ACCESS FINANCE RWANDA (AFR)
ACCESS FINANCE RWANDA (AFR) TERMS OF REFERENCE FOR CONSULTANT TO ASSESS THE REFINANCING GAP FOR MFIs AND SACCOs IN RWANDA
1. INTRODUCTION AND BACKGROUND According to the National Microfinance Strategy 2013 – 2017, MFIs and SACCOs have limited resources for increased outreach. Between 2007 and 2012 the growth of the total microfinance portfolio of the MF industry and the total amount of deposits have generally run parallel (see Table 1 below). The loan portfolio increased from 27 billion to 59 billion RWF while deposits increased from 28 billion to 54 billion RWF. This reflects in principle a sound situation as it indicates that the microfinance providers fund their portfolios with savings generated locally. Table 1: Rwanda – Key Indicators of Microfinance 2007 - 2012 INDICATORS A Total nr regulated MFIs & SACCOs (b) B Total outstanding loan portfolio
2007
2008 100
27,383,632,713
2009 90
2010 514
2011 502
2012 490
490
42,321,005,508 50,143,928,763 36,788,747,624 40,723,908,172 59,194,204,082
C Total number of loan clients (borrowers)
N/A
33,447
96,376
46,567 (c)
110,555
167,326
D Average outstanding loan (B/C)
N/A
1,265,315
520,295
790,018
368,359
353,766
8.2%
5.0%
9.2%
12.6%
12.0%
8.5%
631,689
688,822
714,154
1,041,758
1,527,941
1,959,654
E PAR > 30 days (%) F Number of deposit accounts with MFIs G Total deposits
28,588,412,353
38,316,945,380 48,929,836,562 29,758,087,305 45,861,761,055 54,472,505,085
45,257
55,627
68,514
28,565
30,015
27,797
I Number of service points (c)
N/A
N/A
N/A
815
774
842
J Number of Mfis with automated MIS
N/A
N/A
N/A
N/A
N/A
N/A
K Nr of MFIs submitted audited reports to BNR (e)
N/A
N/A
N/A
N/A
30
23
H Average deposit (F/H)
(a) Amounts are in RWF (b) Figures include Umurenge SACCOs since their inception in 2009. They stared issuing loans in 2011. (c) Drop in outstanding loans/nr of clients in 2010 due to CSS reporting as a commercial bank since 2010. (d) Number of service points include main offices and branches. In 2010 CSS ZIGAMA not included; in 2011 UNGUKA, AGASEKE and CAPECS not included. (e) MFIs (SACCOs) in Category 2 are not required to submit audited reports. Some MFIs in the higher categories failed to comply.
Source: NMPIS 2013-2017 Findings of FinScope survey 2012 revealed that 72% of the adult population have access to financial services (formal services – 42% and informal services at 30%). Despite this significant progress with financial inclusion, access to credit from formal financial institutions (banks, MFIs, SACCOs) is still low. The FinScope survey reveals that most people use informal credit (48%) or borrow from family and friends (28%). Only 3.3% of adults had accessed credit from a bank, and 12% from other formal institutions (SACCOs, MFIs etc.). Although Financial Inclusion has increased adequate financial services for MSME’s and lower income population are lacking. The national Micro Finance Strategy identified lack of adequate refinancing by MFIs and
SACCOs as one of the challenges and also recommended that this situation needs to be analysed so that the funding gap can be effectively addressed. In addition, the Financial Sector Development Program II recognises the need to increase access to credit for the private sector so as to promote investments and job creation in the economy. Access to Finance Rwanda is a private limited company limited by guarantees promoting access to financial services in Rwanda. Currently this company is managed by KPMG and supported with funds from DFID, World Bank, KFW. AFR’s overall goal is to develop sustainable improvements in the livelihoods of poor people through reduced vulnerability to shocks, increased incomes and employment creation. Whereas it’s overall purpose is increased access to financial services for poor rural and urban people (especially women) and micro, small and medium enterprises (MSMEs).
Access to Finance Rwanda (AFR) mandate is to increase access to financial services among which includes credit. In this regard, AFR wishes to support initiatives to increase funding for MFIs and SACCOs. Compared to banks, MFIs and SACCOs are more spread in the rural areas where over 80% of Rwanda population live and work. They are considered as the major source for credit in the rural areas and for the low income people who are AFR target group. However most of these institutions do not meet their client’s credit demand since they are not able to mobilise adequate savings nor access loans from existing financial institutions or instruments. On the other hand, AFR would like to explore the feasibility of promoting refinancing of MFIs and SACCOs as one of the key strategies for the company However this will be effected based on AFR understanding of the supply and demand issues for refinancing in Rwanda and this would inform AFR position/ direction on this subject. AFR objective of investments should result into a sustainable and a strong developmental impact on the microfinance sector with the ultimate goal to foster the integration of the microfinance sector into the financial sector. This will be achieved by the following: Transformation of well-performing MFIs/SACCOs into commercial entities able to attract private equity as well as debt financing; Development of adequate financial services and lending technologies for lower income population and MSME’s; Support commercial banks willing to develop microfinance lending, through refinancing of MFIs and SACCOs in Rwanda. Strengthening the professionalism of MFIs’ organization and management to position them and attract refinancing funds; Improve the infrastructure of MFI’s as well as data management.
OBJECTIVES OF THE STUDY AFR would like to analyse and find suitable measures to address the financing gap that exists among MFIs and SACCOs in Rwanda by developing appropriate interventions to boost the refinancing in Rwanda. EXPECTED RESULTS The expected output of the consultancy is a detailed report that includes: a) An analysis of current refinancing options in Rwanda for MFIs and SACCOs including the existing limitations b) Assess current constraints of commercial banks regarding MFI’s, SACCOs and MSMEs financing and propose possible incentives c) Assess the human, financial and technical capacity issues that need to be addressed from the supply side d) Assess the issues from the demand and supply side focusing on limitations that affect the ability of MFIs and SACCOs to acquire funds and successfully use the refinancing facilities or supply of the funds by existing facilitates. e) A review of existing legislation, regulations , guidelines and financial institutions (e.g.) BDF to gauge its relevancy to support the development of refinancing f) Proposition of suitable interventions by AFR g) Presentation of draft report to key stakeholders, and; h) Final report which takes into account comments by key stakeholders and a roadmap to address the refinancing gap. DESCRIPTION OF TASKS AND METHODOLOGY Taking into account lessons learned from development of financing facilities/options in the region and other countries the consultant will consult relevant stakeholders including the National Bank, Ministry of Finance, and development partners. The consultant will also interview a sample of Banks, MFIs, and SACCOs. The consultant will determine appropriate methods to collect the necessary data and views from stakeholders such as key informant interviews, focus group discussions with clients, questionnaires, documentation review, as appropriate. More specifically the consultant will accomplish the following tasks: 1. Understanding the Supply side of refinancing areas of focus to include:a) Analyse current refinancing options in Rwanda for MFIs and SACCOs by focussing on assessing their strength, limitations/ challenges and opportunities that exist. b) Assess the capacity issues that need to be addressed from the supply side that need to be addressed in order to support refinancing of MFIs and SACCOs.
c) Conduct a review of existing legislation, regulations and guidelines to gauge its relevancy to support the development of refinancing. d) Analyse the current requirements/ process/ reports of suppliers that MFIs and SACCOs have to fulfil in order to access the refinancing facilities. e) Assess the capacity of the suppliers to support / develop refinancing of MFIs/SACCOs in Rwanda. f) Analyse the potential for the following instruments that can be used for financing MFIs/ SACCOs equity, quasi-equity, subordinated debt and conditional loans to generate equity-based returns, ordinary debt at market related rates and guarantees to third party lenders, 2. Understanding the demand side of refinancing- MFIs and SACCOs areas of focus to include:a) Assess the need of refinancing for as well as possible constrains, challenges, limitations that may hinder MFIs and SACCOs to acquire funds and successful use the refinancing facilities. Focus should be with current MFIs/ SACCOs have on going refinancing facilities and those not using refinancing facilities. b) Analyze MFIS/SACCO experience in access refinancing facilities from the different institutions. Focus should be on the process, good/ bad experience. c) Based on (a) and (b) make recommendation on alternative approaches that could be employed by providers of refinancing to improve SACCOs/MFIs up take if the service. 3. Based on the supply and demand assessements make recommendations on the following:a) The need for refinancing facilities for SACCOs and MFIs ( in terms of products; legal requirements etc) b) Advise on AFR’s role in developing refinancing for SACCOs and MFIs considering how best to develop the market of refinancing of MFIS and SACCOs. c) Make recommendation how to improve the operations of current providers of refinancing in Rwanda. d) Identify key issues that will need to beaddressed by the MFIs and SACCOs to position themselves to access financing facility. e) Make recommendations on appropriate financing instruments that could be used to develop refinancing among MFIs and SACCOs
TIMEFRAME AND EXPECTED DELIVERABLES This consultancy is expected to start Mid January 2014 Proposed activity Number of days
Desk Review
Field Work Report Writing Total
Tasks and Deliverables Desk review of Rwanda Financial Sector Documents and laws 2
Desk review of other countries experience on development of MFIs and SACCO Meet key stakeholders and gather data 11 Produce and inception report, which would be presented to stakeholders at a workshop. Review and consider comments from AFR and 4 finalize the report 17
Qualified consultants with relevant experience are invited to submit a detailed technical and financial proposal for carrying out this assignment. The technical proposal should include the following: Profiles of consultant and an outline of recent experience on assignments of a similar nature; References from the consultant’s clients for similar assignments; The consultant’s comments or suggestions on the TORs and appreciation of the assignment – the objectives, tasks and deliverables; A clear description of the methodology and work plan that the consultants proposes to execute the assignment, illustrated where appropriate, with bar charts of activities; A timeline for carrying out the assignment. The Financial proposal should list the costs associated with the assignment. CONSULTANT COMPETENCIES & QUALIFICATIONS
Over 12 years’ experience working in the financial sector and more specially in the area of financing of MFIs/SACCOs Experience in developing financing options, sourcing financing and managing financing facilities from various sources. At least a Master’s degree in Economics, Finance, or MBA in finance Strong analytical and writing ability. Ability to engage effectively with senior public and private sector officials and obtain needed information and insights into the local environment. Experience at the country wide sector level/understanding of building inclusive
financial sectors. For information and submission of the proposals please contact the Finance, Procurement and Human Resources Administrator Mkombozi KARAKE at [email protected]
1. INTRODUCTION AND BACKGROUND According to the National Microfinance Strategy 2013 – 2017, MFIs and SACCOs have limited resources for increased outreach. Between 2007 and 2012 the growth of the total microfinance portfolio of the MF industry and the total amount of deposits have generally run parallel (see Table 1 below). The loan portfolio increased from 27 billion to 59 billion RWF while deposits increased from 28 billion to 54 billion RWF. This reflects in principle a sound situation as it indicates that the microfinance providers fund their portfolios with savings generated locally. Table 1: Rwanda – Key Indicators of Microfinance 2007 - 2012 INDICATORS A Total nr regulated MFIs & SACCOs (b) B Total outstanding loan portfolio
2007
2008 100
27,383,632,713
2009 90
2010 514
2011 502
2012 490
490
42,321,005,508 50,143,928,763 36,788,747,624 40,723,908,172 59,194,204,082
C Total number of loan clients (borrowers)
N/A
33,447
96,376
46,567 (c)
110,555
167,326
D Average outstanding loan (B/C)
N/A
1,265,315
520,295
790,018
368,359
353,766
8.2%
5.0%
9.2%
12.6%
12.0%
8.5%
631,689
688,822
714,154
1,041,758
1,527,941
1,959,654
E PAR > 30 days (%) F Number of deposit accounts with MFIs G Total deposits
28,588,412,353
38,316,945,380 48,929,836,562 29,758,087,305 45,861,761,055 54,472,505,085
45,257
55,627
68,514
28,565
30,015
27,797
I Number of service points (c)
N/A
N/A
N/A
815
774
842
J Number of Mfis with automated MIS
N/A
N/A
N/A
N/A
N/A
N/A
K Nr of MFIs submitted audited reports to BNR (e)
N/A
N/A
N/A
N/A
30
23
H Average deposit (F/H)
(a) Amounts are in RWF (b) Figures include Umurenge SACCOs since their inception in 2009. They stared issuing loans in 2011. (c) Drop in outstanding loans/nr of clients in 2010 due to CSS reporting as a commercial bank since 2010. (d) Number of service points include main offices and branches. In 2010 CSS ZIGAMA not included; in 2011 UNGUKA, AGASEKE and CAPECS not included. (e) MFIs (SACCOs) in Category 2 are not required to submit audited reports. Some MFIs in the higher categories failed to comply.
Source: NMPIS 2013-2017 Findings of FinScope survey 2012 revealed that 72% of the adult population have access to financial services (formal services – 42% and informal services at 30%). Despite this significant progress with financial inclusion, access to credit from formal financial institutions (banks, MFIs, SACCOs) is still low. The FinScope survey reveals that most people use informal credit (48%) or borrow from family and friends (28%). Only 3.3% of adults had accessed credit from a bank, and 12% from other formal institutions (SACCOs, MFIs etc.). Although Financial Inclusion has increased adequate financial services for MSME’s and lower income population are lacking. The national Micro Finance Strategy identified lack of adequate refinancing by MFIs and
SACCOs as one of the challenges and also recommended that this situation needs to be analysed so that the funding gap can be effectively addressed. In addition, the Financial Sector Development Program II recognises the need to increase access to credit for the private sector so as to promote investments and job creation in the economy. Access to Finance Rwanda is a private limited company limited by guarantees promoting access to financial services in Rwanda. Currently this company is managed by KPMG and supported with funds from DFID, World Bank, KFW. AFR’s overall goal is to develop sustainable improvements in the livelihoods of poor people through reduced vulnerability to shocks, increased incomes and employment creation. Whereas it’s overall purpose is increased access to financial services for poor rural and urban people (especially women) and micro, small and medium enterprises (MSMEs).
Access to Finance Rwanda (AFR) mandate is to increase access to financial services among which includes credit. In this regard, AFR wishes to support initiatives to increase funding for MFIs and SACCOs. Compared to banks, MFIs and SACCOs are more spread in the rural areas where over 80% of Rwanda population live and work. They are considered as the major source for credit in the rural areas and for the low income people who are AFR target group. However most of these institutions do not meet their client’s credit demand since they are not able to mobilise adequate savings nor access loans from existing financial institutions or instruments. On the other hand, AFR would like to explore the feasibility of promoting refinancing of MFIs and SACCOs as one of the key strategies for the company However this will be effected based on AFR understanding of the supply and demand issues for refinancing in Rwanda and this would inform AFR position/ direction on this subject. AFR objective of investments should result into a sustainable and a strong developmental impact on the microfinance sector with the ultimate goal to foster the integration of the microfinance sector into the financial sector. This will be achieved by the following: Transformation of well-performing MFIs/SACCOs into commercial entities able to attract private equity as well as debt financing; Development of adequate financial services and lending technologies for lower income population and MSME’s; Support commercial banks willing to develop microfinance lending, through refinancing of MFIs and SACCOs in Rwanda. Strengthening the professionalism of MFIs’ organization and management to position them and attract refinancing funds; Improve the infrastructure of MFI’s as well as data management.
OBJECTIVES OF THE STUDY AFR would like to analyse and find suitable measures to address the financing gap that exists among MFIs and SACCOs in Rwanda by developing appropriate interventions to boost the refinancing in Rwanda. EXPECTED RESULTS The expected output of the consultancy is a detailed report that includes: a) An analysis of current refinancing options in Rwanda for MFIs and SACCOs including the existing limitations b) Assess current constraints of commercial banks regarding MFI’s, SACCOs and MSMEs financing and propose possible incentives c) Assess the human, financial and technical capacity issues that need to be addressed from the supply side d) Assess the issues from the demand and supply side focusing on limitations that affect the ability of MFIs and SACCOs to acquire funds and successfully use the refinancing facilities or supply of the funds by existing facilitates. e) A review of existing legislation, regulations , guidelines and financial institutions (e.g.) BDF to gauge its relevancy to support the development of refinancing f) Proposition of suitable interventions by AFR g) Presentation of draft report to key stakeholders, and; h) Final report which takes into account comments by key stakeholders and a roadmap to address the refinancing gap. DESCRIPTION OF TASKS AND METHODOLOGY Taking into account lessons learned from development of financing facilities/options in the region and other countries the consultant will consult relevant stakeholders including the National Bank, Ministry of Finance, and development partners. The consultant will also interview a sample of Banks, MFIs, and SACCOs. The consultant will determine appropriate methods to collect the necessary data and views from stakeholders such as key informant interviews, focus group discussions with clients, questionnaires, documentation review, as appropriate. More specifically the consultant will accomplish the following tasks: 1. Understanding the Supply side of refinancing areas of focus to include:a) Analyse current refinancing options in Rwanda for MFIs and SACCOs by focussing on assessing their strength, limitations/ challenges and opportunities that exist. b) Assess the capacity issues that need to be addressed from the supply side that need to be addressed in order to support refinancing of MFIs and SACCOs.
c) Conduct a review of existing legislation, regulations and guidelines to gauge its relevancy to support the development of refinancing. d) Analyse the current requirements/ process/ reports of suppliers that MFIs and SACCOs have to fulfil in order to access the refinancing facilities. e) Assess the capacity of the suppliers to support / develop refinancing of MFIs/SACCOs in Rwanda. f) Analyse the potential for the following instruments that can be used for financing MFIs/ SACCOs equity, quasi-equity, subordinated debt and conditional loans to generate equity-based returns, ordinary debt at market related rates and guarantees to third party lenders, 2. Understanding the demand side of refinancing- MFIs and SACCOs areas of focus to include:a) Assess the need of refinancing for as well as possible constrains, challenges, limitations that may hinder MFIs and SACCOs to acquire funds and successful use the refinancing facilities. Focus should be with current MFIs/ SACCOs have on going refinancing facilities and those not using refinancing facilities. b) Analyze MFIS/SACCO experience in access refinancing facilities from the different institutions. Focus should be on the process, good/ bad experience. c) Based on (a) and (b) make recommendation on alternative approaches that could be employed by providers of refinancing to improve SACCOs/MFIs up take if the service. 3. Based on the supply and demand assessements make recommendations on the following:a) The need for refinancing facilities for SACCOs and MFIs ( in terms of products; legal requirements etc) b) Advise on AFR’s role in developing refinancing for SACCOs and MFIs considering how best to develop the market of refinancing of MFIS and SACCOs. c) Make recommendation how to improve the operations of current providers of refinancing in Rwanda. d) Identify key issues that will need to beaddressed by the MFIs and SACCOs to position themselves to access financing facility. e) Make recommendations on appropriate financing instruments that could be used to develop refinancing among MFIs and SACCOs
TIMEFRAME AND EXPECTED DELIVERABLES This consultancy is expected to start Mid January 2014 Proposed activity Number of days
Desk Review
Field Work Report Writing Total
Tasks and Deliverables Desk review of Rwanda Financial Sector Documents and laws 2
Desk review of other countries experience on development of MFIs and SACCO Meet key stakeholders and gather data 11 Produce and inception report, which would be presented to stakeholders at a workshop. Review and consider comments from AFR and 4 finalize the report 17
Qualified consultants with relevant experience are invited to submit a detailed technical and financial proposal for carrying out this assignment. The technical proposal should include the following: Profiles of consultant and an outline of recent experience on assignments of a similar nature; References from the consultant’s clients for similar assignments; The consultant’s comments or suggestions on the TORs and appreciation of the assignment – the objectives, tasks and deliverables; A clear description of the methodology and work plan that the consultants proposes to execute the assignment, illustrated where appropriate, with bar charts of activities; A timeline for carrying out the assignment. The Financial proposal should list the costs associated with the assignment. CONSULTANT COMPETENCIES & QUALIFICATIONS
Over 12 years’ experience working in the financial sector and more specially in the area of financing of MFIs/SACCOs Experience in developing financing options, sourcing financing and managing financing facilities from various sources. At least a Master’s degree in Economics, Finance, or MBA in finance Strong analytical and writing ability. Ability to engage effectively with senior public and private sector officials and obtain needed information and insights into the local environment. Experience at the country wide sector level/understanding of building inclusive
financial sectors. For information and submission of the proposals please contact the Finance, Procurement and Human Resources Administrator Mkombozi KARAKE at [email protected]
