USAID LIFE RFA #7

Issuance Date: 12/20/2018

Closing Date: 1/16/2019 

Grants maximum amount: range between $15,000 and $75,000

Anticipated Number of Grants: multiple Grants up to $200,000

Subject:          Palladiums Request for Applications (RFA) Number RFA-LIFE- 07:

Dear Prospective Applicants,

Palladium is seeking applications from qualified MFIs- NGOs to implement, as recipients, for the Microcredit Component under “USAID Livelihoods and Inclusive Finance Expansion (LIFE) Project”. Palladium is implementing USAID LIFE Project under contract with USAID Contract Number: AID-268-C-16-00002

USAID Livelihoods and Inclusive Finance Expansion

Grants will be administered in accordance with the following regulations as applicable.

• Automated Directives System (ADS) Chapter 303 Grants & Cooperative Agreements to Non-Governmental Organization
• ADS 303.3.24 – Simplified Grants
• ADS 303.3.25 Fixed Amount Awards 
• A Mandatory Reference for ADS Chapter 303: 303_mak Fixed Amount Award Entity Eligibility Checklist
• A Mandatory Reference for ADS Chapter 303: 303_mat Fixed Amount Awards to Non-Governmental Organizations
• A Mandatory Reference for ADS Chapter 303: 303_mab Standard Provisions for Non-U.S. Nongovernmental Organization
• A Mandatory Reference for ADS Chapter 303: 303_maa Standard Provisions for U.S. Nongovernmental Organizations.
• ADS 302.3.4.13 Grants Under Contracts (GUCs)
• 2 C.F.R. 200.45 Definition Fixed Amount Awards
• 2 C.F.R. 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts (as referenced in ADS 303.3.25.a.)
• 2. C.F.R. 200 Subpart E – Cost Principles for non-profit and educational organizations – used to negotiate award amounts and terminations per 2 C.F.R. 200.201 (b)(1))
• FAR Part 31 – Cost Principles for For-Profit organizations used to negotiate award amounts and terminations per 2 C.F.R. 200.201 (b)(1))

The RFA is comprised of the following main sections:

1. Project Description
2. Funding Opportunity Statement
3. Award Information
4. Eligibility Requirements
5. Application Submission Information
6. Application Review Information
7. Award Administration Information
8. Other Information

Successful Applicants will be responsible for ensuring achievement of the program objectives. Please refer to the Program Description section of this RFA for a complete statement of goals and expected results.

Subject to availability of funds, Palladium intends to provide up to $200,000 in total funding for activities to be implemented no later than January 2020 with awards in the range of $15,000-$75,000.Palladium reserves the right to fund any or none of the applications submitted.

To be eligible for award, Applicants must provide all required information in their application, including the requirements found in any attachments to this RFA. Applications that are submitted late, incomplete or are non-responsive will not be considered. Awards will be made to the responsible applicants whose application best meet the requirements of this RFA and the evaluation criteria contained herein.

Palladium requires that applications be submitted electronically (e-mailed) to [[email protected]] no later than December 20, 2018

Issuance of this RFA does not constitute an award commitment on the part of Palladium, nor does it commit Palladium to pay for any costs incurred in the preparation and submission of an application. Further, Palladium reserves the right to reject any or all applications received. Applications are submitted at the risk of the Applicant, and all preparation and submission costs are at the Applicant's own expense.

Palladium team will be conducting different meetings with all interested applicants to answer any questions related to the RFA.

Sincerely,

Palladium Financial Inclusion Director

INTRODUCTION:

1. Project Description

LIFE is a 5-year USAID-funded project implemented by Palladium. The purpose of 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 predecessor USAID award, ‘Lebanon Investment in Microfinance Program (LIM)’ and expand inclusive finance to the unbanked and higher-risk, micro business clientele.

Project Goal

The USAID/Lebanon LIFE project will strengthen livelihoods, advance the microfinance industry, and inclusive finance, in order to improve economic opportunities for under-served entrepreneurs and recipients of microfinance services. 

1. Funding Opportunity Statement

For the purpose of this RFA, the project will use grants to support achievement of LIFE results under Component 2-Microcredit.

During the last couple of years, the Lebanese Small Scale Microfinance Institutions “SC-MFIs[1]” registered under the non-profit umbrella, are facing numerous challenges within the current turbulent microfinance landscape in Lebanon. The microfinance industry is changing radically with an increasing number of large commercial players including financial institutions, commercial banks and consortium of different investors, NBFIs and banks. 

The small-scale microfinance institutions are vulnerable in term of their market position[2]. Meanwhile they have customer-centricity and they are focusing on a large underserved community, unbanked society and borrowers who are depending on erratic revenue and a poor infrastructure for their livelihoods.

The purpose of this RFA is to assist these SC/MFIs to weather the current turbulence and to emerge as viable contributors to the most vulnerable micro-businesses within the unbanked community.

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Small scale MFIs are facing an array of challenges and risks that are threatening their existence and sustainability within the current turbulent landscape:

• The Circular 505 requires MFIs to collaborate and partner with commercial banks. This will require the management of strict requirements that will be imposed on MFIs in term of reporting to the central bank of Lebanon.

• Liquidity Risk due to the lack of capital, small scale MFIs are disadvantaged by poor mobilization of funds and dependence on cash,

• Cost of outreach - reaching the unbanked populations in Lebanon means servicing small loan amounts and servicing remote and sparsely populated areas of Lebanon, which can be unprofitable without high rates of process automation and mobile delivery.

• Lack of scalability - smaller microfinance institutions often struggle to preserve both the growth and margins of their enterprise compared to FI's and banks

• High Transaction Cost - High transaction cost is a challenge for small MFIs. The volume of transactions is very small, whereas the fixed cost of those transactions is high.

• Limited Budgets – Making provisions for large upfront investments is not possible for most of the small MFIs which limits their capability to purchase top tier banking solutions that can help them fulfil their requirements and support their growth targets.

• Political uneasiness, economic turmoil are disproportionately disturbing to Small Scale MFIs.

LIFE is responding to this turbulence within the microfinance sector through funding and investing in the digitization of financial services and Fintech solutions that would allow small scale MFIs to reduce their transactional costs, manage their portfolio, funds, and decrease defaulting loan payments, among others.

Investing in digital financial services “DFS” and fintech solutions will allow small MFIs to reach more people at lower cost and with a greater convenience than traditional “Brick and Mortar” operations.

Small MFIs will need advanced software: an IT system that has the flexibility to grow with the business in the future and to meet the reporting requirements for the central banks through commercial banks. Reporting to BDL is among the mandatory future tasks required from small MFIs under the circular 505. 

Fintech solutions will allow them to enhance the management of defaulting loans, reduce their delinquency and losses through time and get accurate access to data by the loan officers and decision makers.

The usage of digital field applications will allow small MFIs to improve their workflow. They will be able to process additional loans and serve more unbanked people in less time and in accurate manner. The work will be paperless; staff will reduce their field visits; less employees will be involved and committees’ decision--making will be enhanced, automated and accurate.

MFIs need to partner with banks and increase their access to capital in order to expand their outreach. Growth would be impossible without adapting new fintech and digital solutions. Customers will benefit from fintech solutions as well. They will be able to check their balances and proceed in digital payments to repay their loans among other benefits.

LIFE will encourage partnerships between Fintech and digital financial services providers that would lead for the provision of financial services through innovative technologies. LIFE expects these investments to increase the outreach to the poor, improve and build management capacity, competitive edge, efficiency and effectiveness.

1. Award Information

• LIFE anticipates granting performance-based awards according to the proposed activities aligned with LIFE-USAID RFA’s objective and applicants’ eligibility assessment and capabilities.
• Grants period starts with a base period limited to no longer than 15 months. Grantees will be evaluated based on their performance and achieving deliverables.
• Grants outcomes include but are not limited to a measurable expansion of the outreach for unbanked clients, improvement of workflow performance and long-term reductions in transaction costs.
• Grant amount will depend mainly on the digital or Fintech solution proposed by the applicant and its impact on operations, outreach and sustainability.
• Grant amount will depend as well on the MFI capabilities, portfolio management and disbursement of loans. However, no grant shall be issued for an amount exceeding $75,000.

1. Eligibility Requirements 

Grants may be provided to non-profit organizations that are legally registered and recognized under the laws of Lebanon and meet the criteria established by ADS 219 and LIFE project and provide corresponding supporting documents:

• Must be an active member of the Lebanese Microfinance Association with an Outstanding Capital less than ten million USD and an average loan size below $4,000 USD
• Must be willing to invest in Fintech solutions[3] or apply digital finance technology to reduce the transaction costs, workflows, increase and improve the delivery of their financial and non-financial services,
• Must be a Not-For Profit MFI registered under the NGO umbrella and actively providing Access to Finance services in Lebanese under represented areas,
• Must demonstrate sustainability, management performance and strategic planning,
• Their average loan size portfolio should not exceed $4,000,
• Must submit their updated key performance indicators (KPIs) on outreach, disbursement and portfolio at risk for more than 30 days,
• Are willing and able to complete the process of issuing a DUNS number (required by USAID). For more details about DUNS numbers: http://www.dnb.com

Additional Eligibility Criteria Specific for MFIs

The assisted organization's commitment to reach full financial sustainability must be accompanied by a plan outlining the major steps to be undertaken in the process of achieving this goal, including a realistic timetable for undertaking those steps, and defining periodic benchmarks by which progress toward the goal can be determined.

The Chief of Party may waive a requirement if a response to the RFA presents a valid justification, assuming approval from USAID.