Consultant for the review of the use of UNCDF’s Financial Instruments

Contract

This is a International Consultant contract. More about International Consultant contracts.

Background

Founded in 1966, UNCDF is the UN’s development finance arm, primarily for the 47 LDCs, out of which 32 are in Africa. The organization was created by the UN General Assembly during a decade where newly created independent nations sought a development finance advocate given (at the time) the limited options available in Africa and Asia for agile development capital. As a part of the UN family, the organization believes that the maintenance of international peace and security in the world extends to promoting economic development through the SDGs.

Through its programmes UNDCF is de-risking the local investment space, attracting public and private, as well as domestic and international finance to scale up what works by:

• incentivizing businesses to reach poor and underserved households and;
• developing a pipeline of transformational infrastructure projects through structured project finance, innovations in fiscal decentralization, and municipal finance.

To make finance work for the poor the organization deploys a combination of:

• grants;
• reimbursable grants;
• concessional loans and;
• guarantees.

UNCDF has a long history of working with, investing in, and building the capacities of local governments and private sector partners in LDCs. For instance, in 2014-2017, UNCDF engaged with over 140 private sector partners including financial service providers, mobile network operators, and SMEs, as well as some 800 subnational-level local governments to promote financial inclusion and local development. Through this experience, it has first-hand knowledge of the investment context, established networks for market intelligence and partnerships, and deployed an innovative set of investment tools and mitigation measures to prepare against risk while maximizing impact.

Investment sourcing is driven using open competitions, like challenge funds, requests for proposals, or market scans, and focuses on proactively identifying investment opportunities in sectors that are congruent with UNCDF’s development mandate. For that purpose, an established network of investment officers was deployed in key LDCs to help identify and structure investment opportunities. The investment team is complemented by a technical team comprising of approximately project officers and technical advisors on specific sectors (food security, climate change, agriculture finance, women economic empowerment, local economic development, youth empowerment) that backed up by regional hubs for investment, technical and administrative support in Asia and Africa (East and West). Furthermore, a team of investment professionals, based in the New York headquarters, with transactional expertise in LDCs and SMEs provides independent credit risk evaluations to help structure the decision-making process. The investment process uses a dual key system whereby each investment is vetted for impact potential and also vetted for bankability and investability.

Also, UNCDF develops new partnerships as a way to attract catalytic leverage for the missing middle and SDGs in LDCs. UNCDF has established an investment vehicle to attract commercial finance to the UNCDF pipeline of SMEs, financial service providers, and local infrastructure projects. In 2018, it launched the UN’s first-ever exchange-traded fund on the New York Stock Exchange to screen companies against a set of rigorous selection criteria reflecting customized environmental, social, and corporate governance indicators in alignment with the SDGs. UNCDF is also working with a global coalition of municipal governments to establish an institutional basis for accessing municipal finance for secondary cities and below so that local governments can provide essential infrastructure and services.

Purpose of the review

As the United Nations Capital development Fund (UNCDF) is further expanding its capital mandate, the relationship in the specific use of the different types of financial instruments was recently discussed and reviewed internally during the review of the UNCDF Operations Manual. The topics that are emerging from the initial discussions are related primarily to the following points.

• Firstly, the main shortcoming of grants is perceived to be their limited sustainability and the risk of creating a subsidy culture, while the shortcoming of financial instruments such as loans and guarantees is considered to be their administrative complexity.
• Secondly, the growing use of combined grant and debt schemes is requiring greater clarity in the selection process of the instrument, the final decision-making and the execution. Hence the grant and debt financing approaches and procedures may need further harmonization and also synchronization to be efficient, effective and not least coherent.
• Thirdly, there might be risks that UNCDF’s financial instruments might compete, overlap, and not optimizing the expected impact results if they are not appropriately blended to meet objectives and market requirements.
• Fourthly, how can UNCDF deploy and expand its balance sheet of loans and guarantees to maximum development effectiveness, given that it is unable to borrow, take equity positions or hold collateral.
• Fifthly, how can UNCDF improve uniform practices and proper segregation of duties to ensure appropriate checks and balances?
• Sixthly, how can UNCDF deploy its balance sheet operations to leverage and expand upon the impact and purpose of the wider UN system and its contribution to the financing for development agenda?
• And finally, how can UNCDF harmonize its definitions of its clients, and the deployment of appropriate choice(s) of financial instruments? Seventhly, how can UNCDF further improve the fulfillment of its capital mandate to “assist developing countries in the development of their economies by supplementing existing sources of capital assistance using grants and loans, particularly long-term loans made free of interest or at low-interest rates.”

Against this background, and with the overall objective to improving the efficiency and effectiveness of its grant and debt instruments, UNCDF is seeking a senior consultant to conduct an Independent review to:

• Map and review the existing selection criteria, assessment practices, approval process and monitoring activities used for grant and debt instruments. Compare these practices with those in other similar institutions.
• Map and review the different types and categories of UNCDF clients/beneficiaries/applicability of the financial instrument(s) e.g. various types of Small and mid-size enterprises (SMEs) and maturity levels, Project finance, structured project finance, public–private partnerships, special purpose vehicles, subnational governments, intergovernmental, governments, non-governmental organizations, etc.
• Map and categorize the different sources of funding for UNCDF, its programming cycles, programming conditionalities, geographic concentrations, programming restrictions, adherence to their development theory of change, and their impact on the process and deployment of financing instrument(s).
• Map and categorize the existing capacities within UNCDF against existing processes.
• Identify similarities, differences and gaps in the investment/grantmaking process of UNCDF’s financial instruments.
• Propose any relevant additions and/or adjustments in the balance sheet processes to make the use of UNCDFs financial instruments (grants, reimbursable grants, loans, guarantees) more efficient, effective and coherent (if deemed necessary).
• Assess risks and opportunities to UNCDF from the expansion of its balance sheet operations to further advance its development impact in association with its existing deployment of grant finance, bearing in mind the unique characteristics of UNCDF lending.

Scope of the review

The scope of the review shall include an “internal component”, which maps and reviews the current investment/grant-making processes as they relate to the use of financial instruments through UNCDF’s projects and programmes, and an “external component”, which reviews and compares UNCDF’s investment/grant-making processes with current practices financial instruments (grants, reimbursable grants, loans and guarantees) used by other institutions with policy mandates comparable to those of UNCDF while taking into consideration the unique clients, specific client needs and mandate of UNCDF in assisting “developing countries in the development of their economies by supplementing existing sources of capital assistance through grants and loans, particularly long-term loans made free of interest or at low-interest rates.”

The review shall review and recommend ways the UNCDF can determine: (i) under what conditions should grants be preferred to loans, and vice versa; (ii) under what conditions should the utilization of reimbursable grants be preferred to loans, and vice versa and (iii) appropriate investment/grant-making process from selection of instrument, assessment procedure, approval and monitoring, and, lastly, (iv) the appropriate governance structures for the instrument (i.e. investment committees)

The review shall focus on a selected sample of projects and programmes which has been supported by grants and debt transactions. Such a review shall take into account all the financial terms and conditions (i.e. interest rate, service fee, and tenor and grace period of the financial instruments) and investment criteria, where relevant, recommend appropriate improvements for the consideration of UNCDF.

Finally, the review shall focus on alignment with UNCDF Mandate, programming theories of change and its client base, as a special measure for the Least Developed Countries (LDCs).

Duties and Responsibilities

Scope of Services

Specifically, the senior consultant shall conduct the following review :

1. assessment documents and the general financial terms and conditions as codified in the legal documents and selection processes for financial instruments (grants, reimbursable grants, loans and guarantees) extended to the private sector;
2. how UNCDF assesses the concessionality needed for each funding proposal concerning the applicable financial instrument. This shall include assessment of the use of different financial instruments (i.e. grant, reimbursable grants, loan, guarantee) and their terms and conditions to make sure that the UNCDF contribution is additional to what the market or other ODA grant providers can offer, building local institutions rather than parallel processes, incentivizing commercial capital mobilization (primarily from the domestic financial sector) while avoiding market distortion and crowding out/displacing other sources of finance.
3. the practice of investment committees and their respective terms of reference; and
4. the process used to assess the concessionality needed for each funding proposal concerning the applicable financial instrument. This shall include assessment of the use of different financial instruments (i.e. grant, reimbursable grants, loan, guarantee) and their terms and conditions to make sure that the UNCDF contribution is additional to what the market can offer, incentivizing commercial capital mobilization while avoiding market distortion and crowding out/displacing other sources of finance.

The senior consultant shall also take stock of best practices used by other institutions with policy mandates comparable to those of UNCDF.

The senior consultant should interview key stakeholders for the deployment of the instruments at UNCDF and also relevant external partners to complement the desk review.

Deliverables and Payment Terms

Deliverables

% of Contract Price Payable

Review and approvals required

Inception report and work plan

20%

Senior Management Team (i.e., UNCDF Executive Secretary and/or Deputy Executive Secretary).

Report detailing analysis and recommendations based on interviews

20%

Debriefing sessions and presentations to UNCDF staff and Senior Management Team

30%

Final Report

30%

Reporting arrangements

The senior consultant supporting the review shall report to the UNCDF Senior Management Team.

Duration of the Work and Duty Station

The senior consultant is expected to start in immediately upon signing of the contract and to be completed within three (3) months from the effectivity of the contract. The duty station will be New York, USA and/or home-based with virtual or face-to-face meetings when required by either the senior consultant or UNCDF.

Competencies

• Demonstrate leadership with commitment, excitement and excellence in others;
• Ability to meet goals and quality criteria for delivery of products or services;
• Demonstrates strong writing skills, particularly the ability to present persuasive, coherent and well-founded arguments;
• Demonstrates drive to achieve results in timely manner and to seek and find solutions to any problems encountered;
• Has ability to communicate clearly and persuasively

Required Skills and Experience

Professional Expertise and Qualifications of the Successful Consultant

• At least 15 years of relevant working experience in development finance or impact investing, mandatory.
• Proven experience in investments impact assessment, measurement and reporting including setting of KPIs, M&E frameworks, and quality assurance, required.
• Proven experience in knowledge management, data mapping, impact and trends analysis, policy interpretation and investments recommendations, required.
• Significant technical expertise in investment decision making or research analysis, ideally in ESG or Impact Investing
• Proven success in designing and implementing mamagement capacity assessments, investment portfolio-wide evaluation and learning systems
• Strong client orientation and service delivery approach, with the ability to influence and leverage external and internal stakeholders
• Strong analytical and technical writing skills with a proven ability to produce and summarise complex evidence-based findings in a clear and engaging style
• Master’s degree in business administration, fiannce economics, public administration, development finance, marketing or related field, required and relevant certifications (CFA, CFP, etc.) strongly preferred.

Application:

Interested individuals must submit the documents mentioned below in order to demonstrate their qualifications (Note: the system does not allow multiple uploads of documents.)

The following documents are to be uploaded in one PDF file:

• Brief description of why the individual considers him/herself as the most suitable for the assignment, and a methodology, if applicable, on how they will approach the assignment.
• Personal CV indicating all past experience from similar projects, as well as the contact details (email and telephone number) of the Candidate and at least three (3) professional references;

The following document is to be sent by email to financial.proposal@uncdf.org :

• Duly accomplished Letter of Confirmation of Interest and Availability and Financial Proposal (do not upload your financial proposal online.) The financial proposal should be emailed separately to financial.proposal@uncdf.org with the subject line: 98240 - Consultant for the review of the use of UNCDF’s Financial Instruments

Award Criteria

The contract shall be awarded to the offeror whose offer have been evaluated and determined as:

• Responsive and compliant to the requirements of this TOR; and
• Having received the highest combined score: Technical (desk review) 70% + Financial 30% = 100%.

Any individual employed by a company or institution who would like to submit an offer in response to a Procurement Notice for individual consultancy must do so in their individual capacity by providing a personal CV so that their qualifications may be judged accordingly.

UNCDF is committed to achieving workforce diversity in terms of gender, nationality and culture. Women candidates or women-owned businesses are strongly encouraged to apply. Individuals from minority groups, indigenous groups and persons with disabilities are equally encouraged to apply. All applications will be treated with the strictest confidence.

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