1 - SOW.docx

STATEMENT OF WORK

Indonesia Access to Finance for Micro-, Small-, and Medium-Sized Enterprises Consultant

A. Introduction

The Millennium Challenge Corporation (MCC) is a Federal Corporation created under Title VI of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2004. MCC’s mission is to reduce poverty around the world through the promotion of sustainable economic growth based on the principle that aid is most effective when it strengthens good governance, economic freedom and investments in people. MCC requires professional services to provide insights and recommendations about micro-, small-, and medium-sized enterprises (MSMEs) in Indonesia.

B. Program and Project Overview

On December 11, 2018, MCC’s Board of Directors selected Indonesia as eligible to develop a second compact program. MCC compacts are large, five-year grants to implement custom-designed programs that spur economic growth in the partner country by holistically addressing the root causes of poverty in that country. MCC’s first compact program with Indonesia was a $600 million program that ended in April 2018 and focused on procurement reform, maternal and infant nutrition, and green growth.

MCC’s compact programs are developed with partner countries over the course of several years, and MCC’s work with Indonesia on the second compact program is currently in the early stages. The compact development process is data-driven and iterative, moving through the following five distinct phases[footnoteRef:2]: [2: For more on MCC’s approach to compact development, see https://www.mcc.gov/resources/doc/guidance-compact-development-guidance.]

· Preliminary Analysis. In this phase, the country in partnership with MCC undertakes broad consultations with stakeholders and conducts an analysis of the constraints to economic growth in that country. The phase ends with the development of a Constraints Analysis that outlines the binding constraints to growth in the country.

· Problem Diagnosis. In this phase, the country in partnership with MCC defines problems and conducts an analysis of the root causes of the identified binding constraints. The phase ends with the development of Concept Notes that identify the core root causes and what opportunities may exist to address the root causes.

· Project Definition. In this phase, the country in partnership with MCC defines and scopes specific projects, identifies investments and activities, and builds the actual program logic for the proposed compact program. The phase ends with the development of Project Proposals that detail the specific projects that comprise the compact program, and how they might meet MCC’s investment criteria.

· Project Development. In this phase, the country in partnership with MCC launches public procurements, conducts feasibility, environmental and other studies, identifies beneficiaries from the projects and calculate the probable economic impact from the projects. The phase ends with the development of an Investment Memorandum that details the proposed compact program and discusses the manner in which the proposed program accomplishes the overarching objectives in the country while also meeting MCC investment criteria.

· Negotiation. This is the final stage, during which the compact is negotiated with the partner country’s government, the compact is finalized, submitted for approval by both the country and MCC, and signed.

After an MCC compact is signed, the country sets up a local entity that is staffed by local professionals to manage and oversee all aspects of implementation, using MCC’s grant money.

MCC’s work in Indonesia is currently in the Project Definition phase. As part of the Problem Diagnosis work that was recently completed, MCC and the Government of Indonesia (GOI) agreed to focus further development efforts on Indonesia’s financial services sector, and on alleviating issues related to the binding constraint of costly and underdeveloped financial intermediation. MCC and the GOI also agreed to focus project development efforts on three specific provinces: South Sumatra, North Sulawesi, and Riau. As the work progresses, MCC and the GOI will need to define and develop specific projects that will aim to address financial intermediation issues in these selected locations.

C. Country

Indonesia and any MCC eligible country.

D. Scope and Objectives

MCC is seeking in-country expertise with micro-, small-, and medium-sized enterprises (MSMEs), to provide MCC with (i) insights about the specific issues these enterprises face in attempting to access finance, and (ii) recommendations about how to design effective interventions to address these problems in Indonesia. The work would start immediately and feed into the Project Definition and Project Development phases as outlined above.

As described above, MCC and the GOI have agreed to focus the proposed compact program on issues related to the identified binding constraint of costly and underdeveloped financial intermediation. MCC and the GOI plan to approach this issue from two angles: increasing access to finance for infrastructure, particularly transport and logistics infrastructure; and increasing access to finance for MSMEs, particularly women-owned MSMEs. As the work progresses, MCC and the GOI need to identify specific interventions that aim to alleviate both supply- and demand-side issues that prevent growth-oriented MSMEs from accessing finance. MCC and the GOI have discussed a variety of innovative financing mechanisms that could increase the available supply of finance for MSME borrowing, as well as potential activities that would aim to increase the demand for finance by assisting MSMEs with meeting prohibitive collateral and procedural requirements. Within this set of proposed concepts, MCC will need to better understand what is likely to be most feasible and impactful – within the scope of a five-year MCC compact – in order to narrow scope and design an effective package of interventions.

Also during the Problem Diagnosis phase, MCC and the GOI agreed to focus project development efforts on South Sumatra, North Sulawesi, and Riau; however, while MCC will aim to work largely at the provincial or district level, the program will likely still be housed within a national ministry and have ties to national-level policies and other issues. As such, MCC will need to better understand both the national and provincial issues that constrain MSMEs from accessing finance to grow their businesses, though particular emphasis will be given to developing provincial-level projects that aim to address the specific root causes of these problems in the chosen locations.

This work will focus on ascertaining whether specific project / local jurisdiction combinations will be likely to meet MCC’s project Investment Criteria during the Project Definition phase outlined above. Once this determination has been made and projects selected for further due diligence, this work will shift to making project design and implementing arrangement recommendations commensurate with any local context challenges or opportunities. MCC’s Investment Criteria are:

· MCC expects the compact programs it supports to reduce barriers to a country’s long-term economic growth, as identified in the constraints analysis described above.

· MCC expects each project it supports to generate economic benefits that exceed the project’s total costs, as measured through a cost benefit analysis that determines an economic rate of return (ERR).

· MCC’s expects that its compact programs can be completed within an implementation period of no more than five years.

· MCC believes that economic development assistance is most effective when it strengthens the relationship between a selected country’s government and its citizens, reflects the selected country’s own priorities, and augments the impact of other development projects and plans.

· MCC recognizes that economic growth and poverty alleviation can only be achieved when the natural environment is protected and the participation of women, the poor and disadvantaged social groups is ensured.

· MCC supports projects that set clear, measurable goals and are designed to continuously monitor their progress and performance.

· MCC expects its compact programs to continue delivering benefits long after a five-year compact program comes to a close. To do so, compact programs must be designed and implemented for long-term sustainability.

E. Tasks

The MSME Finance Consultant will support MCC activities in Indonesia for a base period of up to 12 months performing the following tasks:

1. Review the proposed project concepts and make recommendations about which areas to take forward for further development, both in terms of (i) increasing the availability of MSME financing, potentially through blended finance mechanisms, and (ii) increasing the demand for MSME financing by building capacity to meet borrowing demands;

2. Collect and analyze the lessons learned from other funders (bilateral, multilateral and foundation) in this space, as well as areas where the GOI has or has not been successful in implementing regulatory reform;

3. Conduct assessments of local financial markets, MSME needs, and capacities of government and other potential project partners, and provide advice to MCC in the Project Definition and Development phases of compact development by taking local context into account;

4. Conduct a location-specific analysis of the challenges and opportunities faced by MSMEs seeking finance within the priority provinces in order to better understand the demand side issues faced issues faced by underserved, growth-oriented MSMEs in these areas. In particular, the teams would like to understand if there is a need for sequencing or particular timeline considerations for specific interventions.

5. Provide technical support to MCC on project design and development efforts inasmuch as they relate to potential interventions to increase MSME lending and borrowing;

6. Proactively convey concerns and status updates to the COR / PM in a timely manner with the use of written technical assessments as needed;

7. Assist, as required, in data gathering and analyses, report writing efforts, as well as participating in selected meetings as needed to assist the work of MCC team members and sector-focused consultants within the Indonesian context, and possibly for other countries in the MCC portfolio; and

8. Perform other relevant duties as required by MCC.

F. Deliverables

Technical direction from the COR/PM will outline a set of activities and deliverables, to include but not be limited to:

Deliverable 1: An analysis of the proposed MSME financing project concepts based on their suitability for investment and implementation within the Indonesian context, and more specifically, within the selected provinces. This deliverable to be completed during the Project Definition phase to guide further development efforts throughout Project Definition and Project Development.

Deliverable 2: Reviews of specific project proposals made by the GOI, making use of the analysis conducted under deliverable 1, and recommendations as to how project design and / or implementation plans can be strengthened in light of conditions in the selected local jurisdictions. This deliverable to be completed during the Project Definition and Project Development phases described above.

Deliverable 3: Trip reports, ad hoc reports and/or information as may be requested by the COR/PM.

G. Conflict of Interest

The Consultant would be precluded from bidding on work and services (design, assessment, program implementation) to be procured by the host country’s Compact program management entity or using funds advanced under a Compact or Threshold Program in the country where services are being provided to MCC. The designated Consultant would be expected to coordinate with local authorities responsible for MCC Compact implementation as well as other donors, where relevant. However, designated Consultant would report directly to the designated COR/PM.

H. Subcontracting

Consultants are authorized to subcontract data collection, data preparation, economic analysis, and related services as needed. The overall costs for subcontracting shall not exceed 25% of the consultant’s total negotiated unloaded direct labor cost.

I. Timing and Reporting

All formal communication with MCC, including reports, will be submitted to the Contracting Officer Technical Representative (COR), Program Monitor (PM), and other designated MCC personnel. The COR/PM for this requirement will be identified via separate correspondence.

The COR/PM will have technical responsibility for monitoring the contractor’s performance. The COR/PM will review and evaluate the contractor’s performance, and also will coordinate any communications with relevant counterparts and other donor agencies and organizations.

Any changes in the terms of the SoW will be made in writing and approved by the Contracting Officer. No representation of the COR/PM shall serve as a basis for an alteration in the general scope of this SoW or of the terms and conditions of the SoW unless confirmed in writing by the Contracting Officer. The contractor must communicate with the Contracting Officer on all matters that pertain to the Contract terms. Proceeding with the work without proper contractual coverage could result in nonpayment for that work.

J. Period and Place of Performance

All work will be completed between the dates of the award for a two-year period of performance.

The estimated level of effort is estimated at up to 1,200 hours per year with an estimated 2 trips per year. MCC anticipates this level of effort but does not guarantee this level of effort as it may increase or decrease.

Consultant will perform the tasks under this contract in Indonesia and other MCC-eligible countries, in MCC offices in Washington DC and at her/his own facilities.

K. Evaluation Criteria

Mandatory:

To be qualified for this consultancy the candidate must have demonstrated the following:

· Masters or PhD;

· Minimum10 years professional (staff or consulting) experience with MSME/SME finance and operations in Indonesia;

· Demonstrated experience of working with financial service providers on similar issues;

· Preferred experience of working with financial service providers targeting women-owned, growth-oriented MSMEs in Indonesia, including identifying the essential risks and issues of concern to a funding entity;

· Experience providing advice to municipal and local governments with respect to the abovementioned types of projects;

· Solid knowledge of strong economic development models as carried out within Indonesia and in other similar economies and systems;

· Excellent written and spoken communication skills in English and Bahasa Indonesia;

· Ability to operate effectively with uncertainty and adjust to a changing work program;

· Demonstrated experience working with public and private sector actors in implementation of US bilateral, other bilateral or multilateral funded programs and projects; and

· Familiarity with leading institutions engaged in project implementation in a decentralized/devolved political and administrative setting.

· Willingness to travel on field visits within Indonesia, to other MCC countries and to Washington DC when needed; and

· Consultant must be able to successfully complete a public trust background investigation conducted by the MCC.

Preferred:

· Experience working on economic development projects in Indonesia and globally, including those in MCC’s existing international portfolio (transportation, water and sanitation, energy infrastructure, health, education, agriculture and land);

· Working in a public or private context on resolution of institutional issues for development project design and implementation, including understanding policy requirements, establishing objectives, building implementing capacities, monitoring results, and evaluating impacts