International consultant to undertake studies on fintech, crypto currencies and Islamic finance in Eastern Africa

Result of Service The assignment is expected to result in three (3) comprehensive studies on Fintech, cryptocurrencies and crypto assets, and Islamic finance, in Eastern Africa. The specific results are disaggregated by respective studies: Study on cryptocurrencies and crypto assets The study is anticipated to generate two documents: (i) One main report with a comprehensive analysis of the status of cryptocurrencies in Eastern Africa, including their uptake, opportunities and challenges; (ii) a policy brief summarizing the key findings of the main report for non-technical audiences including policy makers. Two Expert group meetings will be also organized where the International consultant will make presentations. Islamic finance and Fintech studies  Two separate detailed inception reports highlighting the proposed work plan and methodology for each study;  Detailed list of prospective speakers (email contacts and addresses);  Two separate draft reports Islamic finance and Fintech;  A revised draft report incorporating comments and feedback from ECA experts.  PowerPoint presentation of the report findings to be presented during the ICSEO meetings.  A final report incorporating comments and feedback from the meetings and any additional comments from other stakeholders within 10 working days after the meetings. This final report should consider all recommendations from participants at the ICSOE meetings.

Work Location KIGALI

Expected duration The assignment is expected to last for 4.5 months spread between March and July 2022

Duties and Responsibilities Background and Justification

The Sub-Regional office for Eastern Africa (SRO-EA) is established as one of the five sub-regional offices of United Nations Economic Commission for Africa (UNECA), whose mandate is to promote economic and social transformation in the continent by: a) Collecting information to prepare country and sub-regional profiles that include risk analysis for member states b) Contributing to and promoting the results of ECA’s policy-oriented research; c) Providing policy advisory services to member States, regional economic communities and sub-regional development operators to promote regional integration and sub-regional initiatives; d) Serving as facilitators of the integration activities of organizations of the United Nations system operating within the sub-region; e) Strengthening the capacity of members states, RECs and other stakeholders for policy making in favor of structural transformation, industrialization, and sustainable development. ECA’s Sub-Regional Office for Eastern Africa covers 14 member states: Burundi, Comoros, Djibouti, DRC, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda. Each year, UNECA/SRO-EA convenes the “Intergovernmental Committee of Senior Officials and Experts (ICSOE)” for Eastern Africa, which is a statutory meeting discussing emerging issues as well as opportunities and challenges to fast-track the development process of the sub-region. During the 24th ICSOE, members states urged SRO-EA to continue to support countries in strengthening resilience for fast recovery from the COVID-19 crisis. During the discussions, access to affordable sources of finance for both governments and businesses was identified as a priority challenge that needed to be addressed. Against this backdrop, SRO-EA prepares some background documents that will guide policy dialogues in the region as well as the discussions of the next ICSOE for in Eastern Africa. In the finance sector, emerging areas of interest include Fintech, cryptocurrencies and crypto assets, and Islamic finance. In Eastern Africa, Fintech and Islamic Finance are expanding segments of the financial sector in terms of range of products and services and their uptake. The development of Islamic Finance expands the possibilities of the financial interrelationship between participants at the global level, including those outside the Islamic world. The development of information technologies coupled with the rapid internet penetration catalyze a range of innovative digital financial services, easing the way individuals, firms and other users make financial transactions. These dynamics have ultimate impacts on individuals, households and firms in terms of reduced transactional costs and increased financial inclusion (Munyegera and Matsumoto, 2016; 2018). Financial Technology (FinTech) is the use of modern innovative technology for providing financial services. According to the definition of Oxford Dictionary, “FinTech is the traditional financial services provided through the use of information technology”. In the words of Dorfeitner et al. (2017), “FinTech is basically the composition of companies or group of companies providing modern and innovative financial services through technologies”. Sanicola (2019) argued “FinTech to be an avenue for promoting the technology to enhance the use of financial services. The use of FinTech and Islamic banking could boost access to financial services and payment facilities for SMEs in Eastern Africa and potentially enable them maximize their benefits from the AfCFTA. Alongside fintech and Islamic finance on a positive trajectory are cryptocurrencies and crypto assets which are gaining increasing popularity in developing countries, including Sub-Saharan Africa. Cryptocurrencies and crypto assets have already made inroads into emerging markets, with some countries central bank digital currencies (CBDC) (e.g. eNaira for recently developed by the Central Bank of Nigeria). These are anticipated to ease and facilitate payments and promote access to payment facilities, improve payments efficiency and boost overall levels of financial inclusion and business development. It is further claimed that digital currencies could be one of the options to harness private capital for development financing tied to poverty alleviation and sustainable development (Chan and Ibrahim, 2016). This optimism is based upon the fact that private capital outweighs, by far, a combination of funds from government, development institutions and philanthropists, with great potential to drive projects with sustainable development outcomes. In Africa, the trend of uptake and adoption of crypto currencies is on a positive trajectory. This is however amidst concerns of potential negative environmental impacts, volatility associated with some cryptocurrencies like Bitcoin (Zhongming et al., 2021), and security and regulatory issues, to name a few. ECA SRO-EA seeks an international consultant to undertake three separate and comprehensive studies on Fintechs, cryptocurrencies and crypto assets, and Islamic finance in Eastern African economies. The studies will act as background papers for various policy dialogues, including during the 25th Intergovernmental Committee of senior Officials and Experts (ICSOE). Box 1: AfCFTA and FinTech/Islamic finance studies The fundamental objective of the AfCFTA is to achieve a deeper integration of African economies. The tools to achieving this are not limited to trade but rather entails the free movement of trade, capital and people to achieve deep integration. The deep integration fostered by AfCFTA however does not go without challenges, and among them is the risk that big companies rapidly conquer the dominant market power and abuse it to crowd out small ones from the market. Critical for preventing this scheme, is a better access by companies, at a continental level, to funding and payment facilities regardless of their size. An example of a region-wide financial platform is the Pan-African Payment and Settlement System (PAPSS) project developed in collaboration with the African Export-Import Bank (Afreximbank). The platform is very innovative but is only a centralized payment and settlement infrastructure for intra-African trade and commercial payments. Afreximbank also provided funds to SMEs trough the Fund for Export Development in Africa (FEDA). Although it is innovative, new avenues such as fintech, cryptocurrencies and Islamic finance ought to be explored in ways that address the financial needs of African SMEs. The continental financial landscape awaits such a structure for SMEs to access funding. Funding is for SMEs the key for updating their production process and upscaling their positions in Africa’s value chains. The Islamic finance has proven capacities in developing information technology able to provide financial services more inclusively and in innovative ways. Also, FinTech provides cost-effective solutions for the companies, reduces their costs and improves their business processes (Saba et al., 2019) with potential economic growth impacts (Saba et al., 2019; Abedifar et al., 2016). Abedifar et al. (2016) show that Islamic finance has been growing at an average annual rate of 15% to 20% globally. Yet, the FinTech and Islamic finance encounter several challenges that might hamper SMEs’ full access to finance. Among these difficulties is the public limited knowledge of Islamic finance. In addition, the development of fintech on the continent has mainly concerned the payment services, with less emphasis on other fintech usages, and that because of the poor regulatory and enabling environment in most countries. This calls for an investigation of the level of deployment of FinTech and Islamic Finance in Eastern African and identification of improvement needs of SMEs capacities to take full advantage their financial inclusion potential.

Objectives

The objective of this consultancy assignment is to undertake thorough and comprehensive studies on fintech, cryptocurrencies and crypto assets, and Islamic finance in the context of eastern African economies. The specific objectives of the assignment are elaborated below, disaggregated by the respective studies:

Fintech

 To analyze the current state of fintech development in Eastern Africa and its implications for financial inclusion;  To analyse the role/impact of FinTech on SMEs’ development and growth in East Africa with some concrete successful examples in the world that can be used as case studies;  To analyze Fintech as enabler of financial inclusion of SMEs and households in Africa in general and in Eastern Africa in particular;  To review and analyse FinTech services and instruments that can promote inclusive and sustainable business development including crowdfunding, peer-to-peer lending, payment systems, insurtech, investech, suptech and regtech, crypto currencies/assets, real estate fintechs, neobanks, etc.;  To assess the potential and capacity of digital and neo-banks to finance SMEs owned by women and SMEs operating in selected sectors (manufactural and service);  To determine the existing skills and competences and the gaps in FinTech sector development in East Africa;  To benchmark Eastern Africa with regional and global best practices in Fintech development;  To assess the legal, regulatory and policy frameworks around Fintech development;  To make recommendations on potential pilot projects and way forward for FinTech development in East Africa.

Cryptocurrencies and crypto assets

a) To analyze the trend of uptake of cryptocurrencies and crypto assets in Eastern African economies, including Central Bank Digital Currency (CBDC); b) To assess the availability of conditions necessary for cryptocurrencies to be harnessed for business development and/or development financing (e.g. for poverty alleviation and sustainable development projects) and financial inclusion; c) To examine the potential benefits and demerits of cryptocurrencies in the sub-region, benchmarking with other regions where cryptocurrencies have taken off; d) To highlight opportunities and challenges to harnessing private capital and payment facilitation through cryptocurrencies for sustainable development financing. e) To explore the role of crypto-currencies in promoting intra-regional trade in goods and services, in the context of the AfCFTA; f) To assess the legal, regulatory and policy frameworks around cryptocurrencies and crypto assets; g) Make recommendation for secured and efficient use of crypto currencies/assets within East Africa.

Islamic finance

 To analyse the current state of Islamic finance and its association financial inclusion and sustainable growth in Eastern Africa;  To analyse the role/impact of Islamic finance on SMEs finance and long-term finance with some concrete successful examples in the world;  To analyse drivers of the interactions between Islamic finance and SMEs’ finance in Africa in general and in Eastern Africa in particular;  To assess the potential and capacity of Islamic financial institutions to participate in industrialization and engage in regional value chains through innovative financial services;  To assess the potential and capacity of Islamic banks to finance SMEs owned by women and SMEs operating in selected sectors (manufactural and service);  To determine the existing skills and competences and the gaps in Islamic finance development in East Africa;  To benchmark Eastern Africa with regional and global best practices in Islamic finance development;  To assess the legal, regulatory and policy frameworks around Islamic finance;  To make recommendations on potential pilot projects and way forward for Islamic finance development within East Africa.

Duties and Responsibilities

Under the general guidance and direct supervision of the Director and the Chief of Section¬–on trade and regional Integration in SRO-EA, the consultant will perform the following tasks:

Study on Fintech  Conduct literature review on FinTech and SMEs development and collect sector-specific data (agriculture, industry, manufacturing, agribusiness, tradable services, etc), constraints and opportunities, financing gaps, and benchmarking information wherever relevant with other developing and emerging countries;  Identify the local economic sub-sectors which hold relatively higher potential for industrial and economic growth and determine aspects of FinTech that are more relevant for them to achieve their potential;  Develop tailored and innovative FinTech solutions encompassing relevant sectors;  Conduct a mapping analysis of best practices and lessons learned from developing and developed country experiences and identify ways it can be contextualized in the Eastern Africa region;  Discuss the current SMEs FinTech framework for regional integration, identify its constraints and measures to overcome them;  Provide substantive policy and action-oriented recommendations that are fine-tuned to the region’s economic, social and demographic context;  Present a detailed presentation on the findings in a report and incorporate comments provided during internal and external reviews and finalize the report;  As much as possible, within data availability limitations, the consultant should seek to cover all 14 countries covered by UNECA/SRO-EA: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda.

Study on cryptocurrencies and crypto assets - Conduct through review of the relevant literature and draft an inception report outlining the methodology and approach; - Produce a draft report, with comprehensive analysis of the situation of cryptocurrencies and crypto assets in Eastern Africa; - Make presentation during workshops and expert group meetings organized by SRO-EA/ECA; - Incorporate comments from UNECA and country officials and produce finalized version of the report; - Prepare a policy brief with summarized key messages for policy makers for each of the 3 studies.

Study on Islamic finance  Conduct literature review on Islamic finance and collect sector specific data (SMEs, agriculture, industry, manufacturing, agribusiness, tradable services, etc), constraints and opportunities, financing gaps, and benchmarking information wherever relevant with other developing and emerging countries;  Identify the local economic sub-sectors which hold relatively higher potential for industrial and economic growth and determine aspects of Islamic finance that are more relevant for them to achieve their potential;  Develop tailored and innovative Islamic finance solutions encompassing relevant sectors;  Conduct a mapping analysis of best practices and lessons learned from developing and developed country experiences and identify ways it can be contextualized in the Eastern Africa region;  Discuss the current SMEs Islamic finance framework for regional integration, identify its constraints and measures to overcome them;  Provide a substantive policy and action-oriented recommendations that are fine-tuned to the region’s economic, social and demographic features;  Present a detailed presentation on the findings in a report. The report should address comments provided during internal and external reviews and finalize the report.  As much as possible, within data availability limitations, the consultant should seek to cover all 14 countries covered by UNECA/SRO-EA: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda.

Qualifications/special skills Academic Qualifications: Advanced university degree (Master's degree or equivalent) in economics, finance, statistics, international trade or development studies is required. A first level degree (Bachelor's or equivalent) in the specified fields with two additional years of relevant work experience may be accepted in lieu of the advanced university degree. A doctorate degree in the specified fields is an advantage. Experience: A minimum of 15 years of experience in economic analysis with special focus on financial sector development, financial inclusion, development financing, digital financial services, financial engineering and related work is required. Language: English and French are the working languages of the United Nations. For this consultancy, fluency in English and French (both oral and written) are required.

No Fee THE UNITED NATIONS DOES NOT CHARGE A FEE AT ANY STAGE OF THE RECRUITMENT PROCESS (APPLICATION, INTERVIEW MEETING, PROCESSING, OR TRAINING). THE UNITED NATIONS DOES NOT CONCERN ITSELF WITH INFORMATION ON APPLICANTS’ BANK ACCOUNTS.