Attachment 1. Statement of work_02.15.24.docx

Performance Assessment of the Effectiveness of DFC Loan Portfolio Guaranties

Statement of Work (SOW)

U.S. International Development Finance Corporation (DFC)

Project Title: Performance Assessment of the Effectiveness of DFC Loan Portfolio Guaranties in Increasing Access to Finance for Agriculture Enterprises in Sub-Saharan Africa

1.0 GENERAL INFORMATION

The U.S. International Development Finance Corporation (DFC) is financing solutions to the most critical challenges facing today's developing world. Working with businesses, we mobilize private capital to invest in projects that create jobs and opportunities in emerging markets, including building critical infrastructure, expanding access to telecommunications, and providing small business financing for women entrepreneurs. Launched in 2019, DFC helps to advance America's foreign policy by partnering with projects that create economic stability, protect sovereignty, and ensure transparency. DFC investments adhere to high U.S. business standards and respect the environment, human rights, and worker rights.

DFC’s Office of Development Policy (ODP) works to ensure DFC’s projects produce positive developmental impacts, apply best practices with respect to environmental and social safeguards, and respect human rights, including worker rights.

2.0 BACKGROUND

DFC’s ODP is seeking an independent consultant to conduct a development impact performance assessment of the effectiveness of DFC's Loan Portfolio Guaranties (LPG) in increasing access to finance for agriculture-focused small and medium sized enterprises (SMEs) in Sub-Saharan Africa (“LPG Ag Portfolio”).

3.0 SCOPE

DFC’s ODP requires the services of an independent consultant to conduct an analysis of the performance of DFC’s LPG Ag Portfolio in increasing access to finance for SMEs in select markets. DFC partners with local financial institutions by creating loan guaranty facilities to help de-risk historically underbanked agriculture-focused enterprises with the ultimate goal of increasing lending activities in the sector. However, DFC’s standard metrics do not fully capture the potential impact LPGs have in influencing its partner financial institutions in their overall portfolio growth, strategic direction, product and service development, and risk appetite in the agriculture sector. This portfolio assessment aims to evaluate the effectiveness of ten (10) LPGs in ten (10) countries across Sub-Saharan Africa[footnoteRef:2] in increasing access to credit for ag-focused SMEs and to provide DFC with recommendations on how to better identify, analyze, and monitor the key factors that drive successful LPGs. The scope of the analysis will primarily focus on LPGs with local commercial banks that support lending to SMEs rather than the microfinance sector. The conclusions derived from the analysis should also provide recommendations for how DFC’s LPG tool can be more effectively utilized to contribute to United States Agency for International Development (USAID) mission priorities, the U.S. Government’s Feed the Future program, and the host government’s development priorities. [2: The Financial Intermediaries (FIs) expected to participate in the assessment are located in Benin, Burkina Faso, Ethiopia, Ghana, Kenya, Malawi, Mozambique, Nigeria, Senegal, and Tanzania, with one FI located in each country.]

4.0 REQUIREMENTS

The contractor shall perform the following tasks:

4.1 Task 1: Literature Review (approximately 10% of effort)

a. Conduct a literature review of access to finance issues and initiatives in the agriculture sector in Sub-Saharan Africa to articulate the development challenge LPGs aim to address. The literature review should include but is not limited to:

i. Constraints to accessing finance in the sector, region, and country (e.g., regulatory restrictions, bank credit rating considerations, sector-specific risks) and the identification of development initiatives that aim to increase access to finance for agriculture enterprises.

ii. A synthesis of what has been learned from past evaluations that focus on the effectiveness of LPGs and the approaches used to increase access to finance for agriculture enterprises (including past evaluations of LPGs conducted by USAID country missions or their implementing partners, and the Swedish International Development Cooperation Agency, Sida, a frequent co-guaranty partner with DFC). A catalogue of these evaluations should be included in an appendix to the report.

iii. Identification of available country and sector databases that can be used to contextualize findings from this evaluation and/or use as indicative difference-in-differences comparison of evaluated Financial Intermediary portfolios.

b. Review the following reference documents and frameworks:

i. USAID Country Development Cooperation Strategy (CDCS) in the relevant countries.

ii. U.S. Government Feed the Future Program and the Global Food Security Strategy.

iii. DFC’s impact management framework guidelines, templates, and tools, including the Impact Quotient (IQ) Framework (https://www.dfc.gov/our-impact/impact-quotient-iq).

c. Review DFC’s origination and monitoring documents and interview relevant DFC staff to understand the structure and original development goals of the LPGs. Documents include but are not limited to:

i. Guarantee Agreements, including term sheets that include the qualifying criteria for downstream borrowers.

ii. Data captured in DFC’s Credit Management System (CMS) that includes semi-annual loan schedule reports from selected Financial Intermediaries.

iii. Monitoring data collected by DFC through its annual Development Outcomes Survey (includes data on first-time borrowers, youth, and women-owned/led businesses).

iv. Transaction notes, as applicable, that describe any technical assistance programming provided by USAID to expand and strengthen the capacity of selected Financial Intermediary and institutions and/or qualifying borrowers.

4.2 Task 2: Reconstruct Theory of Change for LPGs (approximately 5% of effort)

a. This task requires constructing an ex-post logic model that illustrates the short, medium, and long-term outputs and outcomes expected to result from DFC LPGs focused on the agriculture sector. The model should incorporate:

i. Outcomes from the literature review in Task 1.

ii. Metrics used to measure development outputs and outcomes.

4.3 Task 3: Data Collection and Impact Scoring (approximately 30% of effort)

a. Collect quantitative and qualitative information to evaluate the development impact of the selected ag-focused LPGs. This task requires:

i. The collection and validation of partner Financial Intermediary portfolio data relevant to the analysis, e.g., the size (by value and number of unique borrowers) in the agriculture portfolio compared with the overall portfolio before and after the origination of the LPG; financial performance indicators for the agriculture portfolio compared with the overall portfolio; and customer feedback surveys that are able to be disaggregated by sector (if available).

ii. Interviews with partner Financial Intermediary management and a subset of loan officer staff. Topics may include:

1. Identification of macroeconomic impacts on the lending environment since origination of the LPG that impacted the usage of the LPGs, such as local capital shortages, banking partner portfolio impacts, market disruptions impacting the agriculture sector such as COVID-19, and government and donor interventions directly impacting or competing with LPG usage (e.g., mandated repayment holidays, new concessional loan schemes competing with the LPGs, moratoriums on defaults, other regulatory/policy changes impacting the market).

2. Identification of corporate factors that impacted lending in the sector that were not alleviated by the LPGs (e.g., product changes, risk management/policy changes, client repayment behaviors, credit scoring frameworks, staff capacity, and training on agriculture lending). This should include, but is not limited to:

a. Discussion of the Financial Intermediary’s corporate strategy in lending in the sector and how that strategy has impacted the Financial Intermediary’s organizational structure, approval process, recruitment, and training of agriculture loan officers. This should include management and staff perspectives on lessons learned in lending in the sector and how these lessons have been incorporated in new strategies and operations.

b. Discussion of the typical reason(s) for denying an agriculture loan and whether and how these policies have evolved over the lifetime of the LPGs.

3. Comparison to other financial incentives/de-risking mechanisms used to increase access to finance in the agriculture sector, if applicable. Has the Financial Intermediary leveraged other financial incentives/de-risking mechanisms such as first-loss, insurance, or third-party guaranties? If so, how has that impacted the effectiveness of the LPGs? How do these mechanisms compare to DFC’s LPGs in terms of (i) effectiveness in unlocking funding for agriculture enterprises, (ii) value for the Financial Intermediary, and (iii) cost to the Financial Intermediary to implement?

4. If applicable, management’s perspective of and data on the effectiveness of USAID-provided Technical Assistance for the Financial Intermediaries in such activities as: product development, agriculture lending skills, credit analysis, risk management, loan monitoring, and pipeline development.

5. Suggestions for improvement. Does the Financial Intermediary have any suggestions that would make DFC’s LPG product more effective in increasing access to finance in the sector?

iii. Interviews or surveys of a small sample of each Financial Intermediary’s agriculture borrowers to triangulate information provided by the Financial Intermediary with the perspectives of the borrowers on their experience with the Financial Intermediary and constraints to finance in general. This could be done through phone interviews or a short electronic survey.

iv. Interviews with USAID Country Missions to understand their perspective on the LPG’s contribution to the USAID CDCS goals.

v. Ex-post IQ scoring utilizing DFC’s Impact Quotient Framework using the data collected.

vi. Incorporation of any other data determined to be significant.

4.4 Task 4: Analysis (approximately 30% of effort)

a. Using the data and impact scoring in Task 3, draw conclusions about the effectiveness of LPGs in influencing the select Financial Intermediaries’ activities in the agriculture sector, including but not limited to:

i. Agriculture portfolio growth relative to the Financial Intermediary’s overall portfolio. Do the data indicate that the LPG helped alleviate the constraints to lending to targeted agriculture enterprises? How has the agriculture portfolio changed compared to the Financial Intermediary’s overall portfolio? Has the agriculture portfolio grown since the implementation of the LPG? Has Technical Assistance and/or other financial incentives/de-risking mechanisms identified in Task 3 impacted performance of the agriculture portfolio?

ii. Strategic direction (including but not limited to geographic, value chain, and/or segment expansion). Has the Financial Intermediary established a robust strategy to serve agriculture enterprises that includes establishing targets and goals, marketing, product development, qualified and dedicated loan officers, and incorporating lessons learned over time? Has the LPG, Technical Assistance and/or other financial incentives identified in Task 3 impacted the Financial Intermediary’s strategy for its agriculture portfolio?

iii. Product and service development. Has the Financial Intermediary developed specialized products and services for agriculture borrowers as a result of the LPG (e.g., longer tenors, flexible repayment schedules, reduced collateral requirements)? Did the LPGs help create differentiated solutions or increase lending for the wide range of agricultural clients along the value chain (e.g., producers, processers, exporters?) Does the Financial Intermediary utilize systematic feedback loops (e.g., customer surveys, uptake data) to assess the performance of existing products and services as well as the current financial needs of agriculture borrowers? Is there a process to systematically consider and act on this feedback? Has the LPG, Technical Assistance, and/or other financial incentives identified in Task 3 impacted product and service development?

iv. Additionality and risk appetite in the agriculture sector. Is it likely that the Financial Intermediary would have issued loans to the eligible borrowers without DFC’s LPG? Would the terms of issued loans be different, e.g., reducing collateral requirements, lengthening loan tenors, and adjusting repayment timelines? Is the Financial Intermediary more likely to lend to new borrowers or markets due to the LPG? Has Technical Assistance and/or other financial incentives identified in Task 3 impacted risk appetite?

v. Likelihood of sustainability of impacts beyond the expiration of the guaranty. Assess the financial performance of the portfolio (e.g., non-performing loan rates) over the lifetime of the LPG and likelihood that the Financial Intermediary will continue lending in the sector.

vi. Comparison of Financial Intermediary portfolio data to available country and sector lending data, as described in Task 1. How do the Financial Intermediary agriculture portfolios compare to overall lending trends in the sector in the country? What are the data limitations hindering such a comparison?

4.5 Task 5: Lessons Learned and Recommendations (approximately 25% of effort)

a. Create and deliver an internal written report (Word document preferred) for DFC with lessons learned and recommendations on how DFC could improve the effectiveness of its LPGs in the agriculture sector.

b. The internal report shall be written in clear, concise language that can be understood by a variety of audiences that contain answers to the following questions as well address as any other recommendations or lessons learned outside of this question set.

i. What were the drivers that contributed to successful (or unsuccessful) LPGs in terms of increasing access to finance for agriculture SMEs?

ii. How can DFC improve processes involving its LPG product and partner selection, due diligence, structuring, monitoring, etc.? How can DFC implement lessons learned from monitoring LPGs?

iii. How can DFC better measure, monitor, and evaluate the impact LPGs have on increasing access to capital in the sector? Are there recommended refinements to DFC’s Impact Quotient Framework to better measure development impact of this product? Are there additional development risks that DFC should consider in the IQ framework?

iv. Has the LPG contributed to USAID’s CDCS and the U.S. Government’s Feed the future Program and the Global Food Security Strategy and, if so, how? What were the positive (or negative) impacts of the LPG on country development outcomes and USAID’s agriculture activities? Are there opportunities to improve coordination and /or communication of these contributions?

c. Provide a written summary report of findings and recommendations for DFC.

d. Provide a PowerPoint presentation and present findings to DFC staff.

e. Provide an external-facing written report and PowerPoint presentation for the public.

5.0 KEY PERSONNEL

The key personnel specified below are essential to work performance. At least 30 days prior to diverting any of the specified individuals to other programs or contracts (or as soon as possible, if an individual must be replaced, for example, as a result of leaving the employ of the Contractor), the Contractor shall notify the Contracting Officer and shall submit comprehensive justification for the diversion or replacement request (including proposed substitutions for key personnel) to permit evaluation by the Government of the impact on performance under this contract. The Contractor shall provide complete resumes for proposed substitutes, and any additional information requested by the Contracting Officer. Proposed substitutes should have comparable qualifications to those of the persons being replaced.

The Contracting Officer will notify the Contractor within 15 calendar days after receipt of all required information regarding the consent on substitutions. No change in fixed unit prices may occur as a result of key personnel substitution. The Contractor shall not divert or otherwise replace any key personnel without the written consent of the Contracting Officer. The Government may modify the contract to add or delete key personnel at the request of the contractor or Government.

Name Position [To be proposed by quoters]

6.0 DELIVERABLES

The contractor shall provide the following deliverables:

Table 6.1 Table of deliverables.

Specifications Due Dates

No later than April 15, 2024.

Every week until delivery of the final report.

Once per month until delivery of the final report.

· At a minimum, the report should include:

a. Executive Summary.

b. Introduction (including the assessment objectives, methodology, assumptions, and data limitations).

c. Literature Review described in Task 1.

d. Reconstructed Theory of Change described in Task 2.

e. Analysis of the development impact performance of the LPG Ag Portfolio described in Task 4.

f. Lessons Learned and Recommendations described in Task 5.

g. An appendix with all data collected during the project, including but not limited to financial data, survey data, and interview notes.

Final report to be delivered no later than September 30, 2024.

To be delivered concurrent to the final report, no later than September 30, 2024.

No later than September 30, 2024.

7.0 QUALIFICATIONS

The contractor shall possess the following qualifications:

a. A strong expertise assessing the development impact of investments made by development finance institutions, such as the International Finance Corporation (IFC), British International Investment (BII), the World Bank, the African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), the Dutch development bank FMO, and IDB Invest.

b. A strong expertise in the financial services sector in Sub-Saharan Africa, with a focus on the agriculture sector.

c. Possess at least 5 years’ experience in conducting development impact performance assessments that result in actionable recommendations.

d. When required, the IC shall deploy additional experts and support staff.

e. Possess strong analytical, report writing, and presentation skills.

f. Be fluent in English, as all communication and deliverables will take place in English, and French for analysis of documents and interviews with Financial Intermediaries located in West Africa.

8.0 TRAVEL

Engagements with DFC’s partner financial intermediaries in sub-Saharan Africa may require travel if the contractor or its sub-contractors, if any, are not already presently located in the region.

The contractor shall obtain written approval from the COR prior to undertaking any travel. All travel will be reimbursed at-cost in accordance with the Federal Travel Regulation (FTR).

9.0 PLACE OF PERFORMANCE

The principal place of performance will be the contractor’s facility.

10.0 HOURS OF OPERATIONS:

DFC standard hours of operation:

Monday - Friday, 9:00 a.m. – 5:00 p.m. Eastern time.

11.0 PERIOD OF PERFORMANCE (POP)

The period of performance shall be one year, from April 8, 2024, through March 31, 2025.

12.0 RESTRICTIONS ON REPRODUCTION AND DISCLOSURE OF GOVERNMENT DATA

a. The Contractor agrees, during the performance of this contract, to keep the information and data, including any controlled unclassified information (CUI), furnished by the Government or acquired and/or developed by the Contractor in performance of this contract in the strictest confidence. The Contractor agrees to maintain the confidentiality of all such data to which access may be obtained throughout contract performance whether the data is transmitted, in process or at rest. Title to any confidential information furnished, acquired and/or developed by the Contractor under this contract does not vest in the Contractor unless expressly provided under the contract. The Contractor agrees not to use, redistribute, publish, divulge, reproduce or disclose, in whole or in part, including any interpretation thereof or data derivative, the information or data obtained, furnished, developed or acquired under this contract, whether in process, at rest or transmitted by the Contractor, nor authorize others to do so, except as specified by the contract.

b. All personnel under the contract with access to Government data under this contract must sign a Non-Disclosure Agreement (NDA) to guarantee the protection and integrity of Government information and data. The Contractor shall provide copies of the signed NDA to the Contracting Officer’s Representative within 72 hours of execution of the form.

c. The Contractor agrees to comply with the security requirements of this contract, including the personnel, data handling and information technology requirements, and to take reasonable measures to restrict access to such information while in the Contractor’s possession to those employees needing such information to perform the work described herein, i.e. on a “need to know” basis. At the Contracting Officer’s discretion, any violation of security requirements under the contract may result in DFC availing itself of any of the remedies available under the contract including contract termination. The Contractor is responsible for safeguarding all government data and property provided under the contract and implement the requirements under the media sanitization policy.

d. The Contractor must insert this clause in all subcontracts and require subcontractors, teammates, and independent contractors to include the clause in all lower-tiered contracts.

13.0 NOTIFICATION REQUIREMENTS

a. The Contractor must comply with all notification of potential or actual breach and/or incident provisions under this contract. In addition, if the Contractor discovers or has reason to suspect confidential patent applications, related data or any part thereof have potentially or actually been publicly displayed on unapproved platforms or applications and/or accessed, viewed, provided to or obtained by persons or entities without need to know or not performing on the contract, the Contractor must immediately notify the Contracting Officer with a statement of the facts and circumstances known at the time within 72 hours of identification. Nothing in this provision relieves the Contactor from any other reporting requirements in this contract.

b. The Contractor must insert this clause in all subcontracts and require subcontractors, teammates, and independent contractors to include the clause in all lower-tiered contracts.

14.0 TRANSMISSION OF FEDERAL CONTRACT INFORMATION

All federal contract information, as defined in the clause at FAR 52.204-21, shall be transmitted between the Contractor and DFC using DFC’s secure Box.com™ account.