Developing New Agricultural Finance Products - Ethiopia

Objective of the Programme

The Land Investment For Transformation (LIFT) Programme is a 6.5 year long (to August 2020) DFID funded programme, that aims to improve the incomes of the rural poor and enhance economic growth, through three components: The development of second level land certification (SLLC); improved rural land administration; and the development of a land systems following a ‘making markets work for the poor’ (M4P) approach. The M4P component aims to implement a number of complementary interventions in three sectors: rural land rental; access to credit; and the environment and conservation in the agriculture market to ensure that the benefits of second level certification are maximised.

In late 2014, the M4P team undertook a market assessment in the Amhara and Oromia regions of Ethiopia to identify the main constraints affecting the poor in each of the three sectors and identified a number of interventions. Within access to credit, there are four interventions:

• Intervention 5 – Promote the development of new agricultural individual loan products linked to SLLC,


• Intervention 6 – Promote the development of new products in agricultural finance (credit related),


• Intervention 7 – Promote partnerships in finance to overcome risk and market limitations, and


• Intervention 8 – Improve knowledge and information on supply and demand of rural financial services.

This ToR directly contributes to the implementation of Intervention 6 – Promote the development of new products in agricultural finance (credit related).

Background to the Assignment

An assessment performed in August 2014 showed that MFIs in Ethiopia primarily used group based lending techniques to provide credit to smallholder farmers. The assessment also indicated that there seems to be a limited understanding among financial institutions on the range of options available to provide increased agricultural finance. In general, financial institutions do not seem willing to explore alternative forms of providing finance for agricultural purposes because of insufficient information and a perception that the risks involved are too high. There also seems to be a lack of innovation and fresh thinking on the part of financial institutions to develop innovative agriculture-related loan products and delivery mechanisms that cater to the credit needs of smallholder farmers.

This assignment aims to develop a more in-depth understanding of what the constraints faced by financial institutions are as well as provide them with technical assistance to help develop new agricultural related financial products that will increase access to credit for smallholder farmers.

Scope of Work

Number of Days:60 days between October 2015 and March 2016 for Phase 1 (see below)

The key activities for the first phase of this assignment include:

Phase 1

• Conduct an in-depth assessment of the constraints and challenges faced by selected MFIs to expand their agricultural related loan products to smallholder farmers, including GESI groups.


• Conduct an in-depth assessment of the demand for agricultural-related credit from smallholder farmers and GESI groups


• Work with selected MFIs to identify new loan products that could be implemented to increase access to credit by smallholder farmers (e.g. cash-flow based lending).

Phase 2

If the MFIs are willing to develop the new products (e.g. MoU), then the second phase of the assignment would include:

• Support the selected MFIs to develop a business plan for the implementation of these new loan products (including required budget, activities, work plan and expected results).


• Support the selected institutions to run a pilot to test the development and implementation of these new products.


• Evaluate the effectiveness of the pilot for each new loan product, including recommendations on how to improve their effectiveness or whether they should be terminated.

Milestones and Timeframe

The selected consultant(s)/consulting firm(s) will be expected to deliver the following outputs:

1. Assessment of constraints faced by MFIs to increase the number and value of agricultural loans to smallholder farmers and GESI groups- December 2015


2. Assessment of agri-finance needs of smallholder farmers and GESI groups- December 2015


3. Identification of feasible new/innovative agricultural related loan products that could be adopted by selected MFIs

January 2016

1. MoUs agreed with selected institutions for the development of new products March 2016

Qualifications:

The following are the required competencies and qualification of the consultant:

• At least 10 years professional experience in the field of agricultural finance.


• Technical experience in developing MFI operational, organisational, financial and management policies and procedures based on international accepted MFI best practices.


• Good knowledge of the Ethiopian banking and MFI sectors, including on the institutional and regulatory environment, particularly with regards to SMEs financing.


• Working experience in Ethiopia and good knowledge of the Ethiopian agribusiness sector is an advantage.


• Strong ability in building capacity of national staff and board members of microfinance programs/MFIs through training, coaching and mentoring.


• Excellent skills in spoken and written English will be required.

Application Deadline:

15th September 2015

Application Process:

All applicants are required to submit the following documentation:

• Cover letter expressing interest and stating previous relevant experience for this assignment.


• CV(s) of consultant(s) who will be undertaking the assignment.


• Please state ‘ToR 10’ in your email title when submitting the above documents

All required documentation must be submitted in electronic form to the LIFT M4P Coordinator – Christian Portal (cportal@htspe-team.com) and copied Max Schultz (mschulz@nathaninc.com) and Matt Woodhouse (matt_woodhouse@dai.com). Incomplete submissions will not be considered.