RFP-IRQ-DIY-2022-001- Strengthening Micro-Finance Services in Iraq for Vulnerable Communities Re-advertised At Danish Refugee Council

DRC

Terms of Reference (TOR)

for

Strengthening Micro-Finance Services in Iraq for vulnerable communities

Organization

Danish Refugee Council

Country Office

Iraq

Approximate consultancy service Timeline

150 days (Last week of Sep 2022 till first week of Feb 2023)

Project locations

Baquba, Diyala Governorate of Iraq

1. Who is the Danish Refugee Council?

Founded in 1956, the Danish Refugee Council (DRC) is a leading international NGO and one of the few with a specific expertise in forced displacement. Active in 40 countries with 9,000 employees and supported by 7,500 volunteers, DRC protects, advocates, and builds sustainable futures for refugees and other displacement affected people and communities. DRC works during displacement at all stages: In the acute crisis, in displacement, when settling and integrating in a new place, or upon return. DRC provides protection and life-saving humanitarian assistance; supports displaced persons in becoming self-reliant and included into hosting societies; and works with civil society and responsible authorities to promote protection of rights and peaceful coexistence.

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) . 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.

2. Purpose of the consultancy

The Danish Refugee Council based in Erbil, Iraq seeks proposals from a consultant to build the capacity of local micro-finance institute to strengthen the functionality and service provision of micro-finance by expanding customer’s base, extended geographical coverage, and demand-driven financial product and service delivery for vulnerable Iraqi farmers and small-scale entrepreneurs.

3. Background

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.

4. Objective of the consultancy

The purpose of this consultancy is to

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.

1. Scope of work and Methodology

The Consultant will be required to prepare a detailed methodology and work plan indicating how

the objectives of the project will be achieved, and the support required from DRC.

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.

2. 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.

3. 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.

4. 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.

5. Deliverables

The Consultant will submit the following deliverables as mentioned below:

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.

Phase

Expected deliverables

Indicative description tasks

Maximum expected timeframe

Phase 1

Review

Presentation

Sourcing

Documentation

30 calendar days

Phase 2

Analysis

Intermediate report

Working meetings, discussions, field visit

Collect data

70 calendar days

Phase 3

Reporting

Final report

Prepare first draft report

Feedback from DRC to submit the final report

50 calendar days

The Consultant will provide the documentation by email and in format as requested by DRC.

1. Duration, timeline, and payment

The total expected duration to complete the assignment will be no more than 150 days.

The consultant shall be prepared to complete the assignment no later than first week-Feb 2023.

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 last week of Sep 2022 and should conclude by end of Feb 2023 for 150 Days.

Implementation will include the following components:

Deliverable No.

Deliverables Description

Time allocation (max.)

inception report

Last week of Sep 2022

Tool for assessing MFI’s

Mid of Oct 2022

MFI’s Capacity assessment completed, and assessment report finalized

Mid of Oct 2022

Tools for micro-credit market demand research

end of Oct 2022

Training of MFI staff on assessment methodology and assessment completed.

End of Oct 2022

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

Mid of Nov 2022

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

End of Nov 2022

New product development completed.

End of Dec 2022

Produce a technical paper.

Mid of Jan 2023

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

First of February 2023

1. Proposed Composition of Team

Consultant is expected to provide the list and composition of the team with their experience and expertise as per the requirement of TOR. At minimum DRC expects to have a focal person for consultancy administrative coordination and technical team member for technical part of the required services.

1. Eligibility, qualification, and experience required

Essential:

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.

Desirable:

• Work experience in Iraq in related field of specialty
• Arabic speaking
• Having local presence in Iraq
• Eligibility:
  • The consultant has the authorization to work in Federal Iraq and Kurdistan Region of Iraq (KRI)
• Qualification:
  • Master’s degree in development finance, development economics, business management or relevant.
• Experience:
  • A minimum of 8 years of proven experience in micro-finance, development finance, financial inclusion.
• Skills and knowledge:
• 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
• A solid understanding of Iraq cultural/economiccontext
• Language requirements:
  • Written and spoken fluency in English
  • Working knowledge of Arabic is an advantage

1. Technical supervision

The selected consultant will work under the supervision of:

• Economic Recovery Coordinator
• Economic Recovery Project Manager

1. Location and support

Project location: Baquba, Diyala Governorate, Iraq, for the field work related to the assignment

The Consultant will provide her/his own computer and mobile telephone

(DRC will provide following while in country and specifically in area of assignment,

i. Transport to project sites, and partners

ii. access approval to project sites.

1. Workspace in DRC Baquba office based on the stage of the consultancy work
2. Travel

Travel to field locations for meeting with local MFIs, interviews with communities, government departments, and working alongside with project team during the terms of assignment.

Consultant will be provided with transportation, workspace, and access approval to project sites. Beside these, consultant is required to make his/her own arrangement for following,

1. Insurance,
2. Food
3. Lodging in Erbil (When needed in Erbil)
4. Workspace in Erbil (when needed in Erbil)
5. Submission process

> Refer to the invitation letter.

1. Evaluation of bids

> Refer to the invitation letter.