MESPT-CREDIT-PRQ03435-2024 – Consultancy for Assessment of opportunities of Islamic finance as a model for financial inclusion

PLEASE NOTE: THIS CONSULTANCY IS ELIGIBLE TO ONLY NATIONAL INDIVIDUAL CONSULTANTS.

BIDS FROM CONSULTING FIRMS WILL BE DISQUALIFIED

1. INTRODUCTION

Micro Enterprise Support Programme Trust (MESPT) is a development organization focused on enhancing, Agricultural Enterprise Development and Market linkages, Agricultural productivity and Food Safety, Financial Access and Inclusion and Green Transformation. MESPT interventions targets small holder farmers, farmer groups, farmer organizations and Agricultural SMEs with the aim of increasing productivity, incomes, market expansion and enhancing competitiveness for decent job creation and financial access and inclusion.

MESPT has taken catalytic and facilitative role to engage both private and public stakeholders to build sustainable partnership to support the agricultural and green eco-system. This calls for integrated delivery model that entails working with:

1. Small holder farmers (SHFs)- MESPT support is geared towards increased productivity, profitability, compliance with food safety and market standards and enhanced linkages to markets. MESPT has a focus on unlocking potential among women and youth in Agri-value chain enterprise development. This is achieved through grant support.
2. Micro Small and Medium Enterprises (MSMEs)-(including farmer co-operatives) – MESPT support focuses on increased market capacity, production capacity, entrenchment of food safety processes, adoption of and transition to ecofriendly agro-processing and value addition, reduction of post-harvest losses, and increased operational efficiency. This is facilitated through Technical/Business Development Services, grant and debt financing. MESPT plays a critical role in facilitating market linkage and market infrastructural development.
3. Financial service providers (FSPs) – MESPT supports focuses towards increased provision of financial services to agricultural sector and more specifically to smallholder farmers, farmer producer organizations, women and youth in agribusiness. MESPT supports FSPs through affordable debt financing for onlending, grant financing for technical and business development services.

Vision

“Build a more Prosperous Society”

Mission

To provide sustainable business development and financial services to small holder farmers and Agri SME’s.

1. RATIONALE

MESPT financial access and inclusion strategy was rolled out in 2021 anchored on promoting increased accessibility and affordability of financial credit to smallholder farmers, Micro, Small and Medium Enterprises in Agri and Green business and farmer co-operatives. The strategy placed a deliberate focus on women and youth led Agri and Green entrepreneurs.

The strategy focused on catalyzing increased Agri-Green loan portfolios within MESPT partnering FSPs, enhanced capital investments within Agri and Green based Small and Medium Enterprises (Agri/Green focused SMEs). With perceived risk in Agri-lending, our engagement with FSPs was and continues to aim at enhancing their funding capacity to Agricultural and Green sectors, evidence based social impact measurement and reporting, improving climate smart investments at enterprise, domestic and farm levels, promoting financial inclusion for women, youth and vulnerable groups and enterprises. MESPT engagement with Agri and Green Based SMEs focused enhancing production capacities through working capital and investment/asset financing. It also aimed at creating opportunities for job creation, adoption of climate smart production technologies and involvement of youth and women.

MESPT has adopted two financing instruments for FSPs and SMEs- Term loans and Credit guarantee. However, due to limited capital, credit guarantee was discontinued. MESPT has also not been successful in rollout of financing to informal groups such as Village Savings and Loans Associations, Financial Service Associations among others, which are popular in enhancing financial inclusion among women.

MESPT has not had clear understanding of the operations of Islamic finance and its contribution to financial inclusion among venerable groups and enterprises. More so, MESPT would wish to identify specific aspects of Islamic banking that can be incorporated to existing financing model to promote financial inclusion, where possible. MESPT wishes to identify technical and operational capacity that is necessary to successfully embed Islamic finance as well as establish fund raising opportunities within Islamic finance model.

OBJECTIVES OF THE ASSIGNMENT

The objective of this consultancy is to undertake an assessment on the understanding the Islamic financing landscape and the opportunities of Islamic finance as a financial inclusion tool, opportunities for MESPT to incorporate Islamic finance models and establish available fundraising opportunities for Islamic financing.

1. SPECIFIC OBJECTIVES

The objectives of the consultancy are to:

1. To determine the level of understanding of MESPT management and technical teams on Islamic financing.
2. To develop a detailed paper on what is Islamic finance, how does it operate, highlighting success cases for Islamic finance as a financial inclusion tool (globally and locally)
3. To understand the current MESPT financing operation and delivery model and identify key opportunities for plugging in Islamic finance and fund-raising opportunities within Islamic finance space.
4. Provide a clear demonstration on how Islamic financing model could be applied to enhance inclusion in Agri and green finance in the context of MESPT operations.
5. To establish and recommend how Islamic models could be applied to facilitate MESPT delivery through inform financial service providers,
6. To establish necessary control environment (Legally, culturally, socially and economically) that could impede or promote rollout of Islamic finance within MESPT. How to mitigate the impediments?
7. To determine the overall benefit or otherwise to MESPT upon embedding Islamic finance as a financial inclusion tool.
8. Develop documentation and tools necessary to facilitate roll out of the Islamic financing model within MESPT.
9. To establish key sustainability risks for Islamic financing model and provide practical mitigation measures.
10. SCOPE OF WORKS

Working closely with MESPT Credit and the Business Development Manager, the consultant will be required to engage MESPT management and technical teams for wider scope of feedback. The consultant shall be expected to undertake the following:

1. Inception meeting to develop harmonized scope for the assignment.
2. Desk review of MESPT documentation to understand MESPT existing credit model- new strategy for financial access and inclusion, new credit policy, profiles of financial products, letter of offers and loan agreements for different financial service providers, loan portfolio reports, social impact statistics held by MESPT among other.
3. Interview MESPT Management, Technical teams and key external informants with practical knowledge and expertise in Islamic financing.
4. Market assessment to
5. Identify how Islamic finance has been utilized within the financial inclusion space. This will entail identification and interview of external key informants with expertise in Islamic finance, practitioners within the space of Islamic finance and review of available literature within development and financial sector on the subject matter.
6. Document detailed perspectives of Islamic financing globally and locally including successful cases.
7. Identify and document fund raising opportunities for Islamic finance.
8. Interview 3 financial service providers (2 Saccos and 1 Microfinance Institution/Bank) to identify and document opportunities for incorporating Islamic finance as a delivery model.
9. Interview funded SMEs (at most 2) to identify and document opportunities of embedding Islamic financing model within SMEs.
10. METHODOLOGY

It is recommended that for maximum value generation for this assignment, the consultant will adopt a participatory approach that include close collaboration with MESPT and FSPs. The consultant will be expected to develop a detailed work schedule that will ensure maximum utility of time and other resources and use proactive engagement methods to generate necessary information from the target stakeholders.

1. KEY DELIVERABLES

Milestone 1:- Inception Report

1. Inception report highlighting harmonized understanding of the assignment in respect to objectives and expected output, agreed work plan with MESPT, schedule of engagements with MESPT team and FSPs, list of documents for desk review from MESPT, generate list of external stakeholders and informants relevant to this assignment, and timelines for the engagement. Also, any confirmation of any additional stakeholders to be interviewed for this assignment.

Milestone 2: Engagement of Stakeholders

Draft report upon desk review of MESPT documents, engagement of respective stakeholders and undertaking market research capturing findings, opportunities, challenges, risks, successful cases.

Milestone 3- Presentation of final report to Management and Board of Trustees

Presentation of final assignment report to Management and Board of Trustees.

1. ASSIGNMENT TIMELINES

The assignment will commence immediately after signing the contract with MESPT and will be for a period of 20 working days delivered within a span of two months.

1. CONSULTANT REQUIREMENTS
2. In-depth knowledge and experience in Islamic finance locally and globally. This includes demonstration of practical experience in application of Islamic finance.
3. Master’s degree in Finance, Economics, Agri-economics, Social science/studies, Environmental science, Mathematics, Computer Science, Statistics, Business Management, Accounting.
4. Demonstrable experience in undertaking surveys/assessments within the financial sector including developing tools for credit appraisal and reporting.
5. Demonstratable Knowledge of Islamic finance processes, appraisals, financial risk analysis and management.
6. INSTITUTIONAL ARRANGEMENT

The Consultant(s) will work under the direct supervision of the Credit & Business Development Manager. During his/her assignment, the consultant will be provided with all necessary information and office space to undertake online interviews and engagements.

1. DOCUMENTATION REQUIREMENTS
2. Covering letter explaining how your experience addresses the requirements of the TOR.
3. CV of consultant involved in the exercise.
4. KRA Pin Certificate and Tax compliance Certificate
5. 3 references of relevant past works, scope, role and contact for the last 3 years
6. Provide detailed proposal with a detailed Work plan demonstrating the number of man-days to be employed and budget for this work.