RFP2412 Provision of Professional Consultancy Services for the Kazakhstan Market Conduct Risk-Based Supervision Framework with a Behavioral Focus

1. Background

The Alliance for Financial Inclusion

The Alliance for Financial Inclusion (AFI) is the world’s leading organization on financial inclusion policy and regulation. Currently, 84 member institutions make up the AFI network including central banks, ministries of finance and other financial policymaking or regulatory institutions from over 76 developing countries and emerging markets. AFI empowers policymakers to increase the access and usage of quality financial services for the underserved through sustainable and inclusive policies and an effective use of digital technologies.

Policies developed and implemented by AFI members contribute to a range of the Sustainable Development Goals. By Setting their own agenda, AFI members harness the power of peer learning to develop practical and tested policy reforms that enhance financial inclusion with strategic support from both public and private sector partners.

AFI has 7 Working Groups (WG): Consumer Empowerment and Market Conduct Working Group (CEMCWG), Digital Financial Services Working Group (DFSWG), Financial Inclusion Data Working Group (FIDWG), Financial Inclusion Strategy Peer Learning Group (FISPLG), Global Standards Proportionality Working Group (GSPWG), Inclusive Green Finance Working Group (IGFWG) and SME Finance Working Group (SMEFWG),

As the key source of policy developments and trends in financial inclusion and as the primary mechanism for generating and incubating technical content in the network, the Working Groups serve as “communities of practice”. Providing a platform for knowledge exchange and peer learning among policymakers to share, deliberate and deepen their understanding, the working groups offer leadership and expertise in their respective policy fields and support the network to monitor new developments in emerging fields.

The knowledge generated via the working groups is disseminated for implementation by a range of capacity building activities such as Joint Learning Programs, Member Trainings, Trainings by Private Sector Partners. The practical experience members garner from engaging in peer learning based capacity building is then applied by members as in country implementation projects which are supported by the provision of financial or technical support to AFI member institutions in conducting activities that aim to deliver financial inclusion policies, regulations, supervisory tools or enablers for the development of policies, such as national financial inclusion strategies.

The working groups receive strategic guidance and insight from the High-Level Global Standards & Policy Committee, while the Gender Inclusive Finance Committee, supports WGs in integrating gender considerations into all aspects of their work and support members in fulfilling their Denarau Action Plan (updated 2022) commitment to promote women’s financial inclusion.

AFI members have made further commitments in a range of other accords which can be read here.

The AFI’s five regional initiatives complete the AFI platform of services by supporting policy implementation in Africa (AfPI), Latin America and the Caribbean (FILAC), the Pacific Islands (PIRI), Eastern Europe and Central Asia (ECAPI) and the Arab Region (FIARI).

2. Project Background:

The development of the financial market in Kazakhstan is characterized by the emergence of a large number of new products and the introduction of new formats for their provision, expanding the boundaries of the provision of financial services and sales channels for financial products, including remote ones using modern information technologies. On the one hand, this increases the availability of financial products and services for various categories of consumers, on the other hand, it creates new risks of violation of their rights, causing the emergence of new types of violations and unacceptable practices that the financial market regulator is designed to identify and suppress.

The Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (ARDFM) has early identified signals in the field of protecting the rights of consumers of financial services, due to the growth of consumer lending, insufficient level of financial literacy of the population and financial products/services aimed at youth, women and persons with disabilities, and other socially vulnerable segments of the population. Furthermore, the agency has noted that from 2020 to the present, more women (57%) have submitted complaints, demonstrating the need to understand and challenges and needs of this population segment. If not cured, the signals may develop into a situation that impedes the further healthy, stable, and equitable expansion of financial inclusion in Kazakhstan and requires a targeted legislative response from the ARDFM based on the best regulatory practices presented in the AFI network.

To overcome these trends, ARDFM is planning to formulate an integrated approach towards solving identified challenges, leveraging AFI technical support. This approach involves studying the regulatory experience within the AFI network (including AFI member organizations and AFI partners) for the practical implementation of a risk-based approach that includes the principles of behavioral supervision, with particular focus on marginalized segments of the population such as women and youth.

Risk-based supervision (RBS) is a relatively new approach to addressing supervisory challenges in an increasingly interconnected marketplace. It is forward-looking, with a focus on evaluating both present and future risks, identifying emerging problems, and facilitating prompt intervention and early corrective actions by focusing on the inherent risks of financial service providers’ business model and product offerings. RBS replaces a compliance-based approach and is expected to become more inclusive, risk-based and data centric.

Reference documents:

• Market Conduct Supervision – A Toolkit
• Guideline Note 21: Market Conduct Supervision of Financial Services Providers – A Risk-Based Supervision Framework
• Impact Assessment of Financial Service Providers: Market Conduct Risk-Based Supervision Guideline Note

3. Overall Objective:

The objective of the project is to develop a comprehensive report with specific recommendations for the implementation of market conduct risk-based supervision by the ARDFM, including principles of behavioral supervision and gender consideration.

The overall goal of this project is to strengthen technical capacity of ARDFM to effectively develop and implement consumer protection policies, with a particular focus on population segments such as women and youth, and therefore enhance the consumer rights and protection that will contribute to the country’s financial inclusion.

4. Scope of Work:

The consultant will be required to work with AFI members and other key stakeholders towards coming up with the deliverables. The assignment entails the following:

• Conducting a detailed assessment of the current legislation of Kazakhstan and the current supervisory practice of the ARDFM, existing challenges and opportunities.
• Developing a comprehensive and actionable report (*) providing specific recommendations for the implementation of a risk-based approach by the ARDFM with the principles of behavioral supervision, including various population segments such as women and youth.
• Conducting a validation workshop for ARDFM staff.

(*) N.B. the final report should be developed in Russian and draft versions of the report should be made available in English for AFI technical team reviews.

5. Timeline & Deliverables:

This work will be undertaken between June 2024 to the end of October 2024. The key timelines are summarized in the table below:

No -Deliverables by the Consultant – Tentative Deadlines

1.Assessment report on the current legislation of Kazakhstan and the current supervisory practice of the ARDFM, existing challenges and opportunities, taking into account the various population segments such as women and youth.

August 2024

2.First draft report providing specific recommendations for the implementation of a risk-based approach by the ARDFM with the principles of behavioral supervision, including various population segments such as women and youth.

September 2024

3.Validation workshop for ARDFM staff to go through the report and recommendations

End September 2024

4.Final recommendation report incorporating last edits from the validation workshop

October 2024

6. Travel:

This consultancy work requires one travel to Kazakhstan for the development of the assessment report, including data collection and interviews and local stakeholders.

The estimated travel expenses should be included with breakdown of the flight, accommodation, per diem whenever relevant and will be capped as reference for further evaluation and contract award.

N.B. The validation workshop with local stakeholders planned at the end of the project to present and discuss the final version of the recommendation report will be conducted virtually.

7. Consultant Experience:

The consultant performing this task must have the following qualifications:

• Open to firms and individuals
• The team leader should have at least ten (10) years of relevant experience and hold a higher degree in a field related to Economics, Finance, Public Policy, International Development, or other related discipline.
• Knowledge and at least seven (7) years of experience in development and financing policies.
• The consulting firm should have a team of experts that have at least five (5) years of experience and knowledge regarding risk-based market conduct-supervision and behavioral economics.
• The individual consultant should have at least five (7) years of experience and knowledge regarding risk-based market conduct-supervision and behavioral economics.
• Good understanding of financial inclusion, financial consumer protection and gender inclusive finance policies.
• Fluency in English and Russian (oral, written and presentation skill) is mandatory.
• Ability to maintain and keep confidential information within the scope of the project.

8. Reporting:

Throughout the contract period, the Consultant will be reporting to AFI’s CEMC Policy Manager, Policy Programs and Implementation.

9. Payment Terms:

The payment terms/schedule proposed for this consultancy are as follows:

Deliverablesn – Percentage

Upon signing of Contract/submission and acceptance of Inception Report – 10%

(KD1) Upon submission and acceptance of the assessment report – 20%

(KD2) Upon submission and acceptance of first draft report on providing specific recommendations for the implementation – 20%

(KD3) Upon validation workshop and acceptance of the report and recommendations – 20%

(KD4) Upon submission and acceptance of the final recommendation report incorporating last edits from the validation workshop – 30%

TOTAL : 100%

10. Evaluation Criteria

The proposals submitted will be evaluated based on the following criteria:

1. Profile and Overall Qualification – 30%

• Academic Qualification 5%
• Sample work – writing experience with Russian and/or English 10%
• Practical experience and knowledge regarding risk-based market conduct-supervision and behavioral economics 15%

2. Technical experience – 40%

• Relevant skills in producing technical publications, report writing and other documentation work. 20%
• Regional and/or global experience 20%

3. Adequacy of the proposed work plan and methodology in responding to the Terms of Reference – 30%

• Technical approach and Methodology 20%

4. Workplan – 10%

Total 100%

Evaluation of technical and financial proposals

AFI reserves the right to award the most suitable proposal based on the evaluation of combined criterion, where bidders are qualified by the combined valuation of the technical and financial proposals, with the following weightage:

i) Technical Proposal: 70% (Seventy percent)

ii) Financial Proposal: 30% (Thirty percent)