Designing a Commercially Viable Risk Management Product to Support NEF’s Revolving Credit Funds in Non-Regime Held Syria

RCF Phase III: Strengthening Agricultural Resilience and Incomes

Consultancy Title: Designing a Commercially Viable Risk Management Product to Support NEF’s Revolving Credit Funds in Non-Regime Held Syria

SOW Date: November 15, 2023

Job Class: Consultancy

Approximate Start/ End Date: Immediately – December 31, 2023

Level of Effort (Days): 20

1. Background:

NEF has delivered inclusive economic growth programming in Syria since 2017. In 2020, NEF established an access to finance program in non-regime held areas in Northeast and Northwest Syria. The Revolving Credit Fund program (RCF) provides lending and non-financial services entrepreneurs in diverse sectors. Since 2020, the RCF has reached over 3000 borrowers in Northeast and Northwest Syria.

A current phase of NEF’s Revolving Credit Fund program, RCF III: Strengthening Agricultural Resilience and Incomes, aims to improve the prosperity and resilience of producers and other agricultural value chain actors. It introduced tailored agricultural loans for borrowers to facilitate access to working capital, with loans and flexible terms to accommodate growing seasons.

Producers in NES confront significant challenges that adversely impact the sector, including climate shocks and stresses, effects of conflict and insecurity, currency depreciation and market volatility, and market isolation. These shocks and stresses undermine production and profitability. NES is unbanked and unregulated. RCF is the only provider of credit outside of informal lending practices. There is no formal insurance market or products. No formal financial institutions exist in the region.

Against this backdrop, NEF seeks to develop and implement a risk management mechanism, e.g., insurance or emergency loans, linked to agricultural finance to mitigate climate-related or other losses for agricultural borrowers.

Through this consultancy, NEF seeks to work with stakeholders and technical experts to develop a commercially viable emergency loan or insurance product that is designed to help producers recover from losses due to drought, flooding, or other natural disasters and to avoid the double risk of physical or production losses alongside the ongoing financial obligation to repay a loan used for agricultural production. The expert will help define the nature of the instrument and identify operational procedures and measurement, recognizing that the instrument should fit as a commercially viable and sustainable product within a broader blended finance portfolio.

In parallel, NEF is trialing an emergency loan product to support borrowers who experience losses due to external factors. The emergency loans make additional loan capital available to credit-worthy agricultural borrowers when identified conditions are triggered. We expect to gather evidence and learning based on this experience on uptake, risks, and impact. Data and learning will be shared with the consultant.

1. Objective:

The primary objective of this consultancy is to advise and assist the Near East Foundation in designing an effective, sustainable, and commercially viable risk management product (RMP) to support its revolving credit fund (RCF) operations in Syria. The RMP should mitigate risk of default for borrowers and overall risks to safeguard the RCF. The consultant will be responsible for providing expert guidance and recommendations for a practical solution for risk management that can be deployed in the context of Northeast Syria.

1. Scope of Work:
   1. Brief report identifying up to three potential risk management product options suitable for RCF, with recommendation for focal RMP for future analyses.

The consultant’s responsibilities will include, but not be limited to:

4.1. Consultations and research:

• Conduct a comprehensive consultation and assessment to understand the risks and insurance requirements of the RCF in Syria and potential sources of information and data to feed into decision-making as part of the RMP
• Building on existing analyses and NEF experience, identify potential options for risk management products in NES. The product should help mitigate risks of default to borrowers and to RCF.
• Consider commercial viability and sustainability with respect to NEF’s plan to sustain RCF operations through a blended finance mechanism.

Deliverable:

4.2. Designing the Insurance Program:

• Based on the three potential risk management product options, recommend a tailored risk management product that addresses the identified needs and aligns with the fund’s objectives. The recommended product should reflect the realities of the NES context, including whether the product is likely to be acceptable to borrowers, information availability, and the multifaceted types of risks that borrowers confront.
• Provide recommendations on specific product details (e.g., coverage types, limits, deductibles, and pricing structures, indexing or other triggers, etc.). These recommendations should take into account the risk management product’s objectives, any specific requirements for compliance under Islamic finance, and commercial viability and sustainability.
• Provide clear operational guidelines on the administration and operation of the RMP, including any specific claims handling procedures and reporting mechanisms.
• Suggest risk management strategies to minimize the RCF’s exposure to various risks.
• Non-regime held regions in Syria where the RCF operates are unbanked and unregulated. Suggest any required regulatory frameworks or policies necessary to complement or facilitate the recommended risk management product.
• Develop a framework to monitor the performance and impact of the insurance program over time.

Deliverables:

1. A detailed design proposal for the RMP
2. Designed RMP Toolkit, including operational guidelines and key performance metrics.
3. Training materials and sessions to RCF Implementation Team on utilization of toolkit

5. Timeline:

The consultant will be expected to complete the assignment by December 31, 2023.

1. Reporting:

The Reports will be reviewed and approved by the Senior Program Manager and will coordinate with and keep both the Senior Program Manager and HQ Program Director informed of progress.

7. Qualifications and Requirements:

7.1. The consultant should have:

• A strong background in understanding innovative risk management and insurance programs in complex environments.
• Demonstrated experience in developing innovative and commercially viable risk. management or insurance programs for financial institutions or similar entities.
• Strong interest in and capacity for innovation and practical problem solving.
• Excellent communications skills (verbal, written, presentation, interpersonal).
• A proven track record in similar assignments.
• Proficiency in English; proficiency in Arabic is a plus.

7.2 The following qualifications are highly desirable:

• Experience in and understanding of the Syrian context.