RFP-IRQ-DIY-2022-001- Strengthening Micro-Finance Services in Iraq for Vulnerable

Terms of reference

Strengthening Micro-Finance Services in Iraq for vulnerable communities

Organization

Danish Refugee Council

Country Office

Iraq

Approximate Research Timeline

July 2022 to December 2022

Project locations

Baquba, Diyala Governorate of Iraq

context

As Iraq enters 2022, the humanitarian context is paradoxical and evolving. Many gains and positive developments continue, slowly bringing millions previously affected by the Islamic State of Iraq and the Levant (ISIL) and related counter-military operations back towards parity with other Iraqis. Yet, simultaneously, humanitarian needs, and displacement remain stubbornly persistent for a relatively small but deeply vulnerable portion of the population. It has been eight years since the first emergence of ISIL. The intervening years have been filled with horrific suffering, widespread destruction, the fraying of a diverse social tapestry, and the internal displacement of some 6 million Iraqis. More recently, these years have given way to a new – albeit tenuous – hope for the future, as the country progresses towards recovery. Of the 6.1 million people displaced during the ISIL crisis between 2014 and 2017, 4.9 million people have returned while 1.2 million remain displaced, the vast majority of whom (1 million people) are displaced outside of formal camps. Based on the revised approach to assessing humanitarian needs, 2.5 million IDPs and returnees remain highly vulnerable and in humanitarian need. This includes all IDPs who live in camps (180,000), just over half of out-of-camp IDPs (549,000), and one third of all returnees (1.7 million)[1]. Of these, about 961,000 people face acute humanitarian needs, reaching extreme or catastrophic levels. In crisis-affected governorates such as Salah al-Din and Diyala, conflict and displacement affected market systems and pre-crisis livelihoods patterns. This is further exacerbated by limited availability of services, infrastructure damage, and outdated administrative and regulatory systems. Access to livelihoods opportunities is one of the major factors determining severity of needs among returnees.

program description

DRC is a longstanding INGO in Iraq, with an extensive program providing consumption and economic recovery support to conflict affected populations across the country. The beneficiary profile of the economic recovery program includes all categories of population, i.e., IDPs, refugees, returnees, and host communities. The program portfolio on economic recovery is divided into two major areas, i.e., relief and recovery.

1. Relief: Under this, DRC provides consumption support to extremely vulnerable displacement and conflict affected population. The assistance is provided through multi-purpose cash grants to households who are selected based on the criteria measured using proxy means text methodology (PMT)
2. Recovery: Through its economic recovery interventions, DRC uses multiple programming approaches which are further divided into two areas: i. self-employment, and ii. wage employment

DRC’s program is designed to serve as a bridge between humanitarian assistance and longer-term recovery and development strategies by identifying entry-points to assistance for households at different vulnerability stages: addressing basic needs and reducing reliance on negative coping strategies for extremely vulnerable households, and job creation and income generation for vulnerable households for sustainable livelihoods.

DRC’s Iraq economic recovery program strategy is transitioning toward longer term recovery and development with application of market systems development approaches. Agriculture is one priority sector identified for recovery and longer-term development which has potential to create employment and provide sustainable income opportunities for conflict affected population recovering from the crisis impacts. However, beside many other constraints in growth of agriculture sector, both for farmers and MSMEs, lack of financial services is identified as one of the major needs and there are huge gaps identified in micro-finance for the rural agriculture communities and MSMEs. Facilitating access to finance for agricultural and other MSMEs in rural areas and smaller urban areas of Diyala Governorate is one of the objectives of the DRC’s agricultural market system development program. To progress on this objective of increasing access to finance, DRC plans to improve the functioning of micro-finance services for agriculture farming communities and MSMEs by addressing the key constraints such as limited presence of financial service providers, absence of trust between clients and formal financial service providers, cultural and social factors, lack of product diversification to population needs, weak capacities of institutes, sole reliance on grants, limited understanding of market opportunities, lack of liquidity with service providers. DRC’s program is aiming to partner with one MFI in Baquba district of Diyala Governorate for addressing the gaps, increase availability of micro-finance services for targeted communities.

consultaNcy project objective

OVERALL OBJECTIVE

The overall objective of the consultancy is to strengthen the functionality and service provision of micro-finance institute through expanded customer’s base, extended geographical coverage, and demand-driven financial product and service delivery for vulnerable Iraqi farmers and small-scale entrepreneurs.

SPECIFIC OBJECTIVE OF THE CONUSLTANCY

• To conduct detailed organizational capacity assessment of micro-finance institute (MFI) with specific focus on its products, services, target market, financial position and transaction volumes, compliance structure, existing business model, customers base, and expansion capacities. The capacity assessment should also cover other relevant dimensions of MFI’s functionality not mentioned here to have a wholistic capacity analysis.
• To develop capacity development plan with defined training methodology, training material, and timeframe based on the identified gaps of MFI during capacities assessment process
• To support identified MFIs in conducting market and client’s demand research for financial products and services (clients in this case are small scale farmers and enterprises)
• To support micro-finance institute in development of product and services for project’s target population (small-scale farmers and entrepreneurs) tailored to their specific needs and preferences, acceptance, and relevance to socio-economic-cultural-political-legal dynamics of country and intended clients.

SCOPE OF WORK

The successful consultant is responsible to take the lead on the overall scope of the consultancy work as per stipulated objectives, tasks, and expected deliverables. The selected consultant will be responsible for the following tasks.

1. Conduct an institutional capacity assessment of selected MFI

• Conduct a review of available research and assessments related to micro-finance institutes and information on related regulatory framework and micro-finance sector development in Iraq in general including constraints and opportunities.
• Develop a capacity assessment tool to assess the technical, operational, and organizational capacities of the MFI. The tool will be shared with DRC technical team for review and approval.
• Conduct MFIs’ capacity assessment and produce the report for DRC’s review with clear results produced with rating (scoring) across all performance and functionality components. Capacity assessment should include the MFIs’ current products, services, with identification of gaps and opportunities with the aim of further development and improvements in the entire functionality of MFIs.
• Conduct detailed analysis of micro-credit management processes and policies including credit administration cycle (client identification, client’s capacity’s assessment procedures, outreach, loan issuance, credit limits, loan guarantees requirements, supervision, loan repayment, interest rates, loans’ default ratio, credit risk assessment methods and risk-based pricing).
• Conduct analysis of MFI’s client and geographical reach, customers and sector’s segmentation, and identify gaps with the objective of recommending plans for expansion capacities of micro-credit services to rural agriculture client’s and micro-small businesses.
• Produce and provide to DRC the detailed capacity assessment report with recommendations for further developments.

1. Develop institutional capacity development plan

• Develop a detailed capacity development plan for the MFI based on the gaps identified during capacity assessment processes and agreed with DRC.
• Provide list of recommendation for MFI to improve and strengthened its functionality, performance, and management an extension of services to clients in rural areas in agriculture sector and micro-small enterprises.
• Produce training material and deliver trainings, coaching and mentoring support to MFI on identified areas of improvement as per the capacity assessment and capacity development plan.
• Coordinate, through DRC, with relevant government institute on the related regularity requirements related to any specific capacity development area.

1. Support MFI in conducting market research

• Develop tools and methodology for assessing existing micro-credit products/services, market demand, customers preferences, capacities, gaps in services, acceptance level of various products, associated risks and barriers, and other relevant dimensions. This market research will be focused only on population in agriculture sector, i.e., farmers, micro-small entrepreneurs.
• Provide training to selected MFI’s staff on the assessment methodology and tools.
• Facilitate and provide technical expertise in the process of developing recommendations for innovative product development, new categories of products/services, etc. based on the finding of the market and demand patterns.
• Identify and provide list of recommendations on capacity development of MFI based on the assessment findings to new products, services, standards development, etc.

1. Development of micro-credit product and related service package.

• Provide technical assistance to MFI in development of new micro-credit product or improvement to existing products and services based on the results of market research and as per regulatory framework.
• Facilitate and provide technical expertise to MFI in the testing of newly developed micro-credit products.
• Develop a business model for MFI in financing the new loan product with development of a marketing, promotional, and distribution plan for launching the new loan product.
• Support MFI and DRC in initial launch of fully developed micro-credit product.
• Conduct an evaluation on the new loan product usage and acceptance, lesson learned, and best practices with recommendations for any further improvements.

KEY DELIVERABLES

1. An inception report with detailed proposed methodology and schedule of activities in line with the objectives stipulated under this TOR.
2. Tool for assessing MFI’s institutional capacity and plan of assessment.
3. Capacity assessment report of assessed MFIs with detailed, feasible and practical recommendations for improvements to be implemented in short-term, and medium term.
4. Tools for micro-credit market demand research and training of MFI staff on assessment methodology.
5. Technical assistance plan and methodology for MFIs in development of new micro-credit product
6. Training material and capacity development plan for MFI with clear timeframe for delivery of capacity development initiatives.
7. Reports of the training conducted for MFIs as per capacity development plan
8. Produce a technical paper with detailed featuring of new micro-credit product and related services covering basic features, eligibility, loan size, installment frequency, collateral conditions, loan repayment period, default conditions, risks of default, etc. This will also include evaluation of the product with user’s experience detailed, best practices, lesson learned, product discrepancies, improvement plans and scalability plan.
9. Final report of the assignment with evaluation of the product/services learnings.

METHODOLOGY

Applicants are required to provide detailed methodology during the proposal submission. The methodology should cover the entire scope of work that should be leading to achievement of the assignment’s objectives. It should also include the review of secondary data on financial inclusion and financial markets in addition to detail insight to micro-finance regulations applicable as per Iraqi law. The other areas of some initial investigation related to micro-credit could include local population preferences and attitude toward micro-credit through formal institutes keeping in view the cultural, social, and religious aspects. For example, a vast majority in Iraq is comprised of Muslim community, and it is forbidden to take interest bearing loans. DRC expects that applicant would elaborate the desk review process, secondary data review, primary data collection approaches when needed, etc. Also, the training plans, technical support in developing and testing new products/services are also needed to have a sound methodology description in the proposal.

Interested applicants are encouraged to propose innovative approaches to development of micro-finance with proven success which can be adopted to market, cultural, economic, and social context of Iraq and for specific target communities, i.e., agriculture communities and MSMEs.

IMPLEMENTATION AND TIMELINE

The deliverables outlined above will be implemented by the successful applicant, with support from DRC team as necessary. The consultancy work will begin at start of last week of July 2022 and should conclude by end of December 2022. Therefore, the estimated overall completion period to be within 155 calendar days.

Implementation will include the following components:

Deliverable No.

Deliverables Description

Time allocation (max.)

inception report

Last week of July2022

Tool for assessing MFI’s

End of July 2022

MFI’s Capacity assessment completed, and assessment report finalized

End of Aug 2022

Tools for micro-credit market demand research

Mid of Sep 2022

Training of MFI staff on assessment methodology and assessment completed

End of Sep 2022

Technical assistance plan and methodology for MFIs in development of new micro-credit product

Mid of Oct 2022

Training material and capacity development plan for MFI with clear timeframe for delivery of capacity development initiatives.

End of Oct 2022

New product development completed.

End of Nov 2022

Produce a technical paper.

Mid of Dec 2022

Final report of the assignment with evaluation of the product/services learnings.

End of Dec 2022

REQUIRED QUALIFICATION, EXPERIENCE AND SKILL:

Applicant, individual or firm, will be a specialized and highly experts in micro-finance with proven experience with MFIs. The proposed consultant/team should include the technical expertise and practical experience required to deliver the scope of work and deliverables. The consultant should have:

• A minimum Master’s degree in business management, banking, finance, development studies or equivalent,
• Fluency in English language. Arabic is added advantage.
• Strong technical skills and knowledge on financial inclusion programs, institutional capacity assessments, development, and delivery of technical assistance.
• Expertise in designing loan product for financial institutions: especially microfinance institutions.
• Demonstrated technical skills and knowledge of data collection and analysis, both quantitative and qualitative
• Minimum of 8 years of relevant experience in micro-finance programming, providing technical support in the sector of micro-finance, financial inclusion, especially for rural communities and focused on agricultural sector and micro-small enterprises.
• Familiarity with the local context, security situation and financial sector development in Iraq, particularly in targeted Governorate
• Companies and individual consultants are both eligible to apply. Where a company is applying, the specific individual(s) to be used for the project should be named in the application, along with the provision of CVs for each proposed consultant
• Individuals’ applicants need to have tax registration documents.
• Awareness of cultural and social sensitivity of Iraq.
• Strong facilitation and capacity development skills.

TERMS AND CONDITIONS

The terms and conditions of service will follow DRC terms of consultancies. Payment will be done according to the finance procedures of DRC. The consultant should make sure to include all costs in the budget since DRC will not make any payments outside the agreed budget.

GENERAL

Commitments: DRC has a Humanitarian Accountability Framework, outlining its global accountability commitments. All staff are required to contribute to the achievement of this framework (http://www.drc.dk/HAF.4265.0.html)

[1] Iraq HRP 2022

How to apply

Interested consultant/s to send email to [email protected] to get the full RFP package

1. Email submission

Bids can be submitted by email to the following dedicated, controlled, & secure email address:

[email protected]

When Bids are emailed the following conditions shall be complied with:

• The RFP number shall be inserted in the Subject Heading of the email
• Separate emails shall be used for the ‘Financial Bid’ and ‘Technical Bid’, and the Subject Heading of the email

shall indicate which type the email contains

• • The financial proposal shall only contain the financial proposal,
    – The technical proposal shall contain all other documents required by the tender, but excluding all pricing information
• Bid documents required, shall be included as an attachment to the email in PDF, JPEG, TIF format, or the same type of files provided as a ZIP file. Documents in MS Word or excel formats, will result in the bid being disqualified.
• Email attachments shall not exceed 4MB; otherwise the bidder shall send his bid in multiple emails.

Failure to comply with the above may disqualify the Bid.

DRC is not responsible for the failure of the Internet, network, server, or any other hardware, or software, used by either the Bidder or DRC in the processing of emails.

DRC is not responsible for the non-receipt of Bids submitted by email as part of the e-Tendering process.