72011422R00006 Amendment 0001 - Revised Solicitation.pdf

SOL #72011422R00006

SECTION B - SUPPLIES OR SERVICES/PRICES .............................................................. B-1 B.1 PURPOSE ........................................................................................................................ B-1 B.2 CONTRACT TYPE ........................................................................................................ B-1 B.3 ESTIMATED COST, FIXED FEE, AND OBLIGATED AMOUNT ......................... B-1 B.4 BUDGET .......................................................................................................................... B-1 B.5 INDIRECT COSTS ........................................................................................................ B-2

B.6 ADVANCE UNDERSTANDING ON CEILING INDIRECT COST RATES

AND FINAL REIMBURSEMENT FOR INDIRECT COSTS……………………...B-3

B.7 PAYMENT OF FIXED FEE .......................................................................................... B-3 B.8 COST REIMBURSABLE .............................................................................................. B-3

SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK .............. C-1

C.1 INTRODUCTION .......................................................................................................... C-1 C.2 BACKGROUND ............................................................................................................ C-2 C.3 SCOPE OF WORK ........................................................................................................ C-5 C.4 COMPONENTS ............................................................................................................. C-6

C.5 CONTRACT DELIVERABLES …...………………………………………………..C-14

C.6 IMPLEMENTATION REQUIREMENTS………………………………………….C-15

C.7 ENVIRONMENTAL COMPLIANCE……………………………………………....C-18

SECTION D - PACKAGING AND MARKING .................................................................... D-1 D.1 AIDAR 752.7009 MARKING (JAN 1993) ................................................................... D-1 D.2 BRANDING STRATEGYAND MARKING POLICY ............................................... D-1 D.3 BRANDING STRATEGY ............................................................................................ D-1

D.4 BRANDING IMPLEMENTATION PLAN (BIP) AND MARKING PLAN (MP) .. D-2

SECTION E - INSPECTION AND ACCEPTANCE .............................................................. E-1

E.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY

REFERENCE .................................................................................................................. E-1 E.2 INSPECTION AND ACCEPTANCE ........................................................................... E-1

SECTION F - DELIVERIES OR PERFORMANCE ............................................................. F-1

F.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY

REFERENCE .................................................................................................................. F-1 F.2 PERIOD OF PERFORMANCE .................................................................................... F-1 F.3 PLACE OF PERFORMANCE ...................................................................................... F-1 F.4 AUTHORIZED WORK WEEK .................................................................................... F-1 F.5 AIDAR 752.242-70 PERIODIC PROGRESS REPORTS (OCT 2007) ...................... F-1 F.6 REPORTS ....................................................................................................................... F-2 F.7 PERFORMANCE STANDARDS ................................................................................ F-10 F.8 PERFORMANCE EVALUATION ............................................................................. F-10

F.9 KEY PERSONNEL…………………………………………………………………...F-10

F.10 ELECTRONIC SUBMISSION OF DOCUMENTS…………………………………F-13

SECTION G - CONTRACT ADMINISTRATION DATA ................................................... G-1

G.1 AIDAR 752.7003 DOCUMENTATION FOR PAYMENT (NOV 1998) ................... G-1

G.2 ADMINISTRATIVE CONTRACTING OFFICE ...................................................... G-2 G.3 CONTRACTING OFFICER’S AUTHORITY ........................................................... G-2 G.4 CONTRACTING OFFICER’S REPRESENTATIVE (COR) ................................... G-2 G.5 TECHNICAL DIRECTIONS/RELATIONSHIP WITH USAID .............................. G-3

G.6 ACCEPTANCE AND APPROVAL…………………………………………………..G-4

G.7 PAYING OFFICE .......................................................................................................... G-4

G.8 INVOICES…………………………………………………………………………….. G-4

G.9 CONTRACTOR’S PRIMARY POINT OF CONTACT……………………………G-5

SECTION H - SPECIAL CONTRACT REQUIREMENTS ................................................. H-1

H.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY

REFERENCE ................................................................................................................. H-1

H.2. AIDAR 752.225-70 SOURCE AND NATIONALITY REQUIREMENTS (FEB 2012)

H-1

H.3 AIDAR 752.7004 EMERGENCY LOCATOR INFORMATION (JUL 1997) ......... H-2

H.4 AIDAR 752.7005, SUBMISSION REQUIREMENTS FOR DEVELOPMENT

EXPERIENCE DOCUMENTS (SEP 2013)................................................................. H-2 H.5 INSURANCE AND SERVICES ................................................................................... H-3

H.6 752.228-70 MEDICAL EVACUATION (MEDEVAC) SERVICES (JULY 2007)... H-5

H.7 AUTHORIZED GEOGRAPHIC CODE ..................................................................... H-5 H.8 LANGUAGE OF REPORTS AND OTHER OUTPUTS ........................................... H-5

H.9 752.7034 ACKNOWLEDGMENT AND DISCLAIMER (DEC 1991) ...................... H-6

H.10 EXECUTIVE ORDER ON TERRORISM FINANCING (FEB 2002) ..................... H-6

H.11 FOREIGN GOVERNMENT DELEGATIONS TO INTERNATIONAL

CONFERENCES (JUNE 2012) .................................................................................... H-6 H.12 REPORTING OF FOREIGN TAXES (JULY 2007) .................................................. H-7 H.13 USAID DISABILITY POLICY - ACQUISITION (DECEMBER 2004) .................. H-7 H.14 ORGANIZATIONAL CONFLICT OF INTEREST .................................................. H-8 H.15 CONFLICTS OF INTEREST ....................................................................................... H-8

H.16 752.7032 INTERNATIONAL TRAVEL APPROVAL AND NOTIFICATION

REQUIREMENTS (APR 2014) .................................................................................... H-9 H.17 ENVIRONMENTAL COMPLIANCE ...................................................................... H-10 H.18 DISCLOSURE OF INFORMATION ........................................................................ H-11 H.19 BUSINESS CLASS TRAVEL ..................................................................................... H-12 H.20 NEWS RELEASE ........................................................................................................ H-12 H.21 TITLE TO PROPERTY .............................................................................................. H-12 H.22 PRESS RELATIONS ................................................................................................... H-12 H.23 NONDISCRIMINATION (JUNE 2012) .................................................................... H-12 H.24 USAID-FINANCED THIRD-PARTY WEB SITES (AUG 2013)............................ H-13

H.25 CONFERENCE PLANNING AND REQUIRED APPROVALS (AUG 2013) ...... H-14

H.26 USAID IMPLEMENTING PARTNER NOTICES (IPN) PORTAL FOR

ACQUISITION (JULY 2014) .................................................................................... H-15

H.27 SUBMISSIONOF DATASETS TO THE DEVELOPMENT DATALIBRARY

(DDL) (OCTOBER 2014) ............................................................................................ H-16

H.28 PROHIBITION ON THE USE OF FEDERAL FUNDS TO PROMOTE, SUPPORT,

OR ADVOCATE THE LEGALIZATION OR PRACTICE OF PROSTITUTION–

TIP ACQUISITION (MAY 2007) .............................................................................. H-17

H.29 USAID IMPLEMENTATION OF SECTION 508 OF THE REHABILITATION

ACT OF 1973 AND FEDERAL ACQUISITION CIRCULAR (FAC) 97-27

"ELECTRONIC AND INFORMATION TECHNOLOGY ACCESSIBILITY .... H-17

H.30 CONTRACTOR’S PERSONNEL INTEGRITY IN FOREIGN ASSISTANCE ... H-17

H.31 THIRD COUNTRY TRAINING ................................................................................ H-18

H.32 52.203-99, PROHIBITION ON CONTRACTING WITH ENTITIES THAT

REQUIRE CERTAIN INTERNAL CONFIDENTIALITY AGREEMENTS

(DEVIATION 2015-02)................................................................................................ H-18

H.33 LOGISTIC SUPPORT ................................................................................................ H-18 H.34 CONSENT TO SUBCONTRACTS ............................................................................ H-18

H.35 CONTRACTOR’S USE OF PROJECT VEHICLES AND LIABILITY

INSURANCE REQUIREMENTS FOR PRIVATELY OWNED VEHICLES ..... H-19

H.36 NONEXPENDABLE PROPERTY PURCHASES AND INFORMATION

TECHNOLOGY RESOURCES ................................................................................. H-19 H.37 FRAUD REPORTING ................................................................................................ H-20 H.38 FACILITIES USED FOR RELIGIOUS ACTIVITIES ........................................... H-20

H.39 CONSIDERATIONS FOR GRANTS UNDER CONTRACT……………………..H-20

H.40 AIDAR 752.7007 PERSONNEL COMPENSATION (JUL 2007)…….……………H-22

H.41 AIDAR 722.170 EMPLOYMENT OF THIRD COUNTRY NATIONALS

(TCNs) AND COOPERATING COUNTRY NATIONALS (CCNs)……………...H-22

H.42 PROHIBITION ON CONTRACTING FOR CERTAIN COVERED

TELECOMMUNICATIONS AND VIDEO SURVEILLANCE SERVICES OR

EQUIPMENT (SECTION 889) (JANUARY 2021)………………………………..H-23

PART II - CONTRACT CLAUSES .......................................................................................... I-1 SECTION I - CONTRACT CLAUSES ..................................................................................... I-1

I.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY

REFERENCE ................................................................................................................... I-1

I.2 52.204-5 WOMEN – OWNED BUSINESS (OTHER THAN SMALL BUSINESS) .. I-4

I.3 52.204-25 PROHIBITION ON CONTRACTING FOR CERTAIN

TELECOMMUNICATIONS AND VIDEO SURVEILLANCE SERVICES OR

EQUIPMENT (AUG 2020) ............................................................................................. I-4

I.4 52.209-9 UPDATES OF PUBLICLY AVAILABLE INFORMATION REGARDING

RESPONSIBILITY MATTERS (OCT 2018) ................................................................ I-7 I.5 52.216-24 LIMITATION OF GOVERNMENT LIABILITY (APR 1984) ................. I-8 I.6 52.219-9 SMALL BUSINESS SUBCONTRACTING PLAN (JUN 2020) .................. I-8 I.7 52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990) .......................... I-20 I.8 52.222-35 EQUAL OPPORTUNITY FOR VETERANS (JUN 2020) ....................... I-21

I.9 52.222-36 EQUAL OPPORTUNITY FOR WORKERS WITH DISABILITIES .... I-21

I.10 ENSURING ADEQUATE COVID-19 SAFETY PROTOCOLS FOR FEDERAL

CONTACTORS (OCT 2021)

(DEVIATION)………………………………………………………………………....I-21

I.11 52.229-8 TAXES – FOREIGN COST REIMBURSEMENT CONTRACTS

(MAR 1990) ..................................................................................................................... I-22 I.12 52.243-7 NOTIFICATION OF CHANGES (JAN 2017) ............................................ I-22

I.13 52.247-67 SUBMISSION OF TRANSPORTATION DOCUMENTS FOR AUDIT

(FEB 2006) ...................................................................................................................... I-24 I.14 752.219-70 USAID MENTOR- PROTÉGÉ PROGRAM (JUL 2007) ....................... I-25

I.15 752.245-70 GOVERNMENT PROPERTY - USAID REPORTING

REQUIREMENTS. (OCT 2017) .................................................................................. I-25

I.16 752.225-9 BUY AMERICAN ACT - TRADE AGREEMENTS ACT –

BALANCE OF PAYMENTS PROGRAM................................................................... I-27

I.17 752.7101 VOLUNTARY POPULATION PLANNING ACTIVITIES (JUN 2008) . I-27

PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS ......... J-1

SECTION J - LIST OF ATTACHMENTS .............................................................................. J-1

SECTION K - REPRESENTATIONS, CERTIFICATIONS, AND OTHER STATEMENTS

OF BIDDERS ................................................................................................................. K-1

K.1 NOTICE LISTING SOLICITATION PROVISIONS INCORPORATED BY

REFERENCE ................................................................................................................. K-1

K.2 52.204-8 ANNUAL REPRESENTATIONS AND CERTIFICATIONS

(MAR 2020) ..................................................................................................................... K-1

K.3 REPRESENTATION REGARDING CERTAIN TELECOMMUNICATIONS

AND VIDEO SURVEILLANCE SERVICES OR EQUIPMENT (OCT 2020) ........ K-5

K.4 INSURANCE - IMMUNITY FROM TORT LIABILITY ......................................... K-8

K.5 AGREEMENT ON, OR EXCEPTIONS TO, TERMS AND CONDITIONS .......... K-8

K.6 52.209-5 CERTIFICATION REGARDING RESPONSIBILITY MATTERS ........ K-8

K.7 52.209-7 INFORMATION REGARDING RESPONSIBILITY MATTERS

(OCT 2018) .................................................................................................................... K-11 K.8 52.215-6 PLACE OF PERFORMANCE (OCT 1997) .............................................. K-13

K.9 52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS

(FEB 1999) ..................................................................................................................... K-13 K.10 52.222-25 AFFIRMATIVE ACTION COMPLIANCE (APR 1984) ....................... K-13

K.11 52.225-20 PROHIBITION ON CONDUCTING RESTRICTED BUSINESS

OPERATIONS IN SUDAN—CERTIFICATION (AUG 2009) .............................. K-13

K. 12 52.227-15 REPRESENTATION OF LIMITED RIGHTS DATA AND

RESTRICTED COMPUTER SOFTWARE (DEC 2007) ......................................... K-14

K.13 52.230-1 COST ACCOUNTING STANDARDS NOTICES AND

CERTIFICATION (JUN 2020) ................................................................................... K-15

K.14 52.230-7 PROPOSAL DISCLOSURE--COST ACCOUNTING PRACTICE

CHANGES (APR 2005) ............................................................................................... K-17 K.15 AUTHORIZED NEGOTIATORS .............................................................................. K-18 K.16 SIGNATURE ................................................................................................................ K-18

SECTION L - INSTRUCTIONS, CONDITIONS, AND NOTICES TO BIDDERS ............ L-1

L.1 52.252-1 SOLICITATION PROVISIONS INCORPORATED BY REFERENCE

(FEB 1998) ....................................................................................................................... L-1 L.2 52.216-1 TYPE OF CONTRACT (APR 1984) ............................................................. L-1

L.3 52.215-1 INSTRUCTIONS TO OFFERORS – COMPETITIVE ACQUISITION

(JAN 2017)………………………………………………………………………………………………………………L-1

L.4 GENERAL INSTRUCTIONS TO OFFERORS .......................................................... L-5 L.5 SUBMISSION/DELIVERY INSTRUCTIONS ............................................................ L-6

L.6 INSTRUCTIONS FOR PREPARATION OF TECHNICAL PROPOSAL .............. L-7

L.7 INSTRUCTIONS FOR PREPARATION AND SUBMISSION OF THE

COST/BUSINESS PROPOSAL.............................................................................. ….L-10

L.8 INSTRUCTIONS FOR THE PREPARATION OF BRANDING AND

MARKING PLANS ....................................................................................................... L-16

L.9 52.233-2 SERVICE OF PROTEST (SEP 2006)……………………………………..L-17

SECTION M - EVALUATION FACTORS FOR AWARD .................................................. M-1 M.1 GENERAL INFORMATION ....................................................................................... M-1 M.2 TECHNICAL EVALUATION CRITERIA ................................................................ M-1 M.3 COST/BUSINESS EVALUATION .............................................................................. M-4 M.4 DETERMINATION OF COMPETITIVE RANGE ................................................... M-5

M.5 SOURCE SELECTION…………………………………………………………….....M-5

SOL #72011422R00006 SECTION B

B-1

SECTION B - SUPPLIES OR SERVICES/PRICES

B.1 PURPOSE

The purpose of the USAID Financial Innovation Program (hereinafter the “Program”) is to increase the flow of diversified investment resources and innovative financial products to

Georgia's private sector in order to expand businesses, create jobs, and attract additional private investment.

The Program will achieve this through a holistic approach that:

• Strengthens the financial market regulatory environment and infrastructure institutions while leveraging innovations in financial technology;

• Stimulates the market for equity and quasi-equity instruments and supports finance providers to offer an expanded set of innovative and diversified financial products and services tailored to Georgian start-ups and high potential SMEs; and,

• Supports Georgian businesses to access fit-for-purpose financing instruments through a network of professional transaction advisors.

B.2 CONTRACT TYPE

This is a Cost-Plus-Fixed-Fee (CPFF) Completion-type contract. For the consideration set forth below, the Contractor will achieve the performance objectives and deliverables or outputs described in Section C, Statement of Work, and in accordance with the performance standards specified herein.

B.3 ESTIMATED COST, FIXED FEE, AND OBLIGATED AMOUNT

(a) For the five-year contract period, the Total Estimated Cost for the performance of the work required hereunder, exclusive of fixed fee, is [ TBD ]. The Total Fixed Fee, is

[ TBD ] . The Total Estimated Cost Plus Fixed Fee, if any, is [ TBD ] .

(b) Within the estimated cost plus fixed fee specified in paragraph (a) above, the amount currently obligated and available for reimbursement of allowable costs incurred by the Contractor (and payment of fee) for performance hereunder is [ TBD ] . The Contractor must not exceed the aforesaid obligated amount, unless authorized by the contracting officer pursuant to the clause of this contract entitled “Limitation of Funds (APR 1984)” FAR 52.232-22.

(c) Funds obligated hereunder are anticipated to be sufficient through [ TBD ] .

B.4 BUDGET

The following itemized budget sets forth the estimates for reimbursement of dollar costs for cost categories and the fixed fee.

B-2

CLIN Item Total ($)

001 Total Direct Costs ___

002 Grants under Contract $6,000,000

003 Total Indirect Costs

004 Contract Total Cost (excluding fee)

005 Fixed Fee

Total Estimated Cost Plus Fixed Fee

B.5 INDIRECT COSTS

The contract clause entitled “Allowable Cost and Payment (JUN 2013)”, FAR 52.216-7, specifies that the indirect cost rates shall be established for each of the contractor’s accounting periods that apply to this contract. Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs shall be reimbursed on the basis of the following negotiated provisional or predetermined rates and the appropriate bases:

For the Prime Contractor:

Description Rate Base Type Period

TBD TBD% 1/ 1/ 1/

TBD TBD% 2/ 2/ 2/

1/ Base of Application: TBD

Type of Rate: TBD

Period: TBD

2/ Base of Application: TBD

Period: TBD

For Major Subcontractor(s):

Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs will be reimbursed on the basis of the following negotiated provisional or predetermined rates and the appropriate bases:

Description Rate Base Type Period

TBD TBD% 1/ 1/ 1/

TBD TBD% 2/ 2/ 2/

1/ Base of Application: TBD

Period: TBD

2/ Base of Application: TBD

Period: TBD

A “Major Subcontractor” is a subcontractor that is performing 20% or more of the contract, B-3

B.6 ADVANCE UNDERSTANDING ON CEILING INDIRECT COST RATES AND

FINAL REIMBURSEMENT FOR INDIRECT COSTS

(a) The Contractor must make no change in its established method of classifying or allocating indirect costs without the prior written approval of the Contracting Officer.

(b) Reimbursement for indirect costs must be at the lower of the negotiated final provisional/pre-determined rates or the following ceiling rates:

Description 2022 2023 2024 2025 2026

[Rate 1 description to be inserted] % % % % %

(c) The Government will not be obligated to pay any additional amount should the final indirect cost rates exceed the negotiated ceiling rates. If the final indirect cost rates are less than the negotiated ceiling rates, the negotiated rates will be reduced to conform to the lower rates.

This advance understanding must not change any monetary ceiling, cost limitation or obligation established in the contract.

B.7 PAYMENT OF FIXED FEE

(a) The Government shall pay the Contractor the fixed fee specified in the Schedule for performing this contract.

(b) In accordance with FAR 52.216-8 “Fixed Fee (JUN 2011),” USAID reserves the right to withhold a reserve not to exceed $100,000. The Contracting Officer shall release 75 percent of all fee withholds under this contract after receipt of an adequate certified final indirect cost rate proposal covering the year of physical completion of this contract, provided the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years’ settlements. The

Contracting Officer may release up to 90 percent of the fee withholds under this contract based on the Contractor’s past performance related to the submission and settlement of final indirect cost rate proposals.

B.8 COST REIMBURSABLE

The U.S. dollar costs allowable shall be limited to reasonable, allocable and necessary costs determined in accordance with FAR 52.216-7, Allowable Cost and Payment, FAR

52.216-8, Fixed Fee, if applicable, and AIDAR 752.7003 “Documentation for Payment.”

END OF SECTION B

SOL #72011422R00006 SECTION C

C-1

SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

USAID FINANCIAL INNOVATION PROGRAM

C.1 INTRODUCTION

The purpose of the USAID Financial Innovation Program (hereinafter the “Program”) is to increase the flow of diversified investment resources and innovative financial products to

Georgia's private sector in order to expand businesses, create jobs, and attract additional private investment. The Program will achieve this through a holistic approach that:

● Strengthens the financial market regulatory environment and infrastructure institutions while leveraging innovations in financial technology;

● Stimulates the market for equity and quasi-equity instruments and supports finance providers to offer an expanded set of innovative and diversified financial products and services tailored to Georgian start-ups and high potential SMEs; and,

● Supports Georgian businesses to access fit-for-purpose financing instruments through a network of professional transaction advisors.

The Program will focus primarily, but not exclusively, on expanding access to finance for start-ups and SMEs with high potential for employment generation. It will also include a focus on non-traditional finance providers. Furthermore, it envisions the establishment of a catalytic, blended finance investment mobilization platform to be available to de-risk and cost-match leverage innovation and risk taking. The Program will be implemented using adaptive management, enabling the Program to adapt activities and targets in response to changes in the political and economic landscape that arise during implementation.

C.2 BACKGROUND

Over the last few decades, Georgia has implemented impressive economic management and governance reforms that have transformed the country from a failing state into one of the world’s top reformers. The expansion of financial resources available to the local private sector has been one of the clearest indicators of the mostly stable and robust economic growth. For example, domestic credit to the private sector increased from 9% of GDP in 2000 to 68% in 2019. Most of this credit has been provided by the banking sector, which is well-capitalized, profitable, and operates according to international standards and practices under prudent supervision by the

National Bank of Georgia (NBG). However, the sector is highly concentrated (two banks control

70% of the market), lending is concentrated in corporate and real estate sectors, and banks rely heavily on foreign exchange borrowing. Furthermore, Georgia’s small market size limits investment diversification and risk mitigation opportunities for potential financial investors. As a result, Georgia's private sector struggles to access credit and equity. This limited access to finance handicaps firms that want to invest in business expansion, improve business processes, and enter new markets. Georgian firms require access to a broader, more flexible set of financing sources in order to grow and create new employment opportunities.

C-2

Georgia’s financial services industry lacks depth and sophistication. The highly concentrated banking sector holds 90% of the financial sector’s net assets (outside of NBG), while non-bank financial institutions (NBFIs), including pension funds and microfinance organizations, hold the remaining 10% of the country’s net assets.1 Thus, Georgian firms face a dearth of competitive and diversified sources of financing to start or expand their business. The International Finance

Corporation (IFC) estimates the Georgian micro, small and medium-sized enterprises

(MSME) financing gap2 at $2.5 billion, twice the current loan portfolio to SMEs. According to the 2019 World Bank Enterprise Survey, 26% of Georgian firms cite access to finance as the top obstacle facing their business and this percentage has been increasing over previous survey waves. Access to finance is also consistently named as one of the top constraints for Georgian

SMEs in quarterly business confidence surveys conducted by the ISET Policy Institute. Both demand and supply-side factors contribute to access to finance limitations in Georgia: demand-side constraints include turbulent global and domestic macroeconomic conditions, including information asymmetry, whereas supply-side constraints include a lack of local currency funding, low profitability, and high market interest rates. According to a 2019 European Investment Bank

(EIB) report, 40% of Bank Lending Survey respondents cited demand-side constraints alone as the main barrier to SME credit expansion, compared to 13% who cited supply-side constraints alone; 47% cited both supply and demand-side factors as primary constraints.3

Start-ups and relatively high-risk-profile enterprises remain particularly underserved by the traditional banking sector.4 The availability of alternative sources of financing are limited to a handful of foreign funds, the state-owned Partnership Fund5, and internationally funded equity programs. However, these funds generally only service well-established businesses seeking equity investors. Moreover, customized financial products, especially those tailored to SMEs, are severely underdeveloped in Georgia. Financing tools like value-chain financing, trade and asset-based financing (including leasing and factoring), pre-export and export financing, and risk insurance are all uncommon.6 USAID consultations with private sector stakeholders also revealed

1 As a comparison, NBFIs in the Euro area hold around 60% of the total financial assets, while in emerging markets this figure stands at 36% (Financial Stability Board).

2 MSME finance gap is estimated as the difference between current supply and potential demand which can potentially be addressed by financial institutions. Offerors must use the definitions of

MSMEs officially used by the Government of Georgia.

3 Conde, Joana and Gattino, Luca (2019). Financing in Georgia: Small and Medium enterprises and the Private Sector. European Investment Bank (EIB).

4 This is evidenced by Georgia’s weak performance on the Financial Systems and Innovation

Capacity pillars of the World Economic Forum’s (WEF) 2019 Global Competitiveness Report, where it lags significantly behind the average of the 140 country sample. On the financial system indicators, Georgia performs relatively well on traditional banking sector indicators such as soundness, health of banks, and compliance with regulatory ratios but underperforms on its low level of market capitalization, lack of life and non-life insurance products, and absence of venture capital.

5 The Government of Georgia is redesigning the management structure of the Partnership Fund and is restricted from initiating new investment deals until a new structure is in place.

6 The EIB Bank Lending Survey (2019) results find that, while credit to SMEs is relatively available, other instruments such as trade finance and leasing are not. In addition, equity financing largely remains underdeveloped and inaccessible for Georgian SMEs.

https://www.eib.org/attachments/efs/smes_and_private_sector_financing_in_georgia_en.pdf https://www.eib.org/attachments/efs/smes_and_private_sector_financing_in_georgia_en.pdf https://www.eib.org/attachments/efs/smes_and_private_sector_financing_in_georgia_en.pdf

C-3 that awareness and use of traditional banking financial instruments, such as bank loans and credit lines, is quite high, but accessibility for smaller companies remains an issue. USAID consultations also identified limited awareness and use of private equity capital, trade credit, crowdfunding, factoring instruments and leasing; international financial institution (IFI) loans and corporate bonds are limited to larger companies.

The lack of alternative sources of finance exposes the private sector to significant economic and foreign exchange risks. Given that about 84% of corporate borrowing is in foreign currency, Georgian firms find it increasingly challenging to repay existing debt due to exchange rate fluctuations and economic shocks. Consequently, firms with access to traditional banking finance have become critically leveraged to the point that they can no longer take on new debt. Absent access to public and private equity markets or other types of risk capital (mezzanine, quasi-equity), options to rebalance growing corporate leverage or obtain risk funding for innovative projects is limited. Access to alternative public or private Georgian Lari (GEL)-denominated equity and debt capital is likewise constrained.

Limited opportunities for women to participate in economic activities is another major development challenge for Georgia. Women’s ownership and management of firms remains low.7

According to the National Statistics Office of Georgia (2021), Georgian men own and dispose of larger shares of assets, including real estate, land, and large equipment. As availability of collateral is one of the key factors for access to finance from traditional financial institutions, this disparity in asset ownership leads to unequal access to financial resources for women-owned and managed enterprises.

Recent Reform Efforts

Over the past few years, significant reforms have been implemented to promote capital market development in Georgia. The 2019 pension reform and the inception of a Pillar II system8 are expected to have a positive effect on local capital market development; as of January 2021, the pension fund size was approximately 1.2 billion GEL (USD380 million). In 2020, the Pension

Agency Investment Board adopted an investment policy document and took steps to streamline its investment activities. A Capital Market Development Strategy (CMDS) is also currently being developed by the Ministry of Economy and Sustainable Development (MoESD) covering 2021-

2026.9 Expected to be finalized and adopted by September 2021, the CMDS will provide a roadmap for the development of the Georgian capital market in a coordinated and sequenced manner.

7 According to the World Bank’s Enterprise Survey 2019, only one-fifth of firms in Georgia have female participation in ownership. Only 16% of firms have a female top manager (Enterprise

Survey 2019). Women’s participation in ownership and management is most prevalent in small firms, while less than 1% of large firms (100 or more employees) have majority female ownership.

8 According to the World Bank’s 5-Pillar Pension model, under Pillar II, recipients and employers pay into a privately-funded system. This includes pension funds and defined-contribution accounts and/or plans with a wide array of design options (i.e. 401k plan).

9 In partnership with the Ministry of Finance, NBG, the private sector, and with technical support from the Asian Development Bank.

C-4

Other recent significant reforms include: (1) amendments to the Law of Georgia on Securities

Markets adopted on July 7, 202010 and (2) the Law of Georgia on Investment Funds adopted on

July 14, 202011. With these reforms, Georgia came into full compliance with international best practices for securities markets regulations and the International Organization of Securities

Commissions (IOSCO) principles. The USAID Economic Governance Program’s ongoing

Capital Market Development Activity focuses on further development of the investment funds ecosystem through the development of asset securitization legislation. In addition, the Economic

Governance Program, in partnership with the Georgian Financial Markets Treasuries Association, is supporting the implementation of money market and foreign exchange mechanisms. Likewise it is supporting the Ministry of Economy and Sustainable Development (MoESD) in setting up a

Capital Market Development Coordination Platform and online training platform for financial market practitioners.

Private Sector Consultations

To ensure private sector perspectives and needs inform the design of the Program, USAID conducted extensive consultations with the private sector, including issuance of a survey administered via business associations that received 94 responses from small (59), medium (18), and large (17) enterprises. The survey findings validate key assumptions on private sector awareness, use, and demand for a range of financial products and services. Highlights from the business survey results include:

● Strong awareness and use of traditional banking financial instruments such as bank loans and credit lines with smaller companies reporting issues with access to credit lines;

● Weak awareness and use of private equity capital, trade credit, crowdfunding, and factoring;

● Strong awareness but low usage of financial products such as leasing, IFI loans, and corporate bond issuance with only large enterprises reporting use of these financial instruments;

● Strong demand for external financing with 77% of firms (mostly medium to large enterprises) planning to apply for financing in the next two years;

10 Legislative amendments to the Securities Markets Law will increase transparency among issuers of public securities by setting requirements regarding submission and reporting of periodic financial/non-financial and insider information. The law incorporates definitions for inside information and market manipulation and prohibits unlawful disclosure of inside information, insider dealing, or market manipulation. In addition, adopted amendments simplify the approval process of the prospectus for public issuances.

11 The Law of Georgia on Investment Funds is based on international principles and regulatory models. Specific requirements of the Alternative Investment Fund Managers Directive (AIFMD) and UCITS (Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009) were considered when drafting legislation about investment funds. In addition, significant amendments have been ratified in the Tax Code of Georgia, particularly, a special tax regimen for investment funds that follows the best practices of leading countries like Ireland and Luxembourg.

Following the drafting of legislation, NBG upgraded the vast majority of capital market regulations.

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● Financing needs by segment: large enterprises indicated needing more than 10m GEL

($3.2m); medium enterprises indicated needing 1-5m GEL ($320k- $1.6m); small enterprises indicated needing 100-500k GEL ($32k -$160k); and,

● The strong correlation between awareness, past use of financial products, and firms’ plans to use them suggests that incentives for the use of new financial products are needed and will require a robust communications strategy targeting the private sector.

C.3 SCOPE OF WORK

The Financial Innovation Program seeks to increase the flow of diversified investment resources and innovative financial products that meet the needs of Georgia's private sector and complements the debt financing of the banking sector. As a result, the Program will help create long-term, high-value employment opportunities and attract additional private investment. This will be accomplished through a three-pronged results framework that:

● Strengthens the financial market regulatory environment and infrastructure

● Delivers innovative financial products and services to the private sector

● Builds long-term private sector capacity through expanding commercial business advisory services

The Program will focus primarily, but not exclusively, on access to finance for start-ups and

SMEs with high potential for sustained, high-value employment generation. It will also include a focus on non-traditional finance providers.

For the purpose of this Solicitation, Offerors must use the definitions of MSMEs officially used by the Government of Georgia. Please see USAID’s “SME Test Guidelines for Business

Regulations, Final Report: USAID Governing for Growth (G4G) in Georgia,” April 10, 2019, at https://pdf.usaid.gov/pdf_docs/PA00TZH8.pdf

The Program anticipates mobilizing $300 million in additional financing (i.e., financing that would not have occurred without the Program). Of this amount, at least $80 million will consist of equity financing, at least $100 million will be mobilized from private sector sources (including banks, non-bank financial institutions, investors, diaspora, etc.), and at least $200 million will consist of additional financing for startups and SMEs. Particular attention will be given to broadening the financial sector (engaging NBFIs and the securities markets) and not less than $50 million in debt financing will come from outside the banking sector. Additionally, it is anticipated that the Program will achieve the following minimum targets, among others:

● Create 2,500 new jobs

● Develop and/or deploy at least 3 new fintech solutions

● Support non-bank financial institutions to design 3 private equity or quasi equity instruments

● Facilitate transactions between 250 startups and SMEs and finance providers through

Business Advisory Services (BAS) https://pdf.usaid.gov/pdf_docs/PA00TZH8.pdf

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To remain flexible to dynamic needs of the private sector, interventions will not target specific sectors, but rather remain responsive to the diversity of emerging opportunities and needs as the economy recovers from the impacts of COVID-19. Activities of the program should be closely aligned with the MoESD’s Capital Market Development Strategy 2021-2026 and be coordinated with all major stakeholders active in the field.

C.4 COMPONENTS

The Financial Innovation Program seeks to improve access to diversified investment resources in

Georgia through a three tiered approach targeting the financial market regulatory framework and infrastructure, financial intermediaries, and the private sector. Component 1 will strengthen the financial market regulatory framework and infrastructure to support the introduction of innovative and diverse financing products and services. Component 2 will support the local financial market to deliver innovative and diverse financial products and services to the private sector. And Component 3 will build the capacity of the private sector to access fit-for-purpose financing through transaction advisors.

Component 1: Financial Market Regulatory Environment and Infrastructure

Under this component, the Contractor must design and pilot initiatives that strengthen the systemic conditions in which Georgia’s financial sector operates, including the legal and regulatory framework and its oversight, protection of property rights, and financial market infrastructure that encourage investment through new and diverse financial products.

Additionally, the Contractor must propose interventions that promote the adoption of financial technologies with the potential to reduce the costs of financial intermediation. Interventions under this component should be closely aligned with the other components of the Financial Innovation

Program and should be targeted at removing barriers to achieving capital mobilization targets.

Outcome 1.1: Improve the financial market regulatory framework and financial market infrastructure to support the introduction of innovative and diverse products and services

Task 1: Conduct a landscape assessment to identify constraints in the financial market regulatory framework and within the financial market infrastructure that hinder private sector access to efficient and diversified financial products and services.

Within 90 calendar days of the contract award, the Contractor must submit an inception report that recommends at least two constraint areas for further in-depth analysis. The findings of this assessment will be critical in prioritizing areas for program interventions.

- To do this, the contractor will conduct a landscape assessment of the financial market ecosystem, its institutions, and interactions with one another in order to identify key constraints in the regulatory framework and financial market infrastructure that hinder private sector access to efficient and diversified financial products and services. This

C-7 assessment must build upon the initial work done by the USAID team, described above.

The assessment must include an analysis of gender-specific constraints faced by female-owned and managed businesses. The Contractor must clearly define the methodology for prioritizing key constraints and the justification for the recommended constraint areas.

Recognizing that the financial ecosystem is dynamic and that priorities may shift during implementation, the Contractor may propose (with corresponding justification) new or complementary focus areas for consideration up until the fourth year of the Program.

Based on USAID/Georgia consultations with public and private sector stakeholders, below is a set of potential constraint areas that may emerge during the landscape assessment:

● Capital market legal and regulatory framework, including registration and filing requirements for issuance of bonds, shares, and other financial market instruments

● Development of licensed non-bank financing vehicles

● Stock exchanges, corporate governance, and infrastructure

● Tax and other incentives for capital market development

● Pension Agency investments in local debt and equity securities

● Private insurance instruments and investments

● Transparency in corporate governance, including environmental and social safeguards (ESG)

● Credit bureaus, collateral registries, and secured transactions

● Enabling conditions for retail investors, such as the Georgian diaspora

● Development of an investment funds industry

Other constraints may be uncovered during the landscape assessment. The Contractor must prioritize all identified constraints and give a rationale for their relative importance in the financial sector.

Task 2: Undertake a root cause analysis in order to identify opportunities for interventions in the prioritized constraint areas.

Within 180 calendar days of the contract award, the Contractor must submit a root cause analysis that analyzes the drivers of the constraints identified in Task 1 and corresponding action plans that describe the intervention(s) proposed to relax each constraint. To do this, the

Contractor must:

- Integrate an applied political economy analysis into the root cause analysis to better understand the underlying drivers of the identified constraints, including the institutional, political, and regulatory factors at play. Particular attention should be paid to the drivers of gender specific constraints and understanding the dynamics and incentives to alleviate the barriers specific to women-owned business. Alternative analytical tools and approaches are allowed but require USAID pre-approval of the proposed methodology.

- Based on the identified root causes and their corresponding drivers, recommend specific interventions that will help alleviate the identified constraints and that are manageable within the Program’s scope. Additionally, the Contractor must highlight those constraints and corresponding root causes, along with identified intervention

C-8 opportunities, that may be more effectively addressed by other actors, including, but not limited, to the GoG, private sector, or other donors.

- Analyze the potential impact of the proposed interventions on financial market development and adjust targets correspondingly

- In consultation with the Public-Private Advisory Council (to be established in Outcome

1.3) and other key stakeholders, develop action plans for employing technical assistance

(TA), grants, training, and other capacity building assistance to relax the identified constraints. Individual action plans must be developed for each proposed constraint area and must define expected impacts and clearly articulate measures of success. Action plans that span multiple years will be updated on an annual basis.

- Based on USAID/Georgia consultations with the public and private sector, below is an illustrative list of potential interventions that the Contractor may prioritize based on the findings of Component I analyses:

- Development and implementation of policies and regulations in line with both international best practices and Georgia’s Association Agreement with the EU;

- Adoption of reputable and efficient financial services and products that facilitate investment transactions in compliance with international standards; and,

- Adoption of software, technologies, and models that enable secure and efficient financial transactions.

Task 3: Implement the action plans developed under Task 2 through technical and financial assistance.

Below is an illustrative list of entities that may benefit from Program support:

Public Sector:

- Ministry of Economy and Sustainable Development

- National Bank of Georgia

- Ministry of Finance

- Pension Agency

- Service for Accounting, Reporting and Auditing Supervision (within the Ministry of Finance)

Private Sector:

- Credit agencies

- Collateral and asset registries

- Stock exchanges

- Specialized depository institutions

The Contractor is encouraged to use cost-match grants to implement action plans. Cost-matching

Grants must be awarded on a competitive basis using detailed and transparent selection criteria developed by the Contractor and approved by USAID. USAID will be involved in approving grant recipients. All grants will include a requirement for the grantee to contribute its own funds to the grant activity. These matching funds will not be considered cost share and will not be subject to cost share audit requirements.

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Outcome 1.2: Introduce innovative, technologically-driven solutions for financial products and services that fulfill unmet business need(s)

Within 12 months of contract award, the Contractor must develop a strategy for the development or adoption and implementation of at least one locally developed financial technology (fintech) solution that addresses the needs of the Georgian private sector. The strategy must detail how a diverse selection of private sector partners will be identified and engaged to help develop and/or deploy solutions.

Using the analyses conducted in Outcome 1.1 as a foundation, the Contractor must identify opportunities to deploy fintech solutions that help alleviate aspects of one or more identified constraints. Illustrative fintech solutions include:

● Matchmaking and crowdfunding platforms

● Data analytics-enabled lending

● Mobile payments

● Financial management tools

● Credit rating analysis tools and algorithms

● Insurance tools

The Contractor must proactively engage with the private sector, including women-owned businesses, business associations, financial intermediaries, technology companies, and other relevant stakeholders to design at least one intervention that will incentivize local technology companies to develop innovative and scalable financial technology solutions.

Cybersecurity protections, including secure data protections and digital literacy for end users, must be built into the design and operation of identified fintech solutions. Additionally, proposed solutions must comply with national regulations and, when applicable, should be tested in NBG’s

Regulatory Laboratory12. By the end of the Program the solutions must be fully operational with adequate sustainability measures in place.

At a minimum, the strategy should:

● Include a cost-benefit analysis, quantifying expected costs incurred for the development of the technological solution, as well as, the benefits, taking into account the expected deal flows through the solution and efficiency improvements attributable to the fintech solution.

● Include a competitive selection mechanism that allows for experimentation and incentivizes a wide range of local technology companies to innovate, especially women-owned or women-managed technology companies.

● Identify potential private sector partner(s) to co-fund development and integrate fintech solutions in their business processes.

12 Regulatory Laboratory is a framework set by the NBG, that financial institutions allow under…