Background
Root Capital is a nonprofit social investment fund that grows rural prosperity in poor, environmentally vulnerable places in Africa and Latin America by lending capital, delivering financial training and strengthening market connections for small and growing agricultural businesses. Root Capital is looking for a consultant in Kenya to help us understand how to serve the ‘last mile’ (businesses with financing needs of $10k-50k) segment in East Africa through collaborations and partnerships with local institutions – financial or otherwise.
Objective
Build Root Capital’s knowledge of the East African market for Last Mile wholesale lending and advisory services. This knowledge will inform our strategy for engaging with prospective partners in the region to expand our impact for smallholder farmers.
Scope of Work
The consultant will conduct a landscape mapping of financial institutions and other finance distribution channels (e.g. input suppliers or equipment leasing companies) to identify opportunities for Root Capital to provide wholesale capitalization and/or advisory services to entities that can lend to agricultural businesses in the last mile segment.
The works envisaged within this scope include:
- Market Assessment: Financial Institution Mapping
As a launchpad for this study, the consultant will conduct a literature and database review to avoid conducting duplicate research within the sector. The consultant will first familiarize him/herself with publically available materials as well as materials provided by members of Root Capital’s network. This may include analysis of a database of microfinance offerings from the Initiative for Smallholder Finance, sector studies organized by peer institutions, and participation in pre-recorded webinars or reviews of presentations per Root Capital’s guidance.
The consultant will then build a framework for mapping our remaining information needs to deepen our understanding of financial institutions in East Africa, with a primary focus on Kenya and a secondary focus on Rwanda, Tanzania, Uganda, and Zambia. The methodology will include interviews with prospective financial institutions partners in Kenya and a desk research review on the other countries in East Africa.
The goal of the assessment is to determine the market potential for lending to and advising local institutions seeking to on-lend to farmers and/or to move into the agricultural business lending space. It will also include evaluating alternate distribution channels for credit, namely input providers and equipment dealers in East Africa.
The assessment should cover three broad segments of actors as potential targets of capitalization with a focus on those that are positioned to reach farmers and smaller enterprises that are outside of Root Capital’s standard model:
- Local financial institutions that are currently, or would like to begin, on-lending directly to farmers and to micro and small agricultural businesses (i.e. microfinance institutions moving upmarket; savings and credit organizations; and small business lenders moving into the agricultural sector);
- Producer organizations that on-lend to their affiliated farmers via internal credit systems; and
- Input suppliers and equipment dealers that distribute goods and services to farmers.
The study results should deliver sector-level trends and opportunities for each country in East Africa and detailed appendices with an assessment of specific financing engagements recommended for follow-up within Kenya. Within the interviews with financial providers, the consultant should assess each business’s appetite for risk sharing with its investors, agricultural value chains of interest for the institution, and additional guarantees or relevant risk management instruments (insurance, etc.) currently available at the state or institution level.
- Financial Product Development
Based on the mapping of financial institutions and alternate distribution channels, the consultant will assess Root Capital’s capability to capitalize local financial institutions and provide the lending department with advice for the future structuring of a financial product and due diligence process for underwriting wholesale loans.
This assessment should outline important processes and policies (due-diligence, underwriting, closing, monitoring and collections) that will help Root Capital managing the risk of these transactions while maintaining an eye on controlling the time and costs associated with them.
Conduct of the Work
The proposed consultancy will be managed by the Business Development Officer for East Africa and work in close collaboration with the East Africa Regional team.
Outcomes and Deliverables
The primary outcome expected from this work is a clear understanding of the strategy Root capital will take to effectively on-lend to financial institutions that serve the last mile segment, including a list of likely candidates, if they exist, to be considered for a full credit analysis in Kenya.
The final deliverable for this consultancy will be a report that includes:
- An assessment of the market potential of Root Capital’s financing of local financial institutions, producer organisations, input suppliers and equipment dealers to reach the Last Mile segment. This should both include: a) a nuanced understanding of the needs and abilities of each type of entity, and b) the potential size of the opportunity for Root Capital by entity type. Trends by geography and industry should also be noted.
- A wholesale lending financial product proposal, including minimum underwriting guidelines, and policies/practices for due-diligence, underwriting, closing, monitoring and collections. This product proposal should note how this product and process could differ by entity type, industry, or geography, as necessary.
- A detailed annex of the surveys and/or interviews carried out, segmented by potential for Root Capital service provision. This annex shall include contact information, financing needs, and qualifications by entity.
The report shall be submitted in Word or PowerPoint, with key findings presented to Root Capital management in our Nairobi office and via teleconference.
Requirements
RC is looking for a consultant who meets the following requirements for this assignment:
Mandatory requirements
- Professional qualification in banking, finance or business
- Strong and up-to-date understanding of East Africa financial services sector
- Expertise in financial product development and underwriting best practices for MFI and SME lending
- Market research and strategic management skills
- Excellent communication skills and ability to engage and work well with others; ability to represent Root Capital well to third parties
- Proven experience carrying out similar work
- Ability to provide clear written documentation at the end of the study, with a willingness to deliver portions of the study for review at pre-defined phases.
The consultant must be willing to sign and abide by a complete confidentiality and non-disclosure agreement with Root Capital. Root Capital retains all rights to the final product of the consultancy.
Timetable
The work is expected to start immediately and be finalized within three calendar months. The assignment is envisaged to take about 45-60 working days, though we are open to proposals that diverge from this assumption.
Instructions for Submission of Proposal
Please submit a proposal of no more than ten pages, structured as follows:
- An executive summary or cover letter introducing your organization and its unique qualifications to conduct this work (1-2 pages)
- Outline of study phases, including proposed activities and timeline (including start date availability) (4-8 pages)
- Expectations for engagement with Root Capital program staff (touchpoints for review and revision of framework and deliverables, any needs for contacts in SME financing, etc.) (up to 1 page)
- List of proposed interim and final deliverables and their desired outcomes (up to 1 page)
- Pricing of study
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Appendices, including:
- Team member names, relevant past consulting projects, and CVs or summaries thereof
- Preliminary list of sources proposed for literature review, interviews, and surveys
There is no page limit on appendices; they are not restricted to the limit for the body of the document.
Proposals should be sent to: jobsafrica@rootcapital.org, no later than the 15th of February, 2016.