Consultancy Title: Disaster Liquidity Fund – Operational and Legal Design Consultant
Consultancy Location: Jakarta and Sumatra, Indonesia Program: ILFAD of Mercy Corps Indonesia Timeframe: March/April 2016
Mercy Corps Indonesia has taken steps to support the creation of a locally registered association to develop a liquidity fund structure for Bank Perkreditan Rakyat (BPR) or rural banks based in Sumatra and Aceh. At present, the association– based in Padang, West Sumatra and referred to as ABSIGAB/Asosiasi BPR-BPRS Siaga Bencana (Disaster Prepared Rural Banks). The liquidity fund structure is not yet operational, but ABSIGAB has started to enroll members and accept membership fees. As of December 2015, 34 BPRs subscribed to the association. Similar liquidity fund structure is also being developed with 7 BPRs in Malang City, East Java. Mercy Corps Indonesia and a selected conventional bank is facilitating the BPRs in developing the liquidity fund structure.
When operational, both in West Sumatera and Malang City, the fund will accept members’ deposits to create a pooled resource to help member rural banks mitigate the effects of specified natural disasters.
At this time, Mercy Corps is still seeking a conventional bank to manage the pooled resource of ABSIGAB.
ABSIGAB has developed a constitution and guidelines for its operation, however in several aspects, both need to be elaborated in more detail. Mercy Corps is seeking a consultant to review both the operational and legal assumptions of the current ABSIGAB liquidity fund model. He/she will provide clear recommendations on how this model should ideally be structured and operated in the case of a disaster and ensure that it meets current Indonesia financial regulations.
Specific tasks of the consultancy work are listed below:
· Recommendations on a due diligence process, including minimum financial and regulatory underwriting criteria, to assess whether a BPR can enter into the fund.
· Prescribe terms on how much liquidity a BPR can access and under what conditions, based on the results of the due diligence.
· Recommendations on policies and procedures for the voluntary exit of a BPR from the fund.
· Provide an expected fund loan loss analysis from BPRs that cannot repay, and how the fund could be structured to absorb these potential losses (including the use of donor funds or potential debt funding to supplement the contributed funds).
· Conduct an analysis of how the fund should be structured to attract investors, maximize the investment returns of the liquidity pool, and provide scenarios to ensure “debt obligations” of the fund can always be met.
· Provide three-year summary profit and loss projections with both best and worst case scenarios. Assumptions should include full operating expenses and the triggering of covered natural disasters.
· Recommendations on the use of a custodian bank to hold and administer the funds, and any necessary oversight roles (including the development of TORs).
· Recommendations on the potential to institutionalize the fund in accordance with Indonesian legal requirements and regulatory constraints.
· Detail scenarios for the creation of a single fund for the whole of Indonesia to diversify fund members risks, and provide an overview of how the fund can reach scale and operational efficiency, including the potential to consolidate two or more different pooling funds in different locations. Mercy Corps Indonesia expects that the review and recommendation on operational and legal aspect of the ABSIGAB liquidity fund structure should also be applied for liquidity fund structure of Malang City, East Java.
· Weekly progress updates (written and/or via a phone call) to the DRR-CCA Director/ILFAD Program Manager, and technical advisors.
· Formal and detailed recommendations in the form of an initial draft and final report, based on each activity listed above.
· Timeline of key next steps to achieve the recommendations listed in the report, and the expertise needed to achieve the listed activities.
· Detailed visuals of the fund operational structure.
Profile of the consultant:
· At least 10 years in Indonesian financial services sector, especially on linkage program and loan mechanism with MFIs/rural banks.
· Knowledge of Indonesian banking sector and central bank and OJK regulations on fund management and MFIs/rural banks.
· Proven experience in the design, and preferably management, of a liquidity or investment fund.
· Strong writing in English is an advantage.
Timeframe / Schedule:
This consultancy will be for a period of 15 business days starting on March 2016 with the potential for an extension.
Number of Days
Meeting with ILFAD Team on ILFAD program and scope work
Desk Study on current ABSIGAB governance on liquidity facility (pooled resource) and on legal and institutional arrangement relevant for the liquidity facility.
Discussion with ABSIGAB board in Padang on planned liquidity facility, scope of facility and selection mechanism for a BPR to receive the facility after disaster, opportunity and potential risk of the liquidity facility in future.
Writing a draft paper, among others, consist of:
- Review on legal and institutional arrangement relevant for the liquidity facility.
- Review on current ABSIGAB governance on liquidity facility
- Improve current ABSIGAB governance into more detailed and complete one.
- Recommendation for ABSIGAB to move forward
Finalization of paper incorporating input from Mercy Corps
The Consultant will report to:
Director of Programs DRR-CCA of Mercy Corps Indonesia.
The consultant will work closely with:
ILFAD Program Manager, board of ABSIGAB, and internal Mercy Corps Indonesia Advisor, including Director for Financial Inclusion and Mercy Corps’ internal Micro-insurance specialist.
Sumatra and Jakarta (assume 60% in Sumatra and 40% in Jakarta)
Interested applicants are requested to submit their CV and application to:firstname.lastname@example.org by 2 March 2016 at the latest with subject “Disaster Liquidity Fund – Operational and Legal Design Consultant” in the subject line of your e-mail.
Only shortlisted candidates will be contacted.