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STTA – Enhancing Governance System for MFIs
Fund used: SMEFP
LOE: Up to 32 days
Period of assignment: June to September, 2019
1. BACKGROUND
Enterprise Partners (EP) is a 7-year (2013-2020) wealth creation programme which, inclusive of women and the environment, aims to support the private sector and Ethiopia’s economic growth. By applying the Making Markets Work for the Poor (M4P) approach for sustainable results, it aims to facilitate market development in order to spur innovation and investment that creates jobs and increases incomes for the poor. It does so with a combination of technical assistance and market facilitation in resolving market failures. EP is being implemented by a consortium led by DAI Europe, and includes First Consult, Enclude and ITAD.
Background specific to this assignment
The Government of Ethiopia (GoE), in cooperation with the World Bank Group, the European Investment Bank and the DFID-funded Enterprise Partners, is implementing the SME Finance Project aimed at enhancing access to finance opportunities for SMEs in Ethiopia. The Development Bank of Ethiopia (DBE) is the implementing agency for the $269 million credit facility aimed at supporting SMEs through lease financing and working capital financing through DBE, commercial banks, microfinance institutions and lease finance companies.
The Ethiopia SME Finance Study (2014) represents the analytical background for the project. The study, conducted by the World Bank at the request of the GoE, looked at (the lack of) SME finance as one of the possible obstacles to job creation. The study has demonstrated the existence of a so-called “missing middle” phenomenon in Ethiopia, whereby small enterprises are more credit constrained than either micro or medium/large enterprises. The study also highlighted the inadequacies of Ethiopia’s financial sector to address the financing needs of SMEs, and the existence of severe limitations in the overall enabling environment for SME lending (e.g. the lack of a collateral registry). Moreover, it also highlighted the importance of lease finance as a complementary source of funding for boosting the Ethiopian economy by providing long-term finance to SMEs, which need funds to expand, but often do not have the credit history or collateral sufficient for credit from conventional financing sources.
The project has four components: Component 1: Financial services to SMEs; Component 2: Enabling environment for SME Finance; Component 3: Business Development Services to SMEs; Component 4: Project’s management, communication and impact evaluation.
Under component 1, the project provides participating financial intermediaries with a line of credit facility for the provision of leasing and working capital to eligible SMEs. This liquidity support is complemented with technical assistance (TA) aimed at supporting participating financial institution in designing, piloting, and rolling out financial products, utilizing innovative lending methodologies (i.e. cash flow based lending) to successfully expand their outreach to target SMEs.
DBE provides direct financing to SMEs, and wholesale finance to other financial intermediaries for on- lending to SMEs through two windows: a lease finance window and a lending/working capital window.
A TA facility is established to complement and reinforce the credit facility. The capacity building will aim to develop the staff of participating financing institutions to serve SMEs adequately – training them in assessing SME business proposals and developing suitable financial products and lending methodologies for the target group. Participating financial institutions will assume full credit risk of lending to SMEs and are free to set pricing and loan conditions, including relevant policies and procedures, commensurate with their cost structure, capital base and risk profile.
2. OBJECTIVES
The objective of the assignment is to support partner MFIs to enhance their governance systems, excel in SME lending, guide in strategy formulation and strengthen subcommittees of the Board. Specific objectives are:
a) To strengthen corporate governance to ensure the governance structure is adequate to support the MFIs in terms of strategy, guidance, and in playing oversight role.
b) Support and guide the board and management in defining strategic priorities (such as portfolio diversification, target market, SME lending, etc) and define standardized change management process.
c) Refine/ develop Board Manual/ code of conduct and TOR for Board Subcommittees
d) Provide governance training to Board and senior management of each MFI to enhance their governances skills and create awareness on SME lending and its strategic importance.
e) Support/ coach Board Subcommittee of partner MFIs by providing clear guideline & tools to discharge their responsibility and impart necessary skill.
3. SPECIFIC TASKS
The consultant will work with at least four MFIs by reviewing their governance system, identifying gaps and recommendation for improvements. Each MFI will receive governance training. The workshops will be followed by MFI-specific support aimed at enhancing their governance systems. The focus area of support to each MFI may vary based on specific needs and strength of their existing governance systems.
The consultant will carry out the following activities:
a) Review MFI Technical Needs Assessment and Inception Report.
b) Meet with the MFI CEOs and Board to understand the governance system and identify areas of intervention.
c) Review institutional document, including board manual, TORs, minutes, progress reports, financial reports, and various reports to the Board, actions taken and follow up mechanisms, and produce refined documents where required.
d) Review Board Minutes to ascertain Board Meeting Agenda (focus areas), understand decision making process and review key decisions.
e) Identify gaps on Board development and oversight responsibilities including tools, policies and procedures, risk management and Board Subcommittees.
f) Assess strategic plan, guide in defining strategic priorities and ensure adequate focus is given to SME lending and forward recommendations
g) Define standardized change management process to proactively respond to changes/ dynamics in the environment.
h) Review structure of the senior management team, reporting lines of internal audit and risk management units, and reporting relationship with Board of Directors.
i) Recommend improvements in the corporate governance in view of the identified gaps and in- line with international best practice.
j) Introduce self-assessment scheme for the Board, if not in place.
k) Develop governance training material with realistic case studies& exercises developed based on realties on the ground to guide decision-making process and promote strategic thinking.
l) Deliver a two days of workshop (the first day shall focus on theoretical background linked to assessment findings and best practices, second day dedicated for defining strategic priorities, strategy formulation, change management process) for each MFI.
m) Conduct on the job mentoring for Board Subcommittee members.
4. TIMEFRAME AND DELIVERABLES
The assignment is expected to begin in June and completed by Sep, 2019. The proposed days are indicative and could be revised in discussion with the consultant, but not exceeding the maximum of 32 days. The proposed days are to work with minimum of four MFIs for onsite support.
No Summary of deliverables
1 (minimum 4MFIs*3 days=12 days) Assessment report for each MFI with actionable recommendations validated with the MFI management and Board
2 (4 days) Tools and templates (including but not limited to checklist and templates for Board meeting folders, progress report template, board manual/code of conduct, TOR and guideline for subcommittees, and self-assessment tool)
3 (11 days) Board training material and delivery, including change management process& guidelines (4 sessions*2 days delivery=8 plus 3 days prep)
4 (4 days) Training and mentoring report for the Board and senior management including defined strategic priorities (Minimum four MFIs, 1 day each)
5 Summarized TA report highlighting key activities performed and results achieved/expected as well as clear way forward (recommendations) and follow-ups to be made
Total Up to 32 days
5. WORKING ARRANGEMENTS
The international consultant will closely work with the SME Finance team and CEOs of partner MFIs. The assignment may require two trips to align the TA to MFI plan and/or readiness. It involves travel to the regions to work with one of the MFIs. The consultant will report to the SME TA manager.
6. CONSULTANTS REQUIREMENT
Senior Expert in corporate governance with hands on experience in strengthening MFI governance systems and provision of board advisory services.
• Minimum of 10 years relevant international experience. Highly specialized in providing corporate governance related training and support to MFIs.
• Proven experience in provision of technical assistance to the financial institutions, preferably MFIs, in corporate governance and developing policies & procedures, tools and templates.
• Experience in SME lending and development of SME strategies
• Knowledge of the Ethiopian financial sector is an asset.
• Competencies required include:
o Fluent in spoken and written English
o Excellent writing and presentation skills
o Excellent working guides and tools developing skills
o Ability to work under pressure and meet tight deadlines
The deadline for applications is June 14 June 2019
