Local Short-Term Technical Assistance (STTA): Introduction Of A Self-Regulation Mechanism For Non-Deposit Taking Microfinance Organizations, International Development
July 18 2019
Bishkek , Kyrgyz Republic
The USAID Enterprise Competitiveness Project is a five-year initiative that aims to accelerate sales growth and increase job creation among Kyrgyzstani small and medium enterprises (SMEs). The USAID Enterprise Competitiveness Project partners with end markets, SMEs, business development and advisory service-providers, government agencies, associations, and other market actors who are willing to co-invest to accelerate inclusive, market-led growth by fostering a system that increases market access and competitiveness, catalyzes investment, unlocks opportunities for women and youth, builds skills, and encourages a more enabling business environment.
In pursuance of the Program of the Government of the Kyrgyz Republic “Unity, Trust, Creation”, approved by the Resolution of Jogorku Kenesh #2377-VI, issued on 20 April 2018, the National Bank and nonbanking financial organizations are expected to undertake measures to improve access to finance for the public. This work includes efforts on decreasing credit interest rates.
Purpose of Assignment
In order to achieve these goals and create a favorable economic, legal and regulatory environment to support institutional development of viable, sustainable and socially responsible microfinance sector (as the key tool for providing funds for development of small and medium businesses, as well as for promoting employment and improving wellbeing of the population), the National Bank with active support from the Association of Microfinance Institutions (hereinafter referred to as the “AMFI”), and microfinance sector actors have developed the “Main Directions for Development of the Microfinance Sector in the Kyrgyz Republic for 2018-2021”, which was approved by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic #2017-П-11/51-4-(НФКУ), in 13 December 2017 (hereinafter referred to as the “2018-2021 MDDMS”).
The main tasks to achieve 2018-2021 MDDMS’s goals include:
• Improving the legal framework to promote new financial products and services, and to expand the number of funding providers for nonbank financial organizations;
• Strengthening the system of regulation and oversight in the microfinance sector;
• Facilitating institutional development of the microfinance sector to make it more efficient and sustainable, expand the services provided by sector, improve availability and affordability of the services;
• Developing the microfinance market’s infrastructure; and
• Ensuring transparency of the microfinance market and protection of the rights of microfinance service consumers.
To strengthen regulation and oversight in the microfinance sector, the “2018-2021 MDDMS Implementation Action Plan” features specific activities that seek to optimize regulatory impact and streamline development of the microfinance market through introduction of regulatory standards for different types of nonbank financial organizations.
Further development of the sector requires establishment and introduction of a self-regulation mechanism, which is expected to improve the efficiency of regulation and oversight and decrease regulatory costs. The “2018-2021 MDDMS Implementation Action Plan” includes the development of specific measures to introduce this mechanism. This work will require reviewing international practices and developing a concept for self-regulation of the system, so as to lay the foundation for a necessary legal framework.
It should also be noted that establishment of a self-regulation mechanism was recommended by the World Bank in the Financial Sector Development Memorandum, which the Bank’s experts prepared under a project of the Trust Fund of the Swiss State Secretariat for Economic Affairs.
When implementing the “2018-2021 MDDMS Implementation Action Plan”, the National Bank and microfinance sector actors realized that they lack expertise in creating Self Regulating Organizations (SRO) in microfinance sector, and require support from international consultants, to advise on introduction and operations of SRO, SRO’s interactions with the National Bank, and development of respective rules and regulations.
• Provide support in the following areas – (i) preparation of a Feasibility Study on introduction of an SRO mechanism for nonbank financial organizations that do not attract deposits, (ii) development of a Concept for an SRO system that defines recommendations for development of proper legal enabling environment, (iii) development of specific measures to introduce SRO, and (iv) drafts of respective rules and regulation. The Consultants should make sure that the National Bank, AMFI and other stakeholders are engaged to this work at all stages – from determining general intentions to making and implementing decisions. The selected consultants must determine a timeframe for implementing decisions, identify responsible parties, agree on specific implementation measures, and prepare supporting documents (explanatory notes, program materials, expert reports, and the draft concept) and forms for reporting.
• Participate in public meetings and round tables with representatives of the sector.
• Organize working meetings to discuss the Feasibility Study and draft a concept paper for the introduction of an SRO system that lays the foundation for the legal framework with representatives of the National Bank, AMFI and other stakeholders.
• Develop recommendations on professional development training for representatives of the National Bank and AMFI, dedicated to the introduction of the SRO mechanism and operations of such organizations.
• Create a separate SOW for the local consultant who will assist on the ground in carrying out this work;
• Reviewing applications for a local expert to assist with the activities in this scope of work (to be hired separately by Nathan Associates);
• In coordination with the local consultant, provide support to the staff of the National Bank, AMFI and other stakeholders with respect to international best practices in the introduction of the SRO mechanism and operations of such organizations;
• Provide support including:
o Assessment of SRO’s impact on the market, and preparation of a Feasibility Study for the introduction of an SRO mechanism for nonbank financial organizations;
o Development of a concept paper on an SRO system that lays the foundation for the legal framework;
o Develop specific measures to introduce SRO;
o Develop respective rules and regulations.
• Conduct an expert assessment of, and provide analytical support to the above-listed activities at National Bank’s meetings and public hearings;
• Conduct necessary consultations, discussions, training, outreach activities and project workshops (including site visits to study international practices, as needed);
• Conduct regulatory impact analysis if needed;
• Participate in meetings and activities, initiated by the National Bank and AMFI;
• Assist representatives of the National Bank, AMFI and other stakeholders received assistance with respect to the preparation of a package of respective documents to be approved by the Board of the National Bank in accordance with the established procedure;
• Assist with the promotion of the product/program in the media.
• Draft SOW for a local consultant;
• Report on the feasibility of introduction of an SRO mechanism for nonbank financial organizations that do not attract deposits;
• Concept paper on the SRO system fully functioning/operating in the realm of the Kyrgyz Republic;
• Roadmap with recommended measures to introduce SRO;
• Draft rules and regulations for the introduction of an SRO mechanism for nonbank financial organizations that do not attract deposits;
• Package with respective draft law and supporting documentation to be approved by the Board of the National Bank in accordance with the established procedures;
• Results of the needs assessment, based on information, collected with “Issue Tree” methodology;
• Promotional media materials on SRO (i.e. posters, infographics, articles).
The reports should be submitted in English.
The estimated timeframe for this assignment is three months.
• Practical experience in the successful implementation of concepts for introduction of SRO mechanisms in the microfinance sector (preferably direct involvement in at least 2 similar projects);
• At least 5 years of international experience in microfinance or banking sector as an officer in a microfinance organization or as a consultant in this sector;
• Russian profiency a plus.
Travel to the Kyrgyz Republic is required.