REVOLVING LOAN FUND WITH MFIs/BANKS IN BURCO SOMALILAND

TERMS OF REFERENCE (TOR)

REVOLVING LOAN FUND WITH MFIs/BANKS IN BURCO SOMALILAND.

1. Background:

World Vision International (WVI) has been operating in Somaliland for several years, focusing on improving community resilience, livelihood sustainability, and economic development. As part of its long-term strategy, WVI integrates sustainable approaches to address recurrent challenges faced by pastoralists, agro-pastoralists, and peri-urban households, particularly droughts, food insecurity, and economic vulnerability.

WVI, through EU-BREACH project, aims to strengthen the capacity of vulnerable communities by providing access to financial services, promoting social inclusion, and reinforcing economic development opportunities. A key aspect of this strategy is the establishment of a Revolving Loan Fund (RLF) in collaboration with reputable microfinance institutions (MFIs) or banks. The RLF will target small and micro-enterprises, Village Savings and Loans Associations (VSLAs), livestock associations, and farmer groups in Burao District, Somaliland. The fund will offer a flexible capital source for businesses, aiming to promote financial inclusion and foster economic growth.

This initiative under WVI’s mandate aims to support vulnerable communities by enabling access to financial services, which are critical for strengthening resilience, fostering economic growth, and enhancing livelihoods in the long term.

2. Introduction:

Through EU-BREACH project, World vision is committed to fostering economic empowerment and improving resilience in Somaliland. The revolving loan fund will provide crucial financial support to economic groups, helping them gain access to capital needed for business development and livelihood improvements.

Partnering with a local MFI or bank, World vision seeks to extend financial services to underserved communities in Burao, including VSLAs, livestock groups, and farmer groups. The financial institution selected will manage and operate the loan fund, providing savings, loans, and additional financial services, including mobile banking. These efforts will enable communities to strengthen their economic activities, become more financially stable, and build resilience against future shocks.

3. Objectives

The objective of this TOR is to identify a suitable MFI or bank to manage and provide demand-driven, high-quality, and innovative financial services tailored to small and micro-enterprises.

The key role of the selected financial service provider will be to manage a loan revolving fund on behalf of World vision. The loan revolving fund will be used to give out loans to agreed cohort between the bank/MFI and BREACH project participants in target IDPs and target villages under Burco district. Additionally, the financial service provider will also offer access to other appropriate financial services including savings, and fund transfer to the BREACH cohort. All this will ensure sustainability of the current program.

The specific objectives are:

• Operate and manage a revolving loan fund in Burao.
• Provide tailored financial products and services to VSLAs, livestock groups, and farmer groups.
• Promote financial inclusion by offering savings, loans, and mobile banking services to rural communities.
• Ensure that financial services are accessible to underserved communities, especially women, by developing gender-sensitive loan products.

4. Expected Results:

• Financial Product Development: Design and implement relevant financial products tailored to the needs of micro and small enterprises. This includes bill payment services, money transfers, and women-inclusive loan products. which help ensure the ease and safety of their financial transactions.
• Increased Financial Access: Enable economic groups such as VSLAs and farmer/livestock groups to access formal financial institutions and services.
• Mobile Banking Accessibility: Ensure that communities, particularly those in remote areas, can access financial services through mobile banking platforms.
• Capacity Building: Strengthen the capacity of MFIs/banks through technical support and gap analysis to improve their service delivery.
  • NB: The selected MFI/bank will also be supported on capacity gaps identified in the MFIs/ banks.

5. Scope of Work:

The selected financial institution will be responsible for managing the loan fund, facilitating loans to economic groups, and providing additional financial services. The scope of work includes:

• Target Location: We anticipate to recruit MFIs/Bank’s which physical location in Burco to support the project target sites including Boodhley Village, Iskudhoon village, Godorka, Kaladhac, Qabri-gorod, Alla Aamin IDP, Ali Hussein IDP, Barwaaqo IDP, Koosar IDP and Marayare of Burao District (Somaliland)
• Loan Management: Facilitate loans to VSLAs, livestock groups, and farmer groups in the project area.
• Additional Services: Provide savings accounts, mobile banking, and fund transfer services.
• Financial Inclusion: Develop and deliver women-inclusive loan products.

6. Eligibility Criteria for MFIs/Banks:

• Must be a reputable, legally registered financial institution in Somaliland.
• Must have operational presence in Burao.
• Relevant experience in facilitating transactions, implemented Revolving Loan Fund activities, and other economic empowerment activities in the past with NGOs.
• Ability to provide alternative banking services, such as mobile banking, for remote areas, whereby remote villages with limited access to physical financial institution could access and do transactions digitally.
• Experience in implementing Micro-finance related activities or experience working with micro, small, and medium enterprises (MSMEs), with a focus on vulnerable communities (small business owners).
• The MFI/bank should have capacity to offer gender-sensitive financial products, especially for women-led enterprises, or be willing to develop women friendly loan products.

7. Requirements

• Proven experience in providing financial services to MSMEs in Burao.
• Legal registration and compliance with the Central Bank of Somaliland and have a presence in the target location (Burco).
• Ability to engage effectively with small businesses and economic groups in the target area.
• Ability to work effectively and deliver all reports in English.

9. Evaluation Criteria:

The Selection of the firm (MFI or bank) will be made based on cumulative analysis (i.e., mandatory requirement and technical qualifications, financial evaluation as follows:

Mandatory Requirements:

Applicants must submit the following documents as part of the application:

• Central Bank registration certificate.
• Commercial operating license from the Government of Somaliland.
• Tax clearance certificate.
• Company profile and organizational structure.
• Capability statement highlighting relevant experience.

Applications without mandatory requirements will not be considered

NB: Successful bidder will be required to sign World Vision Supplier Code of Conduct form.

Technical Evaluation

Applicants need to clearly articulate on the following, but not limited to: –

• The profile of the firm (MFI or bank) and cover letter outlining the suitability of MFI or bank in undertaking the assignment (Not exceeding two pages).
• Up to two-page statement of capability (referencing the selection criteria) and the approach to be take in undertaking this assignment.
• Clear work plan including time frames for the financial services market assessment.
• Detailed CVs of key personnel (including any formal qualifications) should be provided.
• References from at least two previous clients for managing a revolving loan fund including names and contact information from previous clients who can be contacted regarding relevant experience in managing a revolving loan fund (At least two).

Financial Evaluation:

• Financial proposal, including a breakdown of costs in USD and applicable taxes must be clearly stipulated and separated from the base costs.
• Payment terms and credit period.

NB: Financial proposal should not be part of the technical proposal; it should be a separate document.

10. Bid Submission:

Interested financial institutions must submit their technical and financial proposals as separate documents by email to [email protected]. Please indicate “Loan Revolving Fund” in the subject heading. The application deadline is 20th Feb 2025. Canvassing will lead to automatic disqualification.

Email title should be;Loan Revolving Fund – WV BREACH project.