed during the implementation phase of a DF instrument through
operational practices.
Based on different observations and exchanges with DFIs in Tunisia, the 5 principles of the OECD have been
translated into a set of 12 generic practices (see table 6) underlying the Local dimension. The question was to which
extent these generic practices are observable or duplicable in each category defined by the DF taxonomy. Due to a
time and scope of work limitation, exploring this question will be limited to a few examples picked out from the
different quadrants, in an attempt to illustrate the local dimension as an important enabler of BF.
13
Strengthening the Local Dimension of Blended Finance. ACET knowledge brief for G20 CwA peer learning event. Sept. 2019

23. Table 7: Practice Patterns for blending finance
Generic
Practice
Anchoring to local dimension practices
GP 1 Stakeholders consultation and alignment with local development strategy
GP 2 Providing Technical Assistance to address local gaps
GP 3 Showing a demonstration effect (first loss capital, first of its kind investment,…)
GP 4 Syndicating with MDBs/DFIs or local SFIs to mitigate risk
GP 5 Setting up solutions to cover local currency fluctuation risk
GP 6 Driving additionality in the local capital market
GP 7 Scaling up to increase the investment impact
GP 8 Assisting reforms implementation to ensure success and sustainability
GP 9 Synergizing with local ecosystem
GP 10 Transferring knowledge and cross borders impact
GP 11 Targeting and communicating on SDGs
GP 12 Putting the instrument under local financial market authority supervision for transparency and accountability
Another use of this referential of generic practices, is to integrate the local dimension as a concrete list of activities
to be included in the DF instrument modus operandi and governance. It also could serve as a frame for rating the
local dimension level for each DF instrument. This will help measure the BF integration level in a DF initiative.
DF operates under different jurisdictions and interact with different authorities in Tunisia, such as:
- Venture Capital and Private Equity Code supervised by the Ministry of Finance
- Currency exchange code supervised by Central Bank of Tunisia
- Investment Law supervised by the Ministry of Development & International Cooperation
- PPP Law under the supervision of Government Presidency
BF is not promoted as an explicit business model by the KfW in Tunisia, probably because it deals mainly with the
public sector and it has few expectations from the local capital market. This doesn’t mean that there are no vehicles
obeying the OECD principles on BF in their investment portfolio.
For the case study, KfW was able to provide several examples illustrating the whole quadrants of the DF taxonomy,
while considering their alignment with the OECD principles (see table 7) in relation with local dimension. Five
initiatives were selected for deeper analysis (see table 8).

24. Table 8: KfW Tunisia examples of intervention
b) Screening selected examples through the BF practice patterns
It may be tempting to think of BF as a specific asset class when concluding investment deals according to DF
taxonomy. Referring to BF value chain and its practice patterns will show through the next examples that any DF
instrument could cover some of the generic practices, making ultimately BF as a practical approach rather than an
asset class.
Analyzing the 5 initiatives selected from the different quadrants of the DF taxonomy at different stages (running or in
preparation) helped to identify where the generic practices are performed and revealed for each instrument how it is
dealing with risks and constraints of the local context (see table 8).
Exhibit 14: Selected KfW Interventions illustrating the BF Taxonomy
BF could be considered as a catalyst for the local capital market. Attracting DF capital and turning it to local currency
to irrigate some neglected economic compartments is in the scope of BF. In Tunisia, the fluctuation risk on currency
change is undertaken by a specific fund managed by a local reinsurance company Tunisie Ré.
On this basis, CwA agenda is providing a large set of cases that could illustrate the local dimension and help to
understand the good practices that are driving Blended Finance. Under this perspective, the analysis will focus on the
investment process and not on the financial transaction itself. It appears here the notion of transferability of risk,
which could complement the local dimension. A good development investment is not only an investment aligned
with the CwA and agreed between MDBs/DFIs and the beneficiary but also a risk sharing strategy.

25. In coordination with the KfW, the examples (exhibit 14) that have been shortlisted to illustrate their interventions in
Tunisia have been checked first for their compliance with the OECD DAC principles. Then, each instrument has been
screened through the practice patterns of the BF Value Chain as described earlier, to evaluate its local dimension
propensity and to detail the practices that are driving the BF approach (as shown in table 9).
Under this perspective, the analysis will focus on initiative implementation and not on the financial transaction itself.
It appears among this the notion of transferability of risk, which could complement the local dimension as key driver
for BF. A good development investment is not only an investment aligned with the SDGs and agreed between
MDBs/DFIs and the beneficiary but also a risk sharing strategy.
Table 9: mapping the generic practices application by the selected KfW instruments in Tunisia
Generic
Practice
Anchoring to local dimension practices Anava
TunInvest
Croissance
Sanad
Green For
Growth
Banque
des
Régions
GP 1
Stakeholders consultation to align with local development strategy X X X
GP 2
Providing Technical Assistance to address local gaps X X
GP 3
Looking for a demonstration effect (first loss capital, first of its kind
investment,…)
X X X
GP 4
Syndicating with MDBs/DFIs or local SFIs to mitigate risk X X
GP 5
Setting up innovative solutions to cover local currency fluctuation risk X X
GP 6
Driving additionality in the local capital market
X X X
GP 7
Scaling up to increase the investment impact X X X X
GP 8
Assisting reforms implementation to ensure success and sustainability
X X
GP 9
Synergizing with local ecosystem X X X X
GP 10
Transferring knowledge and cross borders impact X X X X
GP 11
Targeting and communicating on SDGs X X X X X
GP 12
Putting the instrument under a local authority supervision for transparency
and accountability
X X X
● Example 1/2 from the quadrant #3: Anava Fund
ANAVA fund (see table 10) is an institutional Fund of Funds (FoF) that has been designed after a long and fastidious
process of consultation that started in 2016 between the public and private sectors. The initiative is supported by a
formal public policy, namely Startup Act14
which has been released in 2018 and which gives to the entrepreneurial
ecosystem actors a friendly regulatory frame based on exceptional laws and specific financial and fiscal incentives to
bootstrap an innovative business in Tunisia. This confirms the strong ownership by local stakeholders and will
certainly contribute to improve the investment climate in Tunisia.
14
https://www.startupact.tn/

26. ANAVA Fund targets US$200 million with a US$75 million already secured for the first closing. The management of
the fund will be entrusted to SMART Capital; an Asset management company owned by the public operator Tunisie
Telecom. The transactions are expected to kickoff by the end of 2020.
Table 10: ANAVA Fund – good practices illustration
ANAV
A Fund
KfW
contribution
Envisaged equity participation of KfW on behalf of the German Government: € 20 million over the period
2020-2040, in addition to € 15 million on behalf of EU (delegated management).
Ownership Public Tunisian Stakeholders including the Ministry of Communication, Technologies and Digital Economy
(MTCEN) and Caisse de Dépôts et des Consignations (CDC) in its role of Public Anchor Investor.
Bridging the
gaps
Technical Assistance enveloppe had been used to prepare the project with an international partner BPI
France. Smart Capital, the FoF, the VC Market as well as the startup ecosystem will benefit from various
accompanying measures and technical assistance programs financed by amongst others: KfW, EU,
Worldbank, GIZ
Reform
conditions
Setting up a Fund of Fund has accelerated the process of reforms, in the wake of the Startup Act. Many
projects of Laws related to investment and venture capital are under discussion at the government level
and should be submitted to the vote of the People Representative Assembly shortly.
Good practices illustration
Exchanges revealed the compliance of ANAVA Fund with 11 generic practices over the 12 listed in the BF practice
pattern, and contextualized as following:
GP 1 A large stakeholders consultation process has started since 2017 in the wake of the Startup Act drafting with
a high involvement of the private sector. The need of a fund of funds and its sizing was an outcome of this process.
GP 2 The FoF has been structured through a Task Force committed by the AFD via BPI France in regular exchange
with potential lenders. The governance mode is aligned with the requirements of MDBs/DFIs and follows the
principle: “Public Shareholding – Private Management”. Therefore, the FoF will be managed by the fund
management company Smart Capital S.A., which has recently been established by Tech’invest, a company owned by
Tunisie Telecom, CDC and other public minority shareholders.
GP 3 As a first of its kind investment fund, the demonstration effect will open the eyes of local investors on the
opportunity to support innovative startups in Tunisia, and even to attract international ones to set up offices in the
country.
GP 4 To mitigate risk, the FoF opted for a syndication of local Sovereign Fund CDC (which leveraged a loan from
the World Bank), the EU and the KfW for the first closing round. The FoF will be denominated in EUR and will conduct
investments in VC Funds in EUR. The latters will be able to finance local startups both in Dinars or in foreign currency.
They will take the currency risk.
GP 6 The FoF objective is to attract private capital and to achieve a target funding matching of 1 to 1. This means
for each 1 US$ invested by ANAVA Fund in a PE/VC Fund will be matched by 1 US$ funding from the private sector.
GP 7 Scaling up with local VC/PE who will join the national Initiative as General Partners in a fair competition
mindset.
GP 8 Materializing the innovation public policy by concrete initiatives and turning the Startup Act into investment
dynamic.

27. GP 9 Boosting the early stage asset class and connecting capabilities to make the entrepreneurial ecosystem more
efficient and innovation friendly.
GP 10 Bringing international expertise and know how from local and international partners and implementing a
State of the Art programs plugged with the most performing actors of the global innovation ecosystem
GP 11 SDGs #8 #9 & #17 are directly concerned by this initiative.
GP 12 The Asset Manager will be under the supervision of the local stock market authority the CMF and the
Ministry of Finance along with an enlarged Board of Directors including institutional and independent members.
Observation on Risk/Constraint status:
The generic practice GP5 dealing with foreign currency fluctuation risk is missing as ANAVA Fund will be exceptionally
authorized to invest in Euros or in US$. This is an open way for a wider reform of the capital investment law. Which
presages an outstanding impact on the transactional level and a change dynamic in the investment climate.
● Example 2/2 from the quadrant #3: TunInvest Croissance
TunInvest Croissance (table 11) is a Fund that provides equity to fast growing SMEs who traditionally cannot easily
find financial support from the banking sector in Tunisia (the missing meso finance). The financial resources of the
fund amount to almost TND 26 million. The fund is based in Tunis and is managed by the experienced fund managers
"TunInvest Gestion Financière". It belongs to AfricInvest, a professional and rapidly growing fund management
company. TunInvest Croissance aims to foster economic development and job creation in Tunisia.
Table 11: TunInvest Croissance Fund – good practices illustration
TIC
Fund
KfW
contribution
KfW’s share in the Fund is € 2.5 million over the € 10 million targeted ceiling.
Ownership Amen Bank - Tunisie Leasing along with Silatech (Qatari philanthropic fund) – Tunisian
American Enterprise Fund (TAEF a USAid fund dedicated to SMEs) and the KfW with a
delegated fund from the EU.
Bridging the
gaps
Equity-Fund (due to its nature) has to hold investments in local currency. The fund is
denominated in TND according to the current Tunisian capital investment law. The German
Federal Ministry for Economic Cooperation and Development (BMZ) is taking the currency
fluctuation risk of KfW’s investment in the fund.
Reform
conditions
No reform conditions
Good practices illustration
Exchanges and observations revealed the compliance of TIC Fund with 5 generic practices over the 12 listed in this
report, and contextualized as following:
GP 3 A showcase to stimulate reforms in regulatory and administrative framework to attract more commercial
capital in future investment funds (VC and Mezzanine funds)

28. GP 4 KfW, TAEF/USAID along with Silatech / Qatar invested in Euros and US$ along with a portion in TND from
local private financial actors. The regulation restricts investment funds based in Tunisia to lend in foreign currency.
GP 6 SMEs benefit not only from the actual capital injection, but also from the professional knowledge and the
wide professional network of the fund management. A financial additionality is projected once the current fund is
closed and its performance assessed. This first closing will determine the profitability of the business model
(currency risk excluded) and will attract more commercial funds in this class of asset.
GP 11 SDGs #8 & #9 are directly concerned by this initiative.
GP 12 TunInvest Croissance is under the supervision of the CMF, the local financial market authority. Public
information is available and disclosed according to the governance rules and capital market regulations.
Observation on Risk/Constraint status:
This intervention looks quite exceptional in the KfW portfolio as regard to the small invested amount with a direct
lending to the private sector. Many generic practices are missing but this seems to not reduce the anchoring to local
dimension. Although it can increase the risk of market distortion because of the proximity with the competition arena.
The listing of a public investment prospectus with regular exercises reports to the local financial market authority are
worth to be highlighted for this initiative.
● Example from the quadrant #1: SANAD for MSMEs
SANAD for MSMEs (table 12) is a KfW fund operating since 2011 in the MENA region to finance micro, small and
medium enterprises, and low-income households via qualified local lenders. SANAD for MSMEs thereby fosters
economic development and job creation, including youth employment, agriculture, affordable housing, and
innovations in finance and financial technologies. SANAD Fund operates through Debt Sub-Fund and Equity Sub-
Funds.
Table 12: SANAD for MSMEs Fund – good practices illustration
SANAD
for
MSMEs
KfW
contribution
350 M€ in total
Ownership SANAD for MSMEs is a KfW fund working with local private intermediates, such as:
Amen Bank - Arab Tunisian Lease - Attijari Leasing - Centre Financier des Entrepreneurs -
Compagnie International de Leasing S.A. – Tunisia Leasing & Factoring - Advans Tunisie -
Enda Tamweel
Bridging the
gaps
The fund is able to lend in local currency thanks to the direct garanty of the German Federal
Ministry for Economic Cooperation and Development.
reform
conditions
no reform conditions
Good practices illustration
Exchanges revealed a priory the compliance of SANAD Fund with 5 generic practices over the 12 listed in this report,
and contextualized as following:
GP 5 The Debt Sub-Fund can offer local currency loans and hedge these either with external hedging

29. counterparties or via an innovative internal mechanism created to enable local currency lending and
supported by the German Federal Ministry for Economic Cooperation and Development (BMZ).
GP 7 Scaling up is done through local microfinance lenders able to address the local demand. The financial support
is complemented by a close mentoring of the MSMEs to increase their chance to grow up.
GP 9 As an ever-green Fund, SANAD continues to expand its impact outreach building on a successful private
public partnership structure.
GP 10 Knowledge transfer stimulates quality deals flows in specific sectors and industries. The process is supervised
by the KfW along with the advisor manager.
GP 11 SDGs #1 #8 #9 #10 & #17 are directly concerned by this initiative.
Observation on Risk/Constraint status:
Only a few good practices are observed by SANAD Fund. As a cross border initiative SANAD didn’t go through a formal
consultation process with Tunisian stakeholders. SANAD started in Egypt and Morocco before being introduced in
Tunisia in 2013 in the favor of a reform regulating the activities of microfinance lenders. Local partners are supposed
to leverage SANAD’s investments with additional local capital or debt and to stimulate competition.
● Example from the quadrant #4: Green for Growth Fund (GGF)
The Green for Growth Fund (table 13) is a cross border impact investment fund that mitigates climate change and
promotes sustainable economic growth, primarily by investing in measures that reduce energy consumption,
resource use and CO2 emissions. This includes energy efficiency, renewable energy and resource efficiency projects.
The fund does so by channeling dedicated green financing to businesses and households through local financial
institutions as well as through direct financing.
Designed initially for Central Europe and Balkan countries, this equity fund spread over the MENA region and
covered Tunisia, in the frame of international cooperation on climate change. GGF has been active since 2010 and
expanded in Tunisia in 2016, when it disbursed the first loan. The Fund has now € 23.0 million sub-loan investments
in Tunisia.
Table 13: Green for Growth Fund – good practices illustration
Green4
Growth
Fund
KfW
contribution
Since inception in 2010, the Fund has EUR 23.0 million sub-loan investments in Tunisia
where operations started in 2016.
Ownership only local intermediates, i.e.
ATL; ARAB TUNISIAN LEASE
ATTIJARI LEASING
CIL; COMPAGNIE INTERNATIONAL DE LEASING S.A.
TLF; TUNISIE LEASING & FACTORING
Bridging the
gaps
The GGF is a cross border vehicle operating in 19 markets across Southeast Europe,
including Turkey, the European Eastern Neighborhood Region, and the Middle East and
North Africa.
reform
conditions
No reforms conditions

30. Good practices illustration
Exchanges revealed a priori the compliance of Green for Growth Fund with 7 generic practices over the 12 listed in
this report, and contextualized as following:
GP 1 The consultation process has been enabled by the GIZ who was already supporting some initiatives in the
Renewable Energy domain with the GoT
GP 3 In line with CwA, GGF aims to enable mobilization of private funding for impact-oriented
investments. Through its 11 years of operations, GGF was able to raise a considerable amount of private
funding representing 27% of the capital at Q2-2020.
GP 5 The GGF can offer local currency loans and hedge these either with external hedging counterparties or via an
innovative internal mechanism created to enable local currency lending and supported by BMZ and EC.
GP 7 In Tunisia the Fund has established relationships with 4 Partner Institutions, which are named above.
GP 9 The KfW is relying on the GIZ to synergize with Renewable Energy ecosystem actors.
GP 10 In addition, GGF is providing Technical Assistance and has granted support to 20 projects since inception,
accounting in a total share of 6% of all TA projects that GGF has provided.
GP 11 SDGs #7 #8 #9 #10 & #17 are directly concerned by this initiative.
Observation on Risk/Constraint status:
Only a few good practices are observed by GGF in Tunisia. As a cross border initiative spreading over geographically,
GGF has not imposed any reform condition before operating locally. It is complementing some other initiatives
already engaged in Tunisia by the GIZ with the GoT. This may explain why the funds invested in Tunisia remain small
despite it proved to be very effective in terms of boosting green entrepreneurship.
● Example from quadrant #2: Banque des Régions
‘Banque des Régions’ is a structuring project (table 14) in the financial system in Tunisia. It’s led by the Ministry of
Finance and aims to improve access to capital for SMEs especially during the early stage phase. The project aims to
rationalize public financing mechanisms with the absorption of the BFPME and SOTUGAR and the establishment of a
new governance model. The application of the on-lending model will help to finance the MSMEs via the banking
sector with a decentralized and improved support to entrepreneurs.
The Bank's implementation phase began following the recruitment of a consortium that won an international bid
funded by the KfW.
Table 14: Green for Growth Fund – good practices illustration
Banque
des
Régions
KfW
contribution
After the legal creation, the KfW is willing to put a first credit line of 100 M€ on this initiative.
Ownership Public Tunisian Stakeholders include the Ministry of Finance and the Central Bank. After the
creation, the on-lending model requires the participation of the banking sector

31. Bridging the
gaps
KfW provides Tunisia with technical assistance for the implementation of the Banque des
Régions. KfW is taking in charge the necessary technical assistance including the future
Banking platform that will operate the deals flows management.
reform
conditions
This project is in itself a reform that aims to improve access to capital for the MSMEs and to
rationalise public financing mechanisms. This enters in the frame of the CwA Matrix and the
KfW's Budgetary Support to local Financial Sector
Good practices illustration
Exchanges revealed the compliance of Banque des Régions with 9 generic practices over the 12 listed in this report,
and contextualized as following:
GP 1 Banque des Régions is a strategic project for Tunisia carried by the Ministry of Finance
GP 2 An international consortium is recruited following an international call for tenders including at least 12 types
of specialized expertise to ensure the successful implementation of the bank
GP 6 Since there will be a complementarity with the banking sector, the latter will take part of the risk to obtain
refinancing
GP 7 The bank's model is based on complementarity with the banking sector
GP 8 This project is in itself a reform that aims to improve access to financing and rationalise public financing
mechanisms. Reform of the CwA Matrix and of KfW's Budgetary Support in Financial Sector
GP 9 The project is based on synergy and complementarity between the public entity and the financial sector
GP 10 Knowledge transfer and bringing international expertise is ensured by the recruitment of international
consortia mixing international and local expertise
GP 11 SDGs #8 #9 #11 & #17 are directly concerned by this initiative.
GP 12 The BdR will be under the supervision of the Central Bank of Tunisia along with the Ministry of Finance with a
dedicated Board with a 3 third model governance (Third members are from the public sector, third from the private
sector and third are institutions representatives.)
Observation on Risk/Constraint status:
The engagement of KfW is very important and supports the Tunisian Ministry of Finance in designing the strategy, the
bank's governance model as well as the institutional and operational model. An international strategy firm was
recruited for this purpose. The project requires the absorption of two public structures (BFPME and SOTUGAR). It is a
form of PPP with a risk of weak ownership and change resistance from the banking sector not used to work in
complementarity.

32. 5. In conclusion: How to make BF as a good option for DF: Challenges & issues
DF as a spearhead of international cooperation is called upon to grow and to become more sophisticated with the
rise of the BF, thanks to an effective approach for anchoring the local dimension.
The multiplicity of International financial institutions and cooperation agencies operating with different mandates in
developing countries provides a wide range of experiences to learn from. Some DF interventions are integrating
explicitly or implicitly the BF in their rationale of achieving SDGs, and look after local finance traction, with the
aim to induce a holistic impact on investment policy and business climate.
Thus, the BF could be seen as a value chain approach with a value proposition that comprehends several
dimensions, i.e. the Sustainability (principle 1), the Additionality (principle 2), the Contextuality (principle 3), the
Risk Mitigation (principle 4) and the Transparency (principle 5). From there practice patterns have been
elaborated.
A selection of 5 DF interventions provided by the KfW to illustrate the 4 quadrants of the DF taxonomy, gives a better
understanding of the modus operandi of each related instrument. From there, introducing an approach of
integration of the local dimension can be done thanks to the BF value chain deployed through the 12 generic
practices stated earlier.
The examples treated in this report, despite they equally obey OECD DAC principles, show different BF practice
patterns adoption schema. Blending Finance is thus optimized by putting the practice patterns as a reference for
the design and implementation of a development aid project. The end goal for the donor is to conclude with a
factual and concrete evaluation and communication of the DF initiatives outcomes to stakeholders.
Comparing instruments through BF practice patterns could be a very instructive exercise. For instance, the fact that
the generic practice #5 related to foreign currency risk is absent or covered by the BMZ in the selected instruments
reveals a room of improvement to better anchor to local context. Exploring innovative solutions like issuing securities
in local currency to trigger commercial finance traction remains out of scope of the practice illustrated by the
different instruments that have been observed.
From the side of the Tunisian Ministry of Finance, even if there is a fund for currency swap to hedge risk on debts
that are directly contracted by the GoT, it looks very far to be extended to DF, as as most of the development aid
initiatives supported by the KfW are transferring the currency risk to the German counterpart, i.e. the Federal
Ministry of Cooperation BMZ.
Tunisia remains a good field for learning from BF practices as it counts among the countries that are attracting more
and more DF flows. Sharing knowledge and best practices is crucial to assess previous initiatives and facilitate the
dialogue on future development finance projects between MDBs/DFSI and local stakeholders, and ultimately
accelerate the decision-making process to bring additional opportunities in the country. This will lead to a deeper
understanding of the local environment and actors, and potential needs.
● Recommendations to consolidate BF as a privileged development aid practice
The Development Aid approach is changing. Beyond concessionality and direct support to infrastructure investment,
MDBs/DFIs and countries beneficiaries are more and more called to align their development strategies with local
beneficiaries ones, and to get involved in a local environment transformation role in addition to the transactional
role.

33. Associating BF practice patterns to OECD DAC principles is an ideal way for MDBs/DFIS to develop a more
favorable driver for attracting commercial capital and inducing additional impact on the local investment climate.
KfW has a long tradition of DF directed to the public sector. It seems that it’s now confronted to lend directly to the
private sector, as it did in Tunisia (see TunInvest Croissance example). Maybe this situation is temporary until its
sister bank the DEG will settle in Tunisia, at the meantime KfW is considering BF as a good option for DF projects
sustainability. This obviously requires an adapted organization apprehending new rules for Due Diligence and risk
management.
Some MDBs/DFIs are already there and they are making BF their preferred investment vehicle (e.g EBRD). The local
presence is then fundamental, and even more, it’s worth it to set up a country team of certified professionals able to
train a community of practice compounded by public and private executives.
The current sanitary crisis generated by the COVID19 opens the eyes on new development aid opportunities with
simultaneously high local and global impact. The associated projects could be designed, implemented and duplicated
in different regions of the world very quickly, if they are monitored properly by MDBs/DFIs. Most of the developing
countries are not prepared to face the damages induced by the crisis with a large similarity in the weak capacity for
the public sector to have the lead on strategic cross borders projects.
In that perspective, seizing development aid investment opportunities requires a faster consultation process and a
mastered projects implementation. The BF practice patterns could help to generate projects with a shorter cycle
time, to not say in emergency, but this requires to have some prerequisites, i.e:
- Implementing a platform for BF calls for projects with a dialogue channel between the different
stakeholders during the project lifetime (before, in-progress and after the implementation).
- Writing a body of knowledge for BF practice patterns.
- Defining a methodology for evaluating local dimension risk in DF intervention.
- Setting up a certification course for BF professionals.
- Scoring DF/BF instruments readiness for commercial finance

34. 6. Annexes
Annex 1: CwA Engagement Matrix

38. Annex 2: KfW portfolio in Tunisia

41. Bibliography
- La Tunisie en 2025. Les fondements de la croissance et du développement économique. ITES 2020
- G20 Development Finance Institution Action Plan. October 2019
- Blended finance. Case of Tunisia. Discussion paper n°259. Fostering the local dimension of Blended
Finance. ECDPM. September 2019.
- Tunisia-Governance-Financial-Sector-and-Local-Governments-Trust-Fund-Project 2019
- Tunisia country strategy 2018-2023. EBRD 2018
- Strengthening the local dimension of Blended Finance. A review of local approaches and instruments
employed by Development Finance Organizations. ACET knowledge Brief for G20 CwA Learning event.
Sept. 2019
- Fostering the local dimension of blended finance: from principles to practice. ECDPM discussion paper
Sept. 2019
- DFI Working Group on Blended Concessional Finance for Private Sector Projects. Joint Report, October
2018
- Blended Finance for sustainable development: moving the agenda forward. OECD DAC meeting. March
2017
- Feasibility study on Financial System development in Tunisia. WSU 2013