National Credit Guarantee Adviser for FirstConsult

Vacancy Announcement for First Consult

Short term Consultancy Services – National Credit Guarantee Adviser – International Hire

Location- Ethiopia

Deadline for submission : March 11, 2022

Apply via – following email address [email protected]

1. BACKGROUND AND CONTEXT

MSMEs and Financial Accessibility

Unemployment and underemployment continue to be serious social challenge in Ethiopia. This problem is even more aggravated with a an estimated 3 million youth joining the labour force each year. Therefore, in Ethiopia, the agenda of creating job opportunity for young people has been a focal point of political and economic agenda. The increasing population with large youth population provides opportunities and challenges to Ethiopia.

It has been also acknowledged that start-ups and small businesses have great potential to create job opportunities for these group and contribute for economic growth. In emerging economies, studies shows that start-ups and small business could contribute to 60% of total employment and 40% of gross domestic production. Increased access to finance allows small businesses to undertake productive investments and contribute to the development of the national economy and reduce of poverty.

However, despite the GOE’s special focus on MSME development, Ethiopia has one of the lowest in the entrepreneurial eco-system in Sub-Saharan Africa. According to 2012 data from the Global Entrepreneurship Monitor, only 12% of Ethiopia’s adult population were in the process of starting a new business or running their own businesses.

2. Rational of the Strategy Development

Ethiopia’s economy has been among the fastest growing in the world registering a double-digit growth consistently for the past 15 years. Despite this stellar performance, as discussed in previous sections access to finance has been a challenge in Ethiopia. The Government of Ethiopia has historically been supporting enterprise development through its flagship policy and programs such as MSME development strategy most recently coupled with a finance support through the Youth Revolving Fund. Through this support, thousands of micro and small enterprises were established with millions of jobs created.

In 2019/20 FY, the government through MoLS leaderships targeted to create 14 million jobs by 2025 by aiming to foster the business environment and conditions necessary, to absorb the currently unemployed, and to ensure that sustainable jobs are created for new entrants to the labour force. This target cannot be achieved only through wage employment as there are limited number of enterprises that can absorb this labour force.

Credit Guarantee Scheme is proposed to be established with the objective of increasing access to finance to enterprises introducing a third party, “the guarantor” promises to pay back the lender a part of the total amount of the loan in case of a default of the borrower. In the exchange of this service, the guarantor collects a fee from the lender.

Credit Guarantee Schemes are an increasingly popular instrument used by public authorities to improve MSMEs access to finance and tackle market failures. From a theoretical perspective, the Guarantee schemes exist for three main reasons (Honohan 2010). The first reason is a principal-agent problem: the guarantor could have an information or enforcement advantage over lenders, typically in the case of high information asymmetry between lenders and borrowers, that lead to the exclusion of creditworthy borrowers. The second reason is that the guarantor could have a better capacity to spread and to diversify risks than lenders. The third reason is that credit guarantees can sometimes be used for regulatory arbitrage when, for instance, the guarantor faces different regulations than lenders and can provide guarantees that lenders can’t provide for regulatory reasons.

Therefore, Credit Guarantee Schemes are expected to provide financial and economic additionalities. Financial additionality is defined by improved access to finance of constrained firms, and economic additionality by increasing the contribution of guaranteed SMEs to exports, job creation, value addition, and other economic outputs.

Hence, this requires establishing national wide credit guarantee scheme which takes into account bringing sustainable solution for challenges related to access to credit for early-stage enterprises for them be able to grow and generate income having a revolving nature to support many youths and also attract funds from bilateral and multi- lateral organizations.

3. OBJECTIVE OF ESTABLISHING CREDIT GURANTEE SCHEME

Given this background, the Ministry of Labor and Skills is seeking technical support from partners to develop detail technical proposal and implementation modality for successfully establishing the scheme in Ethiopia to support its endeavor of unlocking access to finance challenge and resource optimization opportunities for job creation agenda of the country.

The then JCC, now Ministry of Labor and Skills in collaboration with FC-BRIDGES mapped out the workplan in regards to establishing CGS nationally and one of the milestones is to provide Technical Assistance in hiring a Credit Guarantee Adviser to provide his/her expertise regarding the institution’s governance structure, financial and operational modalities, working procedures, Final business plan and operational procedures etc.

4. SCOPE OF WORK for the Credit Guarantee Adviser

Objective 1: Asses existing implementation Challenge and lesson learnt of CGS

• Conduct diagnostic study on macroeconomic ecosystem, regulatory and institutional factors for the current CGS implementation experience in Ethiopia,
• Assess the source of financing and its management mechanism.

• Assess International experiences: key lessons on ownership structure, implementation challenges, impacts and

• Assess the key lessons in the current experience in Ethiopia and recommend types of CGS through:

  • Conduct official consultative workshops with various stakeholders to draw lessons from the current CGS projects
  • Review different documents, success stories and relevant documents
  • Review the key lesson and challenges of revolving Fund Implementation status done by MoLS

Objective 2: Produce the operational and financial modality of the CGS

• Identify opportunities and gaps in existing CGS (technical, institutional, tools and techniques) and provide summary of recommendations through bench marking at least from three Countries experience
• Recommend financial products and a clear implementation roadmap that defines all major stakeholders and roles.
• Develop operational procedures and business plan of the proposes credit guarantee institution

Objective 3: Collaboration with the Legal Adviser

• Provide all the necessary input to the Legal Adviser for drafting the governing proclamations and regulation
• Collaborate with the Legal Adviser in understanding the relevant financial sector governing legal framework

5. EXPECTED DELIVERABLES

This assignment will deliver the following:

A comprehensive technical assessment and proposal including an overview of the existing situation, analysis of project specific credit guarantee scheme experience, explores other countries experience, details workflow processed and mechanisms designed for implementation, management and outlines a time-bound action plan to successfully establish CGS nationally.

The technical proposal should cover;

1. * An assessment of the existing implementation challenges and draw lesson from existing project specific schemes implemented, suggest key recommendation to establish CGS
   • Develop operational and financial modality, processes and procedures of the CGS including:
   • Alternative modalities,
   • sources of finance
   • business model
   • Governance structure etc
   • Conduct consultative and validation workshops and produce the draft legal document for establishing CGS in line with the operational document.
2. DURATION OF THE DELIVERABLES AND TIMELINE

The Consultant will be expected to complete the write up of the technical document and submit the final copy within 50 working days from contract signature against the following time frame.

No.

Main Deliverables

Working Days Allocated

1. Preparation of work plan, outline and submission of inception report – 6 days

2. Review of all relevant documents – desk review – 7 days

3. Conduct assessment of pilot CGS – 7 days

4. Consultation with relevant stakeholders – 5 days

5. Develop the draft technical proposal – 15 days

6. Organize validation workshop with key stakeholders – 2 days

7. Organize validation workshop with public – included in (6)

8. Incorporate comments and submit final operational and financial modality of CGS (English version with soft and hard copy) – 7 days

Total – 50 days

7. WORKING ARRANGEMENT

The selected consultant will travel to Addis Ababa for an agreed period. Reporting and writing can be done from home.

8. REQUIRED QUALIFICATION AND EXPERIANCE

The candidates must have the following qualifications and experience:

• Master’s Degree in Finance, Accounting, Business Administration and related fields
• More than 15 years of advisory experience in credit guarantee
• At least 10 years’ experience in credit guarantee schemes
• Experience in designing and implementing credit guarantee schemes
• Good understanding of the Ethiopian commercial business environment and the ecosystem
• Good understanding and more than 5 years of banking sector (especially on credit facility and loan recovery) and/or insurance industry
• Good understanding and knowledge of organizational structures

9. DOCUMENT SUBMISSION AND DEADLINE

Candidates must submit the following documents:

1. Technical proposal (not exceeding 5 pages) encompassing understanding of the TOR, approaches and methodology for the envisioned service and expected deliverables.
2. Financial proposal incorporating daily rates
3. Curriculum vitae

Deadline for submission of the documents is 11th March 2022. Submit to [email protected]