National consultant – To Support Somali Microfinance (SMFI) to Provide Financial Services to Refugees and Host Communities in Somali Region

1. Background and rationale

The International Labour Organization (ILO) is part of a Partnership on Inclusive Jobs and Education for Host Communities, Refugees and other Forcibly Displaced Persons, known as PROSPECTS. The Partnership is a multi-year programme, funded by the Government of the Netherlands, that brings together five agencies (ILO, World Bank, IFC, UNICEF, UNHCR) to devise collaborative and innovative approaches for inclusive job creation and education in contexts characterized by forced displacement. The programme encompasses three pillars, namely Education, Jobs, and Protection and operates in eight countries across East Africa, Horn of Africa and the Middle East employing an area-based approach, in which the partner agencies jointly focus their activities on selected regions in each country. For Ethiopia, the partner agencies have selected Jigjiga and Shire refugee operations to focus their interventions. Under the partnership, the ILO, together with IFC and World Bank, lead interventions to improve livelihoods of host communities and refugees, including through enterprise development and Financial Education. Please find more information on prospects here: www.ilo.org/prospects

ILO through PROSPECTS commissioned research to assess the financial services provision and inclusion of hosts and refugees in Somali region. The assessment revealed that MFI and commercial banks largely limit themselves to the Host community market particularly in the provision of credit products due to different reasons including negative perception regarding the bankability of refugees and ‘regulatory’ restrictions are their biggest hindrances to reaching out to the refugees.

Based on the assessment findings, the ILO developed the capacity of financial service providers through an ILO course called Making Finance Work for Refugees and Host Communities (25 – 29th January 2021, in Addis Ababa) for an audience of financial service providers and stakeholders dealing with the financial inclusion of refugees in Ethiopia. At the end of the training, participants developed their own action plans to improve the services for Forcibly Displaced Persons (FDPs) and their host communities.

Somali Microfinance (SMFI) and Rays MFI are major financial service providers in the Somali region, and they expressed their interest to develop appropriate financial products targeting FDPs and host communities. The ILO is seeking the services of a National Consultant to provide technical assistance to Somali Microfinance (SMFI) to develop an inclusive outreach strategy and financial products that will meet the needs of refugees and host communities in Somali region.

Brief background of SMFI Somali Microfinance Institution (SMFI), Ethiopia’s first provider of sharia-compliant Microfinance services, was founded in January 31, 2011 registered by the National Bank of Ethiopia (NBE) according to proclamation No. 626/2009. SMFI started operation in December 2011. It has been 10 years since SMFI began providing financial services to the poor in the region. The Institution is providing the services through its 42 branches. SMFI has made a total amount of disbursement of 1,750,368,171.34 Birr to nearly 41,601 clients of which 34,413 are active clients, and over 23,227 of whom are women and 11,186 are men. The total amount of outstanding loan is 1,800,129,453.27 Birr (as of April 30, 2021).

2. Objective of the assignment and scope of work

The national consultant will work under the direct supervision and support of the lead consultant (international) in discharging technical assistance to Somali Microfinance in the following areas:

a) Conduct a market assessment in terms of analysing the status of financial service provision, unmet needs and barriers in the following areas of Awbare, Shedder, and Kebrebiyah covering both refugees and host communities. The market assessment will include major financial institutions in these areas (covering both formal and informal ones); major products/services they offer and which demographic/gender/social/business segments each product/service targets; market penetration (estimation) i.e. number of customers or volume of products disbursed; and gaps in terms of which demographic, gender, social and business segments that are being left out. The national consultant will review the business models of the major financial institutions in the area: what are their major revenue and profit streams, what are major risks and costs. The national consultant should prioritize the gaps, which if met, would bring maximum benefit to the refugees and host communities. The market assessment will be conducted in close collaboration and engagement of SMFI research and marketing departments.

b) Institutional assessment. Assess Somali Microfinance in terms of analysing its governance, strategy, operations, products, delivery systems, processes, current portfolio and financial management. Analyse the current business model of Somali Microfinance in serving the host communities and refugees in Somali region in order to identify gaps in financial service delivery where technical support can improve on their service delivery. Collect and analyse information/data on management system and human resources (skills, capacity, and HR management). Needs to consider attempts to fill the gaps identified in a) and draw lessons and recommendations for the exercise in c). This may include studying financial products that were launched by Somali Microfinance in the past but were discontinued.

c) Propose financial products or services and their high-level specifications that will address the gaps identified in a) and informed by b) making sure these services are financially viable and in compliance with NBE regulations and Sharia guidelines – taking lessons from good practices in similar communities in Ethiopia or beyond. The national consultant will identify and estimate the resources and capabilities required to develop and market the products / services in terms of people, technology, procedures and processes, to deliver, sustain and scale up these products / services. S/he will also assess the current institutional set up of the MFI with respect to the resources and capabilities to deliver the proposed financial services in the area and evaluate their needs. It is also important to put in place a system to prioritize the pilot products or services to be launched based on agreed criteria with SMFI and the level of risks they are ready to take.

d) Recommend the most efficient and effective yet inclusive outreach strategy matching the assessed unmet market needs for financial products with the resource capacity and institutional capability of Somali Microfinance from b) and c) above to deliver the products. This may include upgrading internal capability, procurement/recruitment or partnerships across human resources, IT, processes. As part of this deliverable, the national consultant will design and develop a marketing strategy to recruit and maintain customers from the target communities. The strategy should include a mechanism for measuring the business and social effectiveness of such products including milestones on the clients to be served, products to be rolled out and volume of financial services delivered with quarterly targets/milestones.

e) Translate the inclusive outreach strategy under d) into an operational plan to obtain the resources and build Somali Microfinance capacity. These include technology/ infrastructure (procurement, in-house development, partnership) and human resources development (org structure, skills profiles), proposed changes in processes, procedures and products with milestones, timelines and KPIs such as the number of clients to be served, products to be rolled out and volume of financial services delivered with quarterly targets/milestones. The plan should also have a capacity building programme for the staff to skill them in the proposed product delivery and changes in their operations.

3. Duration of the consultancy

• 43 working days spread between September 2021 and January 2022

4. Methodology

The consultant will describe in detail the methodology to address the above scope of work that they will use to deliver the assignment. This may among others include:

a) Desk research for background information such as the National Bank of Ethiopia (NBE) financial inclusion guidelines, overview of the market

b) Sample surveys and/ or focus group discussions with target communities in the target areas essential for identifying real gaps and test product ideas

c) Interviews with senior executives of Somali Microfinance to understand current organization structure and operations for designing and rolling out products to make sure recommendations build on existing resources and capabilities

d) Monitoring, evaluation and reporting mechanisms together with a plan on how to document lessons learnt from the assignment.

5. Key Deliverables and timeline

The national consultancy is expected to start by 1 September 2021 and take 43 days to complete. The consultancy is expected to end on 31^st January 2022. The selected national consultant will be expected to deliver high quality work within the stipulated timelines. COVID-19 limitations to carrying out consultancy will be taken into consideration.

Key Deliverables of the Individual National Consultancy, Estimated Targets and Timeline

• An inception report after signing of the contract detailing how they will conduct the assignment along with work plan, data collection tools and other technical documents,
  • Estimated Targets: 1 Report
  • Timeline: 3 days
• Market assessment report including a gap analysis on access to financial services in refugee hosting communities of Awbare, Sheder, Keberbeyah, including past attempts to fill this gap among that population segment. An Institutional analysis report of Somali Microfinance governance, strategy, operations, current products, delivery mechanisms, systems processes, policies and procedures together with identified gaps in financial service delivery,
  • Estimated Targets: 1 Market assessment report, including focus group discussions in 3 project localities and 1 Institutional analysis report
  • Timeline: 12 days
• An inclusive outreach strategy matching the assessed market needs with the analysed institutional capacity including a capacity building plan and operational plan for developing, rolling out and performance managing of the new products including clients reached, volume of transactions, etc. The strategy should include how to monitor and evaluate progress together with documenting of the lessons learnt from the assignment,
  • Estimated Targets: 1 inclusive outreach strategy and 1 operational plan
  • Timeline: 10 days
• High level specifications of financial products / services developed for the MFI that will best meet the gaps identified in the market assessment and ensure financially viable for the MFI,
  • Estimated Targets: Financial products or services developed for roll out responding to the needs of refugees and host communities
  • Timeline: 5 days
• Roll out of the outreach strategy and operational plan including institutional capacity building for staff, revision of processes, products and systems. Documenting the progress and lessons learnt,
  • Estimated Targets: Report on roll out of the outreach strategy and support provided, progress in achieving results together with the documentation of lessons learnt
  • Timeline: 10 days
• Report on institutional capacity building and the roll out of the outreach strategy and financial product/s by the MFI and lessons learnt,
  • Estimated Targets: Report
  • Timeline: 3 days

6. Payments

The national consultant will receive five payments based on the following deliverables

1. 20% payment for the assignment will be paid on delivery of an acceptable inception report incorporating ILO’s comments.
2. 20% payment for the contract will be made on delivery of the market assessment report including an institutional gap analysis report for financial services
3. 25% payment will be made on delivery of an inclusive outreach strategy together with detailed financial products design and specifications
4. 20% payment will be made on delivery of a report on the roll out of institutional capacity building and operational plan in terms of progress made in staff capacity building, revision of processes, procedures, product roll out and documentation of lessons learnt.
5. 15% on final acceptable final report on the assignment integrating all feedback from ILO and partner institution

7. Eligibility requirements

• University degree in Business Administration, Commerce, Economics, Finance and Accounting
• A Masters in Business administration with specialisation in banking or financial services is an added advantage
• 5 years’ experience working in or providing capacity building support to a Bank, MFI or similar financial institution, preferably focused on product development, innovation, customer relations, marketing, systems, policy and procedures development or implementation
• Strong familiarity with NBE financial inclusion strategy and guidelines on MFI product design and any applicable laws
• Knowledge of Islamic finance and delivery systems is an added advantage
• Experience in working in Somali region will be an advantage
• Women are encouraged to apply

8. STAFFING, ROLES, AND REPORTING

The national consultant will report to the international consultant for technical matters and coordination and to the PROSPECTS Ethiopia Chief Technical Advisor (CTA). S/he will receive technical guidance from the ILO PROSPECTS Regional Specialist on Enterprise and Market Systems development based in Nairobi, and technical support from ILO PROSPECTS National Program Officer based in Addis.

Throughout the course of this assignment, the national consultant will report on a bi-weekly basis to the ILO for coordination and follow–up. If it appears necessary to modify the tasks or timeline of work or exceed the time allocated, the national consultant must discuss the circumstances with the ILO and obtain prior written approval. The ILO may disclose the draft or final report to any person and for any purpose ILO may deem appropriate.

9. Confidentiality and contracting conditions

All data and information received from the ILO for the purpose of this assignment are to be treated confidentially and are only to be used in connection with the execution of these Terms of Reference. All intellectual property rights arising from the execution of these Terms of Reference are assigned to the ILO. The contents of written materials obtained and used in this assignment may not be disclosed to any third parties without the expressed advance written authorization of the ILO.

The present assignment is a consultancy under the standard terms and condition of external collaborator contract of the ILO.