Terms of Reference for Value Chain Finance Assessment 77 views

Background

“Strengthening African Rural Smallholders” (STARS) is a five-year program, implemented by ICCO Cooperation in partnership with the Mastercard Foundation. The program supports the development of rural finance and agricultural value chains in four African countries, namely Senegal, Burkina Faso, Rwanda and Ethiopia, by applying the Market Systems Development (MSD) approach. The program was launched in 2016 and shall come to an end in March 2021. To achieve its goals, STARS works on three pillars, namely:

Access to Finance (A2F)

Microfinance Institutions (MFIs) are being supported to professionalize themselves, with the goal for MFIs to be better equipped in providing services to smallholder farmers and rural entrepreneurs. Support provided by the program to MFIs, includes the development of agricultural loans, savings mobilization, risk management and linking to international investors for investments in portfolio growth.

Value Chain Development (VCD)

The second pillar in the STARS program is value chain development. In each country, the program focuses on two specific value chains, namely malt barley and potato. Activities under this pillar include facilitating access to (improved) inputs, improving agronomic practices, and output market linkages. STARS partners with producer organizations (POs), more particularly with primary cooperatives, to indirectly reach out to smallholder farmers who are engaged in the targeted value chains. It was also envisaged to engage with financial service providers to finance different actors in the value chain.

Program Embedded Research and Learning (PERL)

Program embedded research and learning expands the knowledge base on rural agricultural finance, value chain development and disseminates lessons learned. Approaches, business models and lessons learned are shared and replicated inside and outside target countries. Particular attention is given to understanding how women can remain active and fully participate in rural agri-finance as well as in different value chains.

In Ethiopia, the STARS program works with six MFIs and 19 POs, all active in Oromia Region. These partner MFIs and POs are the key entry points for the program to reach smallholder farmers, which is in line with the MSD approach the program uses. The value chains targeted are malt barley and potato.

Context of the assessment

STARS makes a distinction between the two focus value chains it works in and so-called “loose value chains”. The latter are value chains which MFIs are supported to invest in (mainly resulting in the development of crop specific loan products), but which are not receiving further value chain development support from the program. The program intended to let MFIs be partners to various actors in the two focus value chains. This means that MFIs were expected to provide crop-specific loan products to producers of malt barley and potato (like what is done in loose value chains) but would also provide (tailored) loans to actors performing other functions in these value chains. STARS supports MFIs to avail credit to, for example, POs, input providers, traders or processors. Some attempts were made to do this in Ethiopia, but this was less successful than what was foreseen at the start of the project. The STARS program has witnessed that MFIs did not invest in other value chain functions, other than agricultural production for malt barley and potato, but is less aware what MFIs do on this in other (loose) agricultural value chains.

The study should therefore not only concentrate on the focus value chains of the programs, rather it should look at the enabling and disabling factors for the MFIs to engage in value chain financing generally and identify what are key critical criteria for engaging in value chain finance (both for loose and tight value chains).

Objective of the assessment

The assessment shall identify what are causes for a less successful implementation of value chain financing (VCF) efforts in Ethiopia, by the STARS program. Additionally, the assessment shall show how MFIs, with and without the support of a development project, can engage itself further in value chain financing in the future in order to improve the livelihoods of rural households.

At the onset of the program, it was expected that VCF would happen in the malt barley and potato value chains but paid less attention for this to happen in loose value chains or any other agricultural value chain the MFIs are dealing with. The observed lack of VCF provided by MFIs could be value chain specific. STARS, however, is more interested in understanding the challenges to VCF at an organizational and institutional level, rather than only at the value chain level.

The objective of the assessment stated above shall deliver a report describing the following:

• Identification of causes inhibiting MFIs to engage in effective VCF at an institutional and organizational level; and at the agricultural sector level;
• Examples of how these causes have blocked STARS and non-STARS efforts to avail VCF by MFIs;
• Identification of key stakeholders for MFIs to enhance their VCF activities;
• Identification of challenges and opportunities, particular to women;
• Identification of opportunities and challenges in the existing enabling environment and MFI operational framework, for MFIs to engage in VCF;
• Recommend MFIs how they can overcome the causes inhibiting them from engaging in VCF;
• Recommend short-term and long-term strategies for the MFIs on how they can engage in VCF by using the opportunities identified;
• Recommend how policy makers can create a more conducive environment for VCF;
• Recommend how development partners can support MFIs on VCF, with special consideration of the MSD approach.

Timeline of the assessment

• The assessment shall start in the week of 21 December 2020 and shall be completed before 14 February 2021.

Scope of work

The assessment has to be completed in a limited timeframe and shall therefore take place in a pre-identified scope. The details of this scope, which are subject to change, are listed here below:

• Focus on three partner MFIs in the STARS program and focus on selected value chains (TBD);
• Field visit to three different zones in Oromia region and visit to at least six woredas in those zones;
• Primary and secondary qualitative data collection, supplemented with secondary quantitative data collection;
• Write up of a report detailing the assessment findings and developing recommendations together with the STARS team.

Since the scope is pre-identified, ICCO restricts the number of billable days the consultant can use in order to ensure efficiency and effectiveness of the consultant. The scope of days per activity is provided here below. The number of days per activity can be shuffled around but shall not exceed a total of 20 billable days.

Candidate requirements

• The consultant or consultancy firm shall have the following requirements
• In case of an individual consultant; a minimum of a Master’s degree in economics, business management or any other related field; or a Bachelor’s degree in the same fields, complemented with at least 5 years or relevant work experience;
• In case of a firm; a strong track record in working on agribusiness and value chain development; or working with rural finance institutions. Consultants proposed for this assignment should have at least the same educational requirements / experience as listed for individual consultants;
• Working knowledge of the MFI sector in Ethiopia; working knowledge of MFI sector internationally is a strong plus;
• Prior experience with VCF activities is a plus;
• Basic but demonstrable understanding of the MSD approach and the implication it has on project implementation done by ICCO Cooperation;
• Excellent language skills in Amharic and English; Afaan Oromo language skill is a plus.

Selection criteria

The applications shall be assessed on the technical and financial proposal submitted. The technical proposal shall have a weight of 70%, whereas the financial proposal shall have a weight of 30%. The technical proposal shall, amongst others, be assessed on the applicant’s 1) understanding of the assignment; 2) demonstrated understanding of the MSD approach; 3) demonstrated familiarity with the MFI sector and agricultural finance. The financial proposal shall include daily consultancy fees, costs for operational activities, and it shall be tax included. It will be assessed on 1) the ratio consultancy costs / other costs; 2) costs for daily fees; and 3) costs for operational activities.