MODIFICATION
R -- Livelihoods and Inclusive Finance Expansion (LIFE)
- Notice Date
- 3/31/2016
- Notice Type
- Modification/Amendment
- NAICS
- 541990
— All Other Professional, Scientific, and Technical Services
- Contracting Office
- Agency for International Development, Overseas Missions, Lebanon USAID-Awkar, Department of State/USAID, 6070 Beirut Place, Washington, District of Columbia, 20521
- ZIP Code
- 20521
- Solicitation Number
- SOL-268-16-000003
- Point of Contact
- Aaron Ruble, , Abeer Rizk,
- E-Mail Address
-
aruble@usaid.gov, arizk@usaid.gov
(aruble@usaid.gov, arizk@usaid.gov)
- Small Business Set-Aside
- N/A
- Description
- The United States Agency for International Development, Lebanon (USAID/Lebanon) intends to release Solicitation Number SOL-268-16-000003, for a project titled "Livelihoods and Inclusive Finance Expansion (LIFE)". The purpose of the activity is to improve livelihoods, support micro finance and expand inclusive finance in Lebanon. The USAID contemplates award of a five-year cost-plus-fixed fee (CPFF) completion type contract. The anticipated award date is o/a September 2016. The North American Industry Classification System (NAICS) code for this acquisition is 541990 (All Other Professional, Scientific, and Technical Services). This procurement will be conducted under full and open competition procedures, pursuant to Part 15 of the Federal Acquisition Regulation (FAR) (48 CFR Chapter 1). The anticipated date for posting the solicitation is April 13, 2016 and the anticipated closing date to submit proposals is May 12, 2016. There is currently no incumbent contractor performing the work. DESCRIPTION The purpose of the Livelihoods and Inclusive Finance Expansion (LIFE) project is to improve economic opportunities and livelihoods of low income individuals and microenterprises by expanding and strengthening microfinance associations' and member institutions' services and enhancing entrepreneurs' business skills. To this end, LIFE will improve livelihoods, strengthen microfinance activities and advance inclusive finance. Inclusive Finance, also referred to as financial inclusion, is defined as "universal access to a broad range of financial services, at a reasonable cost, provided by a diversity of sound and sustainable institutions." LIFE will consolidate the gains made under the Lebanon Investment in Microfinance Program (LIM) and expand inclusive finance to the unbanked and higher-risk, micro business clientele. BACKGROUND Development Challenge Approximately one-fourth of Lebanon's population, more than 1.0 million people, live on $4/day, less than one-fifth of the country's average per capita income. Those people tend to live in remote rural areas where job opportunities and access to municipal and financial services are minimal. Unsurprisingly, these areas were the hardest hit in terms of the refugee influx, which has made living conditions even harder. Growing income disparity, limited job opportunities, due in part to excessive policy constraints to new investments and job creation, and poor public service delivery systems have led to widespread citizen dissatisfaction, thus giving sectarian organizations an opportunity to gain a foothold in the population in exchange for political-confessional loyalty. To the extent possible, this project will seek opportunities in these vulnerable groups. Among these groups, women, youth, and people with disabilities are largely excluded and underserved when it comes to economic empowerment and access to basic financial services. The unemployment rate for persons with disabilities globally is much higher than non-disabled individuals. Lebanon has an excellent reputation for maintaining high international standards and sound policies in the banking and the financial sector. However, the lack of key conducive policies impedes access to finance and technology by the poor and by low-income micro enterprises (MEs). Also, MEs located in hard-to reach areas experiencing conflict and political instability fare worse. The Economist Intelligence Unit (EIU) has developed a Microfinance Index, which ranks countries based on their ability to develop and expand microfinance services. In 2014, the EIU ranked Lebanon 50th among 55 countries examined, based on its microfinance index. In 2011 only 37% of the population (over age 15) had an account at a formal financial institution. For women in particular, this percentage was lower at 25.9% according to the Global Partnership on Financial Inclusion. Thus, there is a clear need for greater financial inclusion in Lebanon, specifically in rural areas where unemployment exceeds 40%. Inadequate and ineffective government regulation concerning microfinance and the sub-optimal delivery of financial and business services have led to uneven access to finance and unbalanced economic growth. Micro, small, and medium enterprises (MSMEs) comprise approximately 95% of Lebanese-owned businesses, employ from two to ten persons, mainly draw upon household family members, and borrow at levels of less than $17,000. In contrast, low-income rural microenterprises borrow at much lower levels ($500 - $ 1,700) due to: less borrowing capacity; scarcity of commercial credit at favorable terms and in sufficiently large loan amounts that would support growth; limited technical know-how at the enterprise level and basic business skills; and a non-inclusive financial landscape. (1) Not unlike other countries, where the rural population and microenterprises can access lending, microfinance in Lebanon typically has higher rates, shorter terms, and requires high collateral. Compounding this issue, the steady influx of Syrian refugees - estimated at more than 1.5 million, approximately 30% of Lebanon's population, increases competition for scarce rural jobs and threatens political and social stability. The availability of microfinance and related entrepreneurial development skills and innovation, provides low-income and poor rural households with economic opportunities to identify new income sources and generate additional income. These essential services are often not available to persons with disabilities for a variety of reasons including physical barriers (i.e. inaccessible buildings and information), institutional barriers (i.e. discriminatory policy or standards), and attitudes/social barriers (i.e. stigma and discrimination at various levels, refusal to provide services). While the Central Bank has approved mobile payments and banks have started to introduce mobile money transfers, these services are presently only available to middle and high-income segments of the business population. High transaction costs associated with loan repayments, the absence of policies conducive to financial inclusion, and the lack of a specialized capacity within the regulatory agencies to foster and accelerate the pace of growth of the microfinance sector continue to impede performance of the sector. Present efforts to expand inclusive finance in Lebanon are overwhelmingly limited to the provision of microcredit and support for the adoption and scaling-up of best practices. Furthermore, efforts to expand the adoption of new technologies and innovative products in the financial sector are lacking. As a consequence, the financial enabling environment, level of development and competition in the microfinance sector is low, resulting in Lebanon's low microfinance index ranking. Also, inadequate support for women entrepreneurs widens the gender gap, slows development, and misses an opportunity to stabilize and bolster the resiliency of rural communities for coping with stress. This is especially noticeable in conflict prone areas where, ironically, women are counted on to rebuild their communities, strengthen household resiliency, and provide for the well-being of their families. MFIs, NGOs, business associations, and other key stakeholders individually do not have the technical, institutional, and financial ability to effectively advocate for policy changes in the microfinance sector. Needed policy reforms include: 1) enabling MFIs to accept savings deposits from their members or develop innovative ways for members to accumulate savings; 2) allowing MFIs to borrow from commercial banks or from the Central Bank to widen and deepen their financial intermediation role and expand their capital and lending base; 3) facilitating sharing of credit information on cross-over borrowing through privately owned and operated credit bureau information exchanges; and, 4) broadening MFIs' capacities, as well as other institutions, to provide financial inclusion type services that offer new opportunities for low income family micro businesses to improve their livelihoods and resiliency. Such reforms would reduce barriers to growth and development of the sector bringing Lebanon's microfinance sector up to par with other countries in the Levant. Moreover, MFIs need assistance to evolve into profit making entities, and develop on-lending arrangements with commercial banks or other international lending facilities to better support the microfinance sector with best practices. Currently and over the near to medium future, the MFIs are the only institutions that can provide the financial services to micro businesses and low-income households. The rural poor, particularly women, youth, and the physically impaired, and many of the low income or microenterprise businesses do not have a source or means to improve and advance their entrepreneurship skills or learn best practices as formal educational institutions do not provide continuing education opportunities to low income households or informal microenterprise owners. Lebanon must expand its inclusive finance in order to expand its microfinance sector to be on the same plane with global best practices. To illustrate, only 37% of the population (over age 15) had an account at a formal financial institution in 2011, and women and youth (aged between 18 and 35) comprise a large percentage of microenterprise borrowers.(2) The history of microfinance shows that innovations will stem from supply side insights together with a fresh in-depth understanding of the financial lives of poor households. Due to the small number of sustainable MFIs, lack of regulation governing the microfinance sector, and a proliferation of low-cost approaches for disseminating improved and affordable technologies and services, there is substantial room for progress towards greater financial inclusion in Lebanon. For instance, mobile banking, online money transfers and greater application of digitalization can reduce costs and increase the quality of services significantly in Lebanon. From the supply side, financial inclusion and microfinance are means to advance opportunities for microenterprises in rural areas of Lebanon. Looking at the demand side, i.e. individuals and/or microenterprises in rural areas of Lebanon, there exists a good portion of these who do not even qualify for financial services offered by the above-mentioned institutions due to lack of collateral and steady income. This group includes high risk rural, unemployed or low income women, youth and the physically impaired. Microfinance or financial inclusion support for this group is not effective. The type of support needed at this end is a "jump-start" or "livelihoods" support that will first make these individuals or microenterprises productive and economically viable and then at a later stage bring them in the financial ecosystem. Lebanon's, physiography, hydrology, and well-developed rural-urban market linkages demonstrate promise for economic growth opportunities especially within the low-income rural areas. Furthermore, Lebanon is endowed with temperate and tropical climatic conditions suited to the cultivation of a diverse range of fruit, vegetable, grain, and niche market crops, and livestock. Its abundant coastal marine resources and fisheries, a relatively well-maintained physical infrastructure throughout the country, significant irrigated and high-input agricultural production systems, and proven Lebanese entrepreneurship hold promise for robust economic growth, especially in the rural areas (3). OBJECTIVE The LIFE project is comprised of three components: 1) Inclusive Finance that will elevate the microfinance discourse by bringing about key policy and institutional changes with the potential to transform the financial inclusion landscape - a proven approach for developing a vibrant, sustainable microfinance sector and economically empowering the unbanked, low-income, and underserved micro clientele; 2) Microcredit that will strengthen the capacity of microfinance institutions (MFIs) and the Lebanese Microfinance Association (LMA) to increase their range of products and services and expand their reach of borrowers to include microenterprises with an emphasis on higher-risk, conflict affected areas (areas where economic pressures and social tensions have increased significantly as a result of the high influx of refugees), including new, unbanked, and existing microenterprises, and low-income women-headed households. LIFE will provide customized business management training, technical know-how, mentoring, basic business development skills, and new lending products to the MFI's current and potential clientele; and 3) Livelihoods that will provide grant support and basic business training to microenterprises and individuals that are excluded from the financial ecosystem and economic value chains, but because of lack of collateral and steady income or revenues, are considered too high of a credit risk to qualify for microcredit from the MFIs. The purpose of these grants, along with business development services, is to give these microenterprises the chance to grow and become potential MFI clients. This group includes high risk rural poor, including unemployed or low income women, youth and the physically impaired and certain microenterprises. The contractor will identify and propose the appropriate and capable stakeholders to receive USAID assistance. Potential stakeholders and counterparts may include, but are not limited to: the LMA, MFIs, Commercial Banks, the Central Bank of Lebanon, local Non-Governmental Organizations (NGOs), new and established microenterprises, Kafalat (a local guarantee provider), etc. The LIFE project is expected to target all regions in rural areas of Lebanon, with special emphasis on areas labeled "host communities", which are currently hosting a large number of refugees (4). STATEMENT OF WORK Overview of Components and Technical Approach LIFE is premised on the development hypothesis that the livelihoods of Lebanon's poorest people will improve significantly only if they can access support services of two kinds, financial and non-financial. LIFE will therefore take steps to make both kinds of services more readily available to the country's marginalized populations, matching the services to the specific business problems clients' face. In other words, LIFE will not be a set of solutions looking for a problem, but a project that tailors its solutions to the problems actually encountered by poor people. That said, USAID's experience under LIM and more generally suggests that finance is indeed a major constraint to Lebanon's poor significantly increasing their incomes. For that reason, it is anticipated that LIFE will devote a substantial proportion of its resources to questions of finance on both the program and policy front. Therefore, if: 1) targeted state and non-state institutions act to create the enabling environment for a more inclusive finance landscape; 2) regulations and guidelines to implement the policy are developed; and 3) staff is trained to carry out the existing and new policies, then it is quite plausible that access to microcredit, microbusiness development services, and technical skills and mentoring in areas of both technical and financial aspects of microbusiness development will increase. Such an improvement in the finance and information symmetry will help to bring out the concept of national financial inclusiveness for supporting broad-based economic growth. At the same time, demand for microfinance service and entrepreneurial development services will increase significantly as has been demonstrated worldwide. Increased availability of efficient microfinance service delivery entities will result in a more dynamic and robust business environment for microbusinesses to grow and flourish. This will lead to increased employment, increased demand for improved service delivery systems for continuing entrepreneurship education for low-income households and micro-businesses to improve their productivity and added value to a changing market. A cycle will thus be initiated in which steadily increasing demand for effective and efficient financial service delivery results in improved service delivery, which in turn results in greater supply and availability, and quality services that are competitively priced. This premise is supported by microfinance-specific literature that is replete with examples of the critical importance of a "national financial inclusion" strategy and actions for improving microfinance access by low-income, rural microenterprises and economically marginalized households in particular (5). It will be recalled that Lebanon's unbanked population (aged 15 and over and without access to financial intermediation comprise 37% of the population and operate the majority of businesses that employ only two family members) are starved for working capital and lack the skills and knowledge for adopting best entrepreneurial practices and innovation. This approach reflects the June 2011 call from USAID Administrator Shah that "USAID's efforts must be grounded in a deeper understanding of the words "country ownership" that encompasses not simply government in its approach, but the gamut of stakeholders, including the end users themselves." The overall purpose of the LIFE project is to contribute to the achievement of USAID/Lebanon's stated goal of "increased access to finance, especially for new business start-ups and women entrepreneurs and enhance entrepreneurs' business skills." More specifically, LIFE's efforts will result in the outcome "strengthened micro-finance association and member institutions." Toward this end, LIFE will, in light of the positive mid-term evaluation of the LIM program, implement the recommendations by further strengthening the capacity of NGOs that will be engaged in providing customized hands-on training and mentorship of microenterprises. Emphasis will be on the underserved and hard-to-reach microenterprises, and new microenterprise start-ups in higher-risk and conflict affected areas including women led low-income rural households. Also, LIFE will facilitate, nurture, and strengthen a network of institutions and stakeholders aimed at providing sustainable support to microenterprise development and inclusive finance support. Microenterprises and entrepreneurs that qualify for microcredit will be the targeted beneficiaries under the microcredit component. High risk, low income or unemployed rural women and youth, as well as microenterprises that do not qualify for microcredit from the MFIs will be the target beneficiaries of the Livelihoods component and eligible for grant support and technical training. The LIFE project will build on the initial successes and lessons of the LIM initiative and advance the goals of improving livelihoods, supporting microfinance activity, and expanding national financial inclusion of the unbanked and low-income households under the following three components: 1) Inclusive Finance will aim to bring about a minimum of three significant policy/institutional changes that will bring many more clients into the financial ecosystem and expand national financial inclusion- an essential element for developing a vibrant, sustainable microfinance sector and economically empowering the unbanked, low-income, and underserved micro clientele; 2) Microcredit will strengthen the capacity of MFI's and LMA to increase their range of products and services and to expand their reach of borrowers to include microenterprises with an emphasis on higher-risk, conflict affected areas (areas where economic pressures and social tensions have increased significantly as a result of the high influx of refugees) including new, unbanked, and existing microenterprises, and low-income women-headed households. LIFE will provide customized business management training, technical know-how, mentoring, basic business development skills, and new lending products to the MFI's current and potential clients; and 3) Livelihoods will provide grant support and basic business training to individuals and microenterprises who would like to participate in the financial ecosystem and economic value chains, but who, because of lack of collateral and steady income, are considered too high of a credit risk to qualify for microcredit from the MFIs. This group includes high risk rural, unemployed or low income women, youth and the physically impaired. Component 1: Inclusive Finance Microfinance is the means to achieving the inclusive finance objective. Microfinance includes the full range of financial services offered in any financial ecosystem, such as savings, funds transfers, payments, credit histories and credit scoring, warehouse receipts, insurance and credit. Because microcredit is critically important to microfinance, and to build on the achievements of the LIM project in this area, microcredit is included as a separate stand-alone component below. The primary objective of the ‘Inclusive Finance" component is to bring about a minimum of three significant policy/institutional changes that would expand national financial inclusion. USAID/ Lebanon conducted an assessment of the overall microfinance landscape and the following four key policy/institutional changes emerged as top priorities to expand financial inclusion: •enable MFIs to accept savings deposits from their members; •allow borrowing from commercial banks or the Central Bank to widen and deepen the financial intermediation role of MFIs and expand their capital and lending base; •facilitate sharing of credit information on cross-over borrowing through privately operated credit bureau information exchanges; and •Broaden MFIs' capacities to provide financial inclusion type services that offer new opportunities for low income family micro businesses to improve their livelihoods and resiliency. Out of these four findings, it is realistic to assume that the last three changes above can be implemented under the LIFE program. If implemented, these reforms could result in significant numbers of currently marginalized Lebanese entering the financial ecosystem and benefiting from opportunities to engage in productive activities and earn more income. This component will work closely with the Central Bank, LMA, and MFIs to translate the reforms from ideas into reality. The relevant literature on microfinance emphasizes the critical importance of national financial inclusion in improving access to financial services for microenterprises and individuals who are excluded from the financial sector (6). Financial inclusion clearly defines and aligns a shared vision among policy makers, MFIs, and other stakeholders for achieving an inclusive financial sector. It represents a shared vision of the role microfinance can play in a country's development and increase people's access to financial services. These strategies are nationally-owned and developed in a consultative process with key stakeholders. The process is policy/institutional changes that outline strategies, approaches, and actions to expand access of poor and low income people to finance services. The LIFE project will provide technical assistance and support to the LMA and the Central Bank to work on these policy/institutional changes. Component 2: Microcredit This component will provide support to microfinance institutions and the LMA with the aim of increasing microcredit products and services available for microenterprises and entrepreneurs in niche markets where access to credit is not readily available. Similar to LIM, this component will work on capitalizing MFIs in order for them to provide new targeted microfinance products and services and provide them with technical assistance that is essential for developing these products. This strategic approach is consistent with a key LIM evaluation recommendation "to target higher-risk categories of potential borrowers to be specifically reached by a portion of sub-grant funds or underwritten through a credit guarantee." In other words, should a credit guarantee scheme be used, it would be mainly for MFIs to raise additional funding from banks, with the USG as a guarantor. Technical assistance under this component will also target loan recipients. This component will also emphasize conflict-affected areas of high unemployment and high numbers of unbanked individuals. The difference between activity under this component and activity under LIM is this component targets beneficiaries better through greater outreach. This component's activities will support the microfinance sector while at the same time expand financial inclusion, one of the main aims of the program. This component aims to increase access to finance by the unbanked, hard-to-reach borrowers by the end of the program. As a corollary, and in aggregate, it is expected that the lending capital portfolio dedicated to higher-risk, underserved microbusinesses increases by several-fold throughout the project period, with commercial banks providing a significant share of the additional lending capital. Under this component, assistance will be compliant with ADS 219, which specifies conditions to delivering assistance to MFIs. Component 3: Livelihoods This component will provide grant support and training to individuals who are currently excluded from the financial sector's products and services who do not meet the requirements for receiving loans from the MFIs. There is a large group of potential entrepreneurs and microenterprises which does not qualify for microloans from the MFIs -even those with credit guarantees and other credit enhancements, because they lack the collateral and stable income necessary to secure and enable repayment of the loans. This group includes many of the rural poor including low income or unemployed women, youth, and physically impaired. LIFE will strive to link individuals and microenterprises in this target population into economic value chains and bring them into the financial ecosystem by providing them with market-linkage grants and basic business training. The assistance package may include customized technical and soft business development skills training and mentoring as well as limited market linkage grants for investment capital to enable potential entrepreneurs and microenterprises to acquire small pieces of capital equipment. Existing commercial training modules will be administered by organizations that specialize in providing entrepreneurial and basic business development technical skills training and mentorship across various small-scale enterprises of relevance to the Lebanese rural landscape and urban markets. A series of focused thematic training totaling about 50 hours of training per individual administered over a series of weeks. The project will identify NGOs that cater to filling these needs and are exclusive to the MFI partners involved with the microfinance aspects of the project. Assistance under this component is mainly aimed at improving livelihoods through increased income and/or increased employment. --- (1)UNHCR is constantly updating a risk classification of areas in Lebanon based on the number of hosted registered refugees (2)The U.S. Library of Congress (3)The Agricultural Sector of Lebanon, UN Economic and Social Commission for Western Asia, Beirut, Lebanon, October 1, 2013 (4)UNHCR is constantly updating a risk classification of areas in Lebanon based on the number of hosted registered refugees (5)The New Microfinance Handbook, a Financial Market System Perspective, edited by Joanna Ledgerwood with Julie Earne and Candace Nelson, the World Bank 2013. (6)The New Microfinance Handbook (World Bank, 2013), National Strategies, (Porter, 2011), Building Inclusive Financial Sectors ("The Blue Book," 2006) Except for the above information, no additional information regarding this planned RFP is available at this time. All necessary information will be supplied at the time the RFP is posted on www.fbo.gov. Questions/requests for information will not be responded to until RFP issuance. Interested parties are advised to periodically monitor the above website for updates concerning this procurement. No proposals for funding should be submitted until after the RFP is issued. This notice does not obligate USAID to release a solicitation or award a contract nor does it commit the Government to pay for costs incurred in the preparation and submission of a proposal. In addition, final award cannot be made until funds have been fully appropriated, allocated, and committed and internal USAID procedures have been completed.
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