Access to Sharia-compliant Microcredit Review

Terms of Reference for an Access to Sharia-compliant Microcredit Review

HiH Afghanistan – Access to Credit and Microfinance

Overview

Hand in Hand Afghanistan (HiH AF) is seeking to procure the services of a suitable microfinance consultant, with expertise in Islamic finance, to conduct a thorough review and analysis of HiH AF’s Access to Credit element of its approach. The review will result in a comprehensive strategy and process for this core element of the Hand in Hand approach, where achieving financial sustainability of operations is key. The review will take place in September 2013 with a final report by 1st October 2013.

Brief Organization Description

The Hand in Hand Group (HiH) includes four operational partners, Hand in Hand Afghanistan, Hand in Hand Eastern Africa, Hand in Hand India and Hand in Hand Southern Africa. Additionally, HiH includes Hand in Hand International, which serves as the fundraising, coordination, support and strategic expansion office, as well as a sister fundraising organization, Hand in Hand Sweden. Together, as independent organizations with a joint mission, HiH works to alleviate poverty through sustainable job creation.

HiH AF is a Non-Governmental Organization (NGO) based In Kabul, and member of the Hand in Hand Group. HiH AF started operations in 2007, with a vision to reduce poverty through job creation in marginalized communities throughout the country. With current operations in the Balkh province, Kabul and Mazar-el-Sharif, HiH AF focuses on poor women farmers and micro- entrepreneurs in rural and sub-urban communities.

Access to Credit Review

The Hand in Hand approach, while tailored to suit the local market, is defined by four key elements:

1. Social Mobilization
2. Business Training
3. Access to Credit
4. Market Linkages and Value Addition

An integral part of the HiH approach is providing access to credit, either directly or through partners. HiH AF’s current approach to credit access is guided by its board-approved Enterprise Incubation Fund (EIF) Policy Statement, which outlines the catalytic intent of the credit provision offered by HiH. HiH AF requires a full review and assessment of its current approach, including product offering, operational process and procedures and long-term strategy to financial sustainability.

To date, HiH AF has provided credit access to members on a modest scale; near-term plans, as outlined in its 2013-15 Strategic Plan, board approved in March 2013, include a significant expansion of lending activities.

HiH AF’s Current Program

HiH AF aims to provide the very initial, catalytic capital to its members who are otherwise excluded from the financial market. The ambition is that when group members have built up a business and credit history they should transfer to the more formal financial system. The organization began direct lending just over a year ago and through May 2013, had disbursed USD 340,000. Initial funding for HiH AF’s loan program was provided through a grant from Johnson and Johnson Citizenship Corporate Trust and through loan capital provided by HiH International for on-lending to HiH AF’s members. Current loan products vary in term, purpose and size, but, in an effort to meet the Sharia-compliant needs of its members, all charge a flat up-front administrative fee of 2.0% instead of charging interest.

As a further consequence of the need for sharia compliance, most microfinance institutions in Afghanistan struggle to achieve sustainability, and those who do, tend to target more densely populated urban areas. As a result, there are limited opportunities within the Afghanistan market to link members to micro-credit partners.

The Review

The review should aim at assessing the overall effectiveness of the current approach associated with providing access to credit. The review should result in a further developed and refined approach, ensuring that it meets the Sharia-compliant needs of HiH AF’s members, as well as the organization’s needs for operational sustainability. It should encompass a comprehensive evaluation of the local market dynamics, including, but not limited to, identification and evaluation of all stakeholders, current access to financial products and any gap in the financial market; and the findings should provide concrete recommendations for a revised approach, including a view towards achieving sustainability, as well as detailed recommendations on procedures, staffing, systems, etc.

The recommended, forward looking strategy should reflect the following:

• An appropriate, realistic and focused approach relative to the specific market environment in Afghanistan and the need for sustainable lending operations
• An approach that fits well within HIH AF’s EIF Policy Statement and complements the overall HiH AF program, framework and operational capacity
• Development of authentic and market-driven Sharia-compliant products
• A strategy that allows for appropriate growth and expansion

Key Deliverable

• An Access to Credit and Microfinance review plan at inception
• A presentation of draft findings to HiH AF for discussion and feedback
• A report on the findings and the recommended forward-looking strategy, which should include achieving sustainability and self-sufficiency, for the Access to Credit element of the HiH AF approach
• A detailed implementation plan, including, but not limited to, staffing requirements and MIS/systems requirements and improvements and updates to current practices and procedures
• An outline of the plan and measures to build the capacity of HiH AF staff
• An Executive Summary of the report
• Presentation of the final report to HiH AF

Consultant Skills and Experience

HiH AF is looking for a consultant with the following skills and experience:

• 5+ years of experience in microfinance program design, implementation and evaluation
• Expert/deep knowledge of Islamic finance and Sharia-compliance
• Strong analytical (market and economic analysis) writing skills
• Ability to operate in challenging environments, direct experience working and implementing in Afghanistan a plus
• Solid project management and implementation experience
• Willingness and ability to travel to Afghanistan

How to apply:

Proposals should be submitted to Abdul Rahim Nasry, HiH AF Country Director, via email toarahimnasry@hihafghanistan.org, no later than 15 August 2013. Proposals should include the consultant’s broad approach and expected process, anticipated time frame and fee quote, as well as a summary of skills and experience.

HiH AF aims to engage the consultant by Sep 2013.