Technical Assistance for MESMER Partner Banks

ABOUT FC AFRICA

Founded in Ethiopia and operating across the continent, FC Africa is a pan-African organization delivering complex economic development programs at scale. Established in 2006, FC Africa has grown into a trusted partner for governments, development partners, financial institutions, and private sector actors, known for execution discipline, institutional credibility, and results that endure. Our multidisciplinary teams combine a capacity to execute with clarity of the local context. As a result, we have delivered at-scale real impact in terms of job creation, business formation, business growth, and investment attraction and mobilization.

ABOUT THE PROGRAMME

Micro, Small, and Medium Enterprise Recovery and Resilience Program (MESMER) is a 5-year program launched in October 2022 to support 72,200 MSMEs and 410,800 jobs by creating access to finance for micro, small and medium enterprises (MSME) to realize their growth prospects and resilience. MESMER will also work to provide support to MSMEs through business development support, psychosocial services, and technical assistance to financial institutions. MESMER is a countrywide program implemented by First Consult in partnership with the Mastercard Foundation as part of the Foundation’s Young Africa Works strategy and will strive to create dignified and fulfilling work for the youth, the majority of them women.

MESMER is a national scale-up of the existing MSE Resilience Facility launched in 2020 to support enterprises affected by the COVID pandemic. The project will mainly be following a four-pronged approach to meet its objectives: a) Grants and soft loans to MSMEs through a risk-sharing liquidity fund arrangement, b) Technical assistance to financial institutions, c) Business development services and life skills, d) Psychosocial support. The FDRE Ministry of Labour and Skills will be the main government counterpart for the program. Other partners include financial institutions (microfinance institutions, banks, and digital financial service providers), BDS, and psychosocial support providers.

BACKGROUND OF THE ASSIGNMENT

Ethiopian MSMEs growth and development as well as their contributions to socioeconomic development of the country are undermined by various challenges including limited access to finance, poor technical and business leadership skills, lack of working premise, weak support system and market access, high exposure to shocks such as conflict, inflation, and other macroeconomic challenges. Access to finance is the most top citied constraint by MSMEs as the banks’ business model is primarily catered to large enterprises who have fixed assets collateral and hence they do not have MSMEs targeted financial products/services. In addition, banks are not particularly keen to engage MSMEs due to perceived risks and low return. Microfinance institutions have also primarily targeted micro-enterprise and offering group loans so that they have limited experiences and technical capacity to offer tailored financial services for SMEs. Further, in general, Ethiopian FIs have liquidity challenges to adequately finance MSMEs. Consequently, Ethiopian SMEs are categorized under the “Missing Middle” group within the context of access to finance.

Therefore, MESMER program aims to promote inclusive and innovative financial services for MSMEs and support partner FIs to develop innovative products that meets the specific financing needs of the MSMEs. Against this background, the MESMER Programme identified technical assistance (TA) as a key enabler for equipping partner financial institutions to deliver innovative, responsible, and inclusive financial services to its target MSMEs. Accordingly, MESMER continues to provide TA to four partner banks to improve credit performance and sustainably expand their MSME finance portfolios, thereby supporting enterprise growth and job creation. In collaboration with the National Bank of Ethiopia (NBE), MESMER also supports system-level interventions, including the establishment of a National Credit Guarantee Fund and the strengthening of national financial education, to promote scale and sustainability.

This Technical Assistance (TA) assignment will focus on providing tailored support to partner banks to sustain financing for MESMER participants through repeat loan packages, introduce innovative and customized commercial MSME finance products, and strengthen their policies, practices, and skills in line with MSME finance principles and best practices. The repeat loan product will help MESMER participants grow, create quality employment, build strong repayment records, reduce their risk profiles, and improve their bankability. The TA will also support the development of customized financial products for other underserved groups, enabling partner banks to strengthen and sustainably scale their MSME finance portfolios.

DUTIES AND RESPONSIBILITIES

Financial sector updates, insights and awareness creation:

• Review and analyze emerging regulations & provisions implications on financial sector growth & development, financial inclusion with the emphasis on MSME financing.
• Provide guidance, financial sector insights and MSME market update for MESMER Mgmt team, partner banks Mgmt and other key stakeholders, specifically focusing on access to finance for MSMEs and other relevant interventions.

MSME finance products development and rollout:

• Conduct rapid assessment on MSMEs operational contexts, market dynamics, priorities, challenges and analyze & define financing needs and prospects.
• Review MESMER participants’ profiles, business performance, operational challenges, loan repayment records, financing needs, and other support requirements to enhance their growth and productivity and strengthen their potential to create quality employment.
• Review PFIs existing initiatives, policies, guidelines and financial products that target MSMEs, and analyze institutional readiness, areas of improvements to create synergies.
• Develop a repeat loan product with a tailored delivery methodology for MESMER participants who have demonstrated strong repayment performance and high potential for business growth and quality job creation.
• Develop or refine inclusive and innovative financial products and delivery methodologies for underserved MSMEs for MSMEs owned by women, youth and other underserved groups, based on their financing needs and risk profiles, prevailing market dynamics, best practices and the bank’s strategy.
• Organize product concepts and operating assumptions validation sessions with the MESMER management, PFI’s top management team and relevant ecosystem stakeholders.
• Translate approved concepts into implementation-ready product packages, processes, tools, controls and staff guidance.
• Support pilot launch and early rollout, monitor performance and customer experience, and recommend evidence-based adjustments.

MSME Finance policy and strategy:

• Follow up and continue provide ongoing technical guidance for each partner bank’s strategy formulation team to produce customized and enhanced MSME finance strategy.
• Review draft MSME finance strategy produced by each bank and provide constructive feedback in order to align with the contexts, best practices and principles as well as overall mission, vision and strategy of the bank.
• Organize MSME strategy validation sessions/workshop with the top management of each bank to ensure buy in and approval as well as to enhance adoption of change in policies, procedures and practices to boost SME finance portfolio.
• Closely engage partner FIs management and provide advisory supports to effectively implement enhanced MSMEs finance strategy and other recommended solutions and relevant changes in policies, procedures and practices aiming enhance MSME credit portfolio.
• Engage in policy advocacy and stakeholders’ engagements relevant to promote financial inclusion and positively influence financial sector engagements towards MSME financing. This could include change in FIs’ policies, procedures and strategies towards MSME financing.

Digital Lending:

• Closely engage and advise partner banks to launch and operationalize MESMER digital loan. This could include reviewing digital credit concepts, scoring factors/mechanisms and proposing areas of improvements following best practices and local contexts.
• Provide ongoing operationalization support, guidance and follow-up to enhance partner banks’ digital lending capabilities and performance.
• Produce monthly progress report on MESMER digital credit operations.

MSME Credit Risk Management:

• Review and provide ongoing technical guidance on MSME credit risk management system and practices and identify gaps and ensure early actions are taken to further strengthen quality of MSME credit portfolio.
• Coordinate and engage with the risk management TA provider, review deliverables and provide inputs to ensure quality on diagnosis findings, guidelines, policy, procedures, tools, training materials & materials & another relevant deliverable.
• Train, mentor and coach bank’s staff in NPL management system, practices and reporting.

Ongoing technical guidance to partner FIs as required

• Provide ongoing guidance and technical advice for MESMER Mgmt and partner FIs to enhance programme performance,
• Organize MSME finance trainings for banks districts and branches staff

Reporting

• Provide biweekly and monthly progress reports in respective TA activities
• Any other related activities assigned by TA Lead.

Based on the agreed training schedule and timing, FC Africa will cover the consultant lodging, travel and related costs.

REPORTING

The consultant will be working under the close guidance and direct reporting line to the MESMER Programme TA lead.

The minimum qualifications and professional experiences are expected to be:

• University degree or higher, in business, economics, finance or related discipline
• A minimum of 8 years proven experience in financial sector and MSME finance and more specifically in designing and provision of TA for banks and other FIs,
• Experience in conducting a diagnostic and devise practical recommendations for FIs in areas of MSME financing,
• Good knowledge of the financial sector in Ethiopia,
• Good knowledge of the IMSME finance market in Ethiopia,
• Proven experience in training delivery and mentoring programs for financial institutions,
• Excellent analytical, reporting and interpersonal skills and ability to work with others,
• Ability to work with public and private sector stakeholders,
• Commitment to building the skills and competence of the team,