Attachment J.1 Bangladesh A2F SOO revised clean amendment 1.docx

PROCUREMENT SENSITIVE

ATTACHMENT J.1: STATEMENT OF OBJECTIVE

Feed the Future (FtF) Bangladesh Inclusive Access to Finance Activity (IAF)

SECTION C – DESCRIPTION/STATEMENT OF OBJECTIVES (SOO)

C.1. INTRODUCTION

The United States Agency for International Development (USAID)/Bangladesh mission seeks to award a five-year contract with a ceiling of $35 million for the Bangladesh Inclusive Access to Finance activity (hereafter known as “the activity”). The overall goal of the activity is to generate a sustainable increase in lending volume to the agricultural sector that is additional and with positive development impact. The activity will facilitate financing (a strong emphasis on additionality, i.e. financing which otherwise would not have occurred) to agricultural micro, small, and medium enterprises (MSMEs), including farmers.

This Statement of Objectives (SOO) describes the objectives of the United States Agency for International Development in Bangladesh (USAID/Bangladesh) for the USAID/Feed the Future (FtF) Bangladesh Inclusive Access to Finance activity and provides Offerors with the flexibility to propose cost-effective solutions and innovative approaches to meet the stated objectives. Offerors should also submit targets as to the financing which it anticipates it will generate—taking into account the minimum targets described below—and the methodology through which it derived those targets. Offerors should submit how they will ensure that financing generated is additional (would otherwise not have occurred), an exit strategy for the activity, and the long-term plans for the proposed activities (e.g. what will happen to the lending markets after the five years are over.)

The intended geographic coverage for the IAF activity is the Feed the Future Zone of Influence (the 21 districts of southeast and south-central Bangladesh), while noting that the Mission is in the process of finalizing an updated Global Food Security Country Plan, which may entail adjusting the Zone of Influence. AreasDeals located outside the Zone of Influence should have a link to the Zone of Influence (i.e., a processor who purchases commodities from farmers in the Zone of Influence).

Given the experimental nature of many of the approaches that will be used under this activity, Offerors should build adequate flexibility into the performance work statement to allow for sufficient adaptation in response to new data or evidence regarding the efficacy and sustainability of tested interventions. The award will be issued on a cost plus fixed-fee basis. This award will be managed adaptively, which means that USAID will work with the contractor to periodically review and —based on experience, progress, and learning—make changes to the workplan and/or the Contractor’s overall approach. Therefore, performance work statements must incorporate technical and budgetary flexibility such that the Contractor is able to pivot in response to new data, evidence, and opportunities in coordination with the USAID COR. In the interest of adaptive management, targets are expected to be modified periodically (at least annually during the workplanning phase) based upon learning and evidence to ensure that targets are realistic but aggressive. See “Adaptive Management” below for more details.

C.2. BACKGROUND/PROBLEM STATEMENT

Agriculture provides a livelihood to over 40 percent of Bangladesh’s population—even more in rural areas—but access to finance for farmers, agribusinesses, and other groups remains a challenge.

Financial institutions are unwilling and unable to provide adequate financing to agricultural small and medium enterprises (agri-SMEs) and smallholder farmers, leaving a financing gap estimated at $2 to $7 billion in agriculture alone. Close to half of all SMEs (both agri and non-agri) report access to finance as an obstacle.[footnoteRef:1] That number is higher for women-owned SMEs (60 percent) and the Bangladesh Bank (the central bank) reports that the share of women in total SME loans stood at just 3.5 percent, well below its goal of 15 percent.[footnoteRef:2] The problem for agri-MSMEs, women, youth, and smallholder farmers—who often lack collateral and require specific financial products—is even more acute. [1: “Creating Markets in Bangladesh,” World Bank Group, June 2021.] [2: Jebun Nesa Alo & Sakhawat Prince, “Loans Elude Growing Women Entrepreneurs,” The Business Standard, March 7, 2022.]

C.3. CONTRACT OBJECTIVES AND EXPECTED RESULTS

The following describes the objectives and the results that the Contractor must accomplish under the contract. Our theory of change is that if smart incentives are provided to finance providers and the financial sector policy environment is improved, finance providers will shift their lending behavior to provide more capital to micro, small, and medium enterprises (MSMEs), including farmers, which will in turn make the agricultural sector more inclusive and environmentally-friendly, increase MSME and farmer revenue, create new jobs, and contribute to overall economic growth.

a). Objectives Objective 1 Generate a measurable and sustainable increase in access to finance for agricultural micro, small, and medium enterprises (MSMEs), including farmers

Note: These sub-indicators are not mutually exclusive. Criteria for gender inclusion, food security and nutrition, climate-smart agriculture, and youth inclusion to be developed post-award with USAID.

Objective 2 Add to the important evidence base about agricultural finance in low-income countries through a rigorous impact evaluation, measuring the cost-effectiveness of one or more interventions with a counterfactual. To that end, Offerors should identify in their proposal which interventions would be useful to evaluate as a public good, and which would be best-suited for evaluation, ideally under some kind of randomization.

C.4. ADDITIONAL CONSIDERATIONS

In addition to addressing the challenges and achieving performance objectives, the PWS must address and integrate each of the following cross-cutting requirements and key principles below:

Coordination with other activities This activity is part of a portfolio of USAID/Bangladesh activities that are intended to complement one another and work at different levels to achieve the objectives outlined in the Bangladesh Country Development Cooperation Strategy (CDCS) and U.S. Government Global Food Security Strategy (GFSS).[footnoteRef:3] [3: The USAID/Bangladesh CDCS is available here. The revised GFSS is available here.]

Localization and sustainability The activity will prioritize locally-led development through which local actors set their own agendas, develop solutions, and bring the capacity, leadership, and resources to make those solutions a reality. In order to successfully accomplish the goals of this activity, it will be essential for the prime implementer to work through local organizations

Integration and coordination This will be USAID/Bangladesh’s only standalone access to finance activity but should complement other existing activities that include access to finance components.

Developmental Impact and Leverage It is incumbent upon the successful Offeror to ensure that transactions facilitated are necessary to accomplish USAID developmental objectives, that the cost of facilitating the targeted transactions is minimized and that the amount of funds used to facilitate transactions achieves maximum impact (not necessarily maximum leverage). In order to ensure lasting impact, bidders may propose an approach to ensuring that learning from this activity (particularly with regard to government policies which impede financing in Bangladesh) are communicated to policy makers. This could include some form of public/private advisory council which would meet periodically to provide input to and learn from project activities.

Market Distortion and Sustainability This activity must avoid market distortion, promote competition, and avoid favoritism. The activity will ensure that the funding is used where it is most required and to the greatest extent possible is facilitating additional commercial financing (financing which otherwise would not have occurred). The activity should use funding in such a way that it catalyzes systemic and sustainable improvements in terms of the access to finance ecosystem.

Inclusive Development Inclusive development is a key priority for Bangladesh. Special attention should be given to expanding access to finance for women, youth (18-29 years of age), first-time borrowers, indigenous and ethnic minorities, and the LGBTIQ+ community.

Digital As noted in the GFSS (CC IR 10), digital technology should play an integral role in the implementation of the activity, as appropriate. This activity should seek opportunities to responsibly leverage digital technologies to improve the activity’s measurable development outcomes, consistent with USAID’s Digital Strategy and in line with the Principles for Digital Development.

Environmental Guidelines and Climate Risk Management.

The Foreign Assistance Act of 1961, as amended, Section 117 requires that the impact of USAID’s activities on the environment should be considered, and that USAID include environmental sustainability as a central consideration in designing and carrying out its development programs. This mandate is codified in the Code of Federal Regulations (22 CFR 216) and in ADS Part 201.5.10(g) and in ADS 204 (http://www.usaid.gov/policy/ads/204/), which, in part, require that the potential environmental impacts of USAID-financed activities are identified prior to a final decision to proceed and that appropriate environmental safeguards are adopted for all activities. In addition, the recipient must comply with host country environmental regulations unless otherwise directed in writing by USAID.

No interventions funded under this activity will be implemented unless an environmental threshold determination, as defined by 22 CFR 216, has been reached for that intervention, as documented in a Request for Categorical Exclusion, Initial Environmental Examination (IEE), or Environmental Assessment duly signed by the Bureau Environmental Officer (BEO).

This activity is covered in USAID/Bangladesh’s Feed the Future Program IEE Asia 22-104 and a copy will be provided to the recipient.

Most of the activities under this activity will be technical assistance (TA) in nature and will impart no negative impact on the physical or natural environment. These TA activities qualify for a Categorical Exclusion per 22 CFR 216.2 (c)(2)(i). However, a threshold determination of Negative Determination with Conditions pursuant to 22 CFR 216.3 (a) (2) (iii) is recommended for possible purchases made with loaned funds, since the purchases may have negative impacts on the environment unless due diligence is followed.

USAID rates the climate risk as Moderate for this activity. Based on the threshold determinations and the climate risk assessment, at the implementation stage, the Implementing Partner (IP) must prepare an Environmental Mitigation and Management Plan (EMMP) and a Climate Risk Mitigation (CRM) plan. Environmental responsibilities of the IP will be encapsulated through the new IEE, which the AOR, DMEO and MEO will explain to the IP at the post award meeting.

Cost Effectiveness USAID requires the use of cost-effectiveness analysis to ensure the best value for money of its investments. The activity shall incorporate collection of detailed, disaggregated cost data so that cost-effectiveness and other types of cost analyses can be conducted. The activity will conduct analyses of program costs, including the overall cost of implementing and sustaining the activity, costs for specific program activities, and costs per beneficiary. The COR will approve the categorization of these interventions for accounting purposes in annual work plans.

Adaptive Management As noted above, USAID will manage IAF adaptively. USAID defines adaptive management as “an intentional approach to making decisions and adjustments in response to new information and changes in context.” Adaptive management is not about changing goals during implementation, it is about changing the path being used to achieve the goals in response to changes. With respect to IAF, USAID will operationalize adaptive management via the workplanning process. In collaboration with the Contractor, USAID will periodically review and—based on experience, progress, and learning—make changes to the workplan and/or the Contractor’s overall approach. The performance work statement must incorporate technical and budgetary flexibility such that the Contractor is able to pivot in response to new data, evidence, and opportunities in coordination with the USAID COR. In the interest of adaptive management, targets are expected to be modified periodically (at least annually during the workplanning phase) based upon learning and evidence to ensure that targets are realistic but aggressive. The performance work statement must clearly outline the Contractor’s approach to collaborating with USAID to achieving the goals of adaptive management.

Resources Offeror’s may find the following USAID policies and resources useful in terms of developing approaches to respond to this SOO:

· Policies

· Private Sector Engagement Policy

· Local Capacity Strengthening Policy

· Global Food Security Strategy

· USAID 2023 Gender and Women’s Empowerment Policy

· Bangladesh New Partnerships Initiative

· Resources

· USAID INVEST Publications

· USAID Finance Vignettes

· Agrilinks Series on Agricultural Finance

· Feed the Future Indicator Handbook