A rapid assessment on remittances for cost reduction, enhanced financial inclusion&increased resilience of migrants and remittance receiving families

Terms of Reference
Position Title: A rapid assessment on remittances for cost reduction, enhanced financial inclusion and increased resilience of migrants and remittance receiving families in Lesotho
Type of Contract: Consultancy service (individual)
Duration of Assignment: 60 working days (September 2021 to January 2022)

1. BACKGROUND
   The Government of Lesotho is implementing a joint SDG fund project in collaboration with three UN agencies in Lesotho (IOM, UNDP and UNICEF). The objective of the project is to support the Government of Lesotho to establish a functional integrated Public Finance Management (PFM) ecosystem that contributes to accelerated achievement of the SDGs targets and the NSDP II. In line with the priorities of the NSDP II, the Joint Programme aims to support the Government of Lesotho to achieve private sector-led economic growth, employment creation and public-private partnerships, by facilitating a conducive policy environment. The JP will establish an enabling environment to mobilize alternative financing and partnerships for sustainable development. One way to achieve this is by engaging diaspora and leveraging remittances sent by the diaspora. Through this project, IOM will support the government to exploit potential technical and financial resources of the diaspora under output 3.3 (Remittance and diaspora finances are leveraged towards SDG and NSDP II acceleration).
   The COVID-19 pandemic hit in early 2020 as the JP was supposed to take off, and brought new dimensions to be considered in the planned rapid assessment on remittances. The COVID-19 pandemic has led to an unprecedented global decline in economic activity and living standards, inequality has widened and the most vulnerable have been disproportionally affected. Remittances – an important source of income for receiving families in developing countries – are projected to decline by about 40 billion USD globally due to the COVID-19 crisis. At the same time, remittances will be more vital than ever to sustain the livelihoods of remittance receivers. However, even prior to COVID-19, the high costs of sending remittance was a challenge. The technology sector has performed particularly well during COVID-19, driven by accelerated digitalization in response to enforced social distancing and remote working. Despite the notable advances in digital financial services, a significant share of the world’s population remain unbanked, in particular women and youth. Many migrants – especially vulnerable migrants – remain unbanked and financially excluded1. Given the increase in poverty and vulnerability amongst the most vulnerable, the long-term impact that COVID-19 may have on sustainable economic development, and the significant fiscal stimuli that will be invested by Governments to recover from COVID-19, it is vital that recovery strategies focus on building back better so that all investments are directed towards a sustainable recovery that increases the resilience of people’s livelihoods, particularly for the most vulnerable.
   Lesotho is a landlocked country with a population of two million people. It is distinct in its mountainous terrain and it is surrounded geographically by South Africa. Basotho migrants, working mainly in South Africa, make a vital contribution to livelihoods through remittances. In 2019 (most recent data), formal remittances account for 21% of GDP2. This is mainly due to limited access to financial services especially among the rural poor and lack of relevant financial intermediation services and interoperability between South Africa and Lesotho. The FinScope (2011) indicates that only 38% of Basotho are using formal financial services, with the majority using the informal channels. While mobile connectivity has improved substantively since 2015, those who use mobile financial services are limited.
   A recent study conducted by World Bank found that MNOs, MTOs, retail banks and bureau de changes have increasingly partnered in the provision of financial services, significantly easing access to remittance services in Lesotho. However, despite the entry of non-bank service providers in the remittance space, gaps in innovation and outreach remain and remittances are often cashed out at respective providers outlets4. The study also reveals that the cost of sending cross-border remittances from South Africa to Lesotho is high and acts as a barrier to the use of formal channels for sending money. Given Lesotho’s reliance on remittances, innovative Digital Financial Services (DFS) business models that could reduce costs is important. Also, Lesotho could potentially learn from other African countries that have advanced DFS, such as South Africa, Kenya and Ghana. Additional financial products, including savings and insurance, accompanied by enhanced digital and financial literacy skills for both labour migrants and remittance receiving families, will build necessary resilience to future shocks. As part of the financial sector strategy and digitization of financial services, innovative solutions are necessary to complement existing market structures to identify innovative solutions that can reduce remittance costs and minimize risks in hard-to-reach area, and if feasible, improve DFS to include saving and insurance services to build resilience and prepare for the future shocks among the rural households that depend on remittance.
   Furthermore, the Development Finance Assessment conducted by UNDP has stated that Remittance have suffered in 2020 as a consensus of COVID-19 pandemic impact. Making remittance transfers and making effective financial corridor within SADC countries should be a priority, as well as investing and supporting the development of digital finance, including digital finance. One of the recommendation from DFA is to establish annual targets for each of the development final revenues, ensuring that there is a lead institution in delivering them and that are linked to specific to NSDP II and SDG target. For remittance, under the SDG 17.3, the cost of remittance should be below 3%. To this end, IOM is seeking to recruit a consultant to undertake a study to assess remittance services, including any new developments that may have been introduced during COVID-19. The study should also reflect who is which population groups to not have access to DFS and mobile wallet services and identify why they are excluded and how they may be included. The study will also explore innovative solutions that could reduce remittance costs. Finally, the assessment will propose a strategy and recommendations on; (i) Digital Financial Service and Financial Inclusion: how to ensure affordable, reliable and accessible remittance to the migrants’ family in Lesotho through DFS, (ii) Enhancing Financial Literacy and Digital Skills: how to increase financial literacy and digital skills among the remittance senders and receivers; (iii) Remittance services in Remote Areas: how to improve access to affordable remittances in remote or hard to reach areas, (iv) Resilience Building / Shock preparedness: identify financial products / services that would build resilience and prepare for future shocks amongst the remittance receiving households.
   1. OBJECTIVE
      The overall objective of the project is to support the Government of Lesotho to establish a functional and sustainable integrated Public Finance Management (PFM) ecosystem. To realize this objective, there is need for an enabling regulatory and policy framework. Findings and recommendations of the assessment will inform the development of the Remittance Policy / strategy, that will allow Lesotho to strengthen remittance transfer mechanisms and bolster financial inclusion. IOM will also assist the government to assess the effectiveness of the existing remittances corridors, focusing on the latest developments brought by DFS to reduce the barriers in accessing remittances, especially for low-income users.
      Specifically, the consultant will;
      • Conduct a desk review on formal remittance service providers, transactional costs, geographic coverage, risks and opportunities for expansion and costs reduction.
      • Conduct a desk review and in-depth interviews with MNOs, MTOs, retail shops (Shoprite), Postal Services and bureau de changes, focusing on South Africa – Lesotho corridor. The review and interviews will identify the latest developments in remittance services, emerging opportunities and challenges brought by COVID-19, and a strategy to build back better beyond COVID-19.
      • Conduct in-depth interviews with diaspora members, including professionals, investors, migrant workers and un-skilled / semi-skilled workers (i.e. farm workers, domestic workers, street hawkers etc.) to uncover the dominant remittance channels and constraints in remittance services, and to identify who is let behind and why.
      • Analyze findings of the assessment to establish the following; ; (i) Digital Financial Service and Financial Inclusion: how to ensure affordable, reliable and accessible remittance to the migrants’ family in Lesotho through DFS, (ii) Enhancing Financial Literacy and Digital Skills: how to increase financial literacy and digital skills, as well as investment skills among the remittance senders and receivers; (iii) Remittance services in Remote Areas: how to improve access to affordable remittances in remote or hard to reach areas, (iv) Resilience Building / Shock preparedness: identify financial products / services that would build resilience and prepare for future shocks amongst the remittance receiving households. Draft a rapid assessment report based on findings, facilitate a meeting to present findings and recommendations of the assessment to the Technical Working Group and a validation meeting for stakeholders.
   2. SCOPE
      Under the overall supervision of IOM Lesotho Head of Office, working closely with the National project support officer and the Technical Working Group, the consultant will undertake the assignment covering relevant stakeholders in Lesotho and Basotho migrants abroad, especially South Africa – Lesotho corridor due to its significant volume.
   3. METHODOLOGY
   4. The consultant will conduct a desk review of secondary literature on remittances, digital finance, financial inclusion and other relevant fields, existing policy framework in relation to domestic resource mobilization, remittance, digital finance and financial inclusion.
      • Conduct a stakeholder analysis to identify key players and informants for extensive stakeholder interviews to collect primary data. Key stakeholders will include but not limited to the following;
      o The Central Bank of Lesotho
      o Commercial banks (in South Africa and Lesotho)
      o Microfinance service providers
      o Mobile money operators (Vodacom Lesotho, Econet)
      o Retails (Shoprite)
      o Postal services
      o Bureau de change
      o Private sector / financial services
      o Migrant workers and diaspora in various categories
      • The consultant will research the best practices from other African countries that have cost-effective and user-friendly mobile transfer / remittance solutions and consider the similar application to the South Africa – Lesotho remittance corridor
      • Draft the assessment report and present findings to the Technical Working Group
      • Review the report incorporating inputs from TWG and facilitate a validation workshop of the report
   5. DELIVERABLES
      The consultant will submit the following reports within the timeframe. The receipt and approval of each deliverable is subject to approval from IOM.
      Deliverables Timeframe
      Submit inception report that includes methodology to undertake the assessment 7 days after signing contract Sept 2021
      Conduct desk review and Interview with key stakeholders and migrant workers and remittances recipient including women migrants October 2021
      Submit the first draft of the assessment report to IOM Lesotho November 2021
      Organize and present key findings and recommendations to IOM and the TWG November 2021
      Submit the second draft including the outcome of the events to IOM Lesotho December 2021
      Facilitate a validation workshop with all participating stakeholders December 2021
      Submit the final report incorporating the inputs / feedback from validation meeting January 2022
      *The receipt and approval of each deliverable is subject to approval from IOM.
   6. QUALIFICATIONS AND EXPERIENCE
      The successful consultant should have the following qualifications and experience:
      • Advanced university degree in Economics, International Relations, Finance, Migration Management or a related field.
      • Extensive knowledge of financial environment in Lesotho, and preferably in the area of remittance, digital financial services and other relevant area
      • Minimum of 10 years of relevant professional experience working for Government or an Intergovernmental Organization in assignments related to area on migration and development.
      • Proven previous working experience consisting of substantial involvement in research / assessments, evaluations, and/or reviews in related areas
      • Working experience with senior officials within government, inter-governmental, and non-governmental organizations.
      • Full computer literacy, including familiarity with research and basic statistical tools.
      • Excellent written and spoken English. Knowledge of local languages an advantage.
      • Demonstrated ability to work in a multicultural environment and establish harmonious and effective relationships
   7. PAYMENT SCHEDULE
      Total fee, inclusive of all travel and related costs, not subject to any deductions, will be paid to the consultant as follows;
      • 20 % upon the satisfactory completion of the deliverable 1
      • 30 % upon the satisfactory completion of the deliverable 2, 3
      • 20% upon the satisfactory completion of the deliverables 4, 5,
      • 30 % upon the satisfactory completion of the deliverable 6, 7