Contracting Authority:
Secretariat of the African, Caribbean and Pacific Group of States
(ACP Secretariat)
EU/ACP Microfinance Programme II
Guidelines
for grant applicants
10th European Development Fund
Restricted call for proposals 2011
Reference: EuropeAid/131603/D/ACT/MULTI
Deadline for submission of proposals: 01/08/2011
NOTICE
This is a restricted Call for Proposals. In the first instance, only Concept Notes must be submitted for evaluation. Thereafter, applicants whose Concept Notes have been pre-selected will be invited to submit a Full Application Form. Further to the evaluation of the Full Applications, an eligibility check will be performed for those which are provisionally selected. This check will be undertaken on the basis of the supporting documents requested by the Contracting Authority and the signed "Declaration by the Applicant" sent together with the application.
1. EU/ACP MICROFINANCE PROGRAMME II
1.1 BACKGROUND
Context and evolution of microfinance
The overall landscape of the microfinance sector has changed considerably over the last decade. The last 10 years have seen strong growth across the sector, including an average yearly growth in borrower numbers of 21% over the period 2003-2008 and a rise in the total number of known and recognised microfinance institutions . This has been facilitated by the expansion of microfinance institutions under a variety of shapes, from microfinance banks to specialised NGOs. Further favourable factors have been the emergence of adapted service providers, such as specialist microfinance rating agencies and Information Service (IS) companies and products. Expansion has been assisted by technological advances, the emergence of new models of microfinance beyond microcredit, and the arrival of new players in the industry, including communications technologies. Importantly, the legal and regulatory environment has also taken a favourable outlook with new legislation and regulatory framework tailor-made to suit microfinance development.
All this positive change has been promoted and supported by the international donor community, and more and more by local stakeholders. Funds have flown into microfinance from the traditional aid-related sources but also from private investors, who found in microfinance an underlying asset that brought both financial and social return.
Among the international donors the European Union has played a important role in these years, in terms of amount of financing, estimated at 200 M EUR in 2010 for all developing countries, and in terms of focus, capacity building of microfinance actors. In particular in 2005, the European Union and the ACP Group of States launched the first EU/ACP Microfinance programme for the development of sound microfinance within the ACP countries, with a budget of 15 M Euro for 5 years in the framework of a comprehensive strategy for private sector development.
But the sector has still a long way to go. The financial crisis has deeply shaken the industry: microfinance institutions seek to strengthen their risk management internal controls to avoid bankruptcy in cascade, clients affected by the economic downturn naturally require new types of financial services and eventually governments are in some cases tempted by interventionist policies that could have a negative impact on the microfinance industry.
Microfinance development has been uneven in different areas of the world especially because some segments of the population have received more attention than others. Large sectors of the population still have poor or no access to appropriate financial services. Microfinance growth concentrated in urban areas where large customer outreach was easily attainable and the mass effect facilitated the goal of financial sustainability. External financing tended to focus on those institutions able to pass due diligence and bound to provide financial return. The final result was a concentration of financing on relatively few MFIs, serving homogeneous and concentrated chunks of population.
The ACP countries have seen a relatively slow sectorial growth, with a few exceptions. As an average, access to finance in ACP countries remains lower than in the rest of the world, with only one out of five households having proper access to financial services.
The European Union and ACP countries integrated these observations when designing the new EU/ACP Microfinance Programme and try to address these challenges. The overarching goal of the EU/ACP Microfinance programme II is to contribute to poverty alleviation through economic growth. With this particular background, the Programme has decided to focus its action on three main components (i) Pro-poor access to finance, (ii) Consumer empowerment and capacity building, (iii) Equitable and efficient local markets.
To reach its aims, the Programme uses different implementation methods, contribution agreements with other international organisations (for a total amount of €5 million) in the framework of the Paris Declaration of aid effectiveness, (CGAP-World bank, UNDP-UNCDF, ITC-ILO, IADB-FOMIN and KfW) and grant award via the present Call for Proposals (for a total amount of €7.5 million).
1.2 THE GENERAL AIM OF THE CALL FOR PROPOSALS
The global objective of this Call for Proposals is to develop inclusive financial systems adapted to the needs of the poor. That is to support the responsible offer and delivery of financial services to those who are still excluded from mainstream access to proper financial services, and the knowledgeable uptake of such services by the potential clients. This entails support to both the supply side (financial services providers, and their supporting institutions) and the demand side (clients).
The specific objectives of this Call for Proposals are:
Specific objective 1: to facilitate access to finance for communities excluded from the formal financial system, including vulnerable populations, very poor and in remote areas, in a sustainable manner and by using innovative delivery models as needed/necessary.
Specific objective 2: to improve the institutions’ capacity, particularly in the fields of financial and risk management, transparency on financial and social performance towards all stakeholders and specifically clients.
Specific objective 3: to build the financial capability of ACP microfinance clients, to empower them for an improved use of financial services enhancing their capacity to become autonomous economic actors.
Priorities:
The call will favour initiatives focussing on innovative approaches as a key element of expanded outreach to our target beneficiaries. Innovative approaches relate to technology use, process and methodology adaptation and, tailored research to meet clients' needs or partnership/integration with other initiatives pursuing similar objectives such as the social inclusion of poor, vulnerable and excluded populations.
The call prioritises initiatives that carry initiation effect. The EU/ACP Microfinance programme sees its role as one of kick-starter for innovative initiatives in difficult or little-explored environments and markets, where financial inclusion is proven to be insufficient. The Call for Proposals will prioritise well-designed ground breaking initiatives, that may find it difficult to initially fund themselves on a purely market-based approach. The support brought by the call may act as leverage for further and diversified support and funding.
Local empowerment: The Programme has a goal of creating local capacity at MFIs and for MFI support, thus setting the base for sustainable local microfinance activity. An important criterion for the proposals selection will be the effort made on local empowerment, through training, mentoring, technology transfer and generally the promotion of local actors.
South-South cooperation: There is plenty of local resource in ACP countries. The best way to consolidate it is to provide it with opportunities. The use of ACP based consulting capacity or tools will be considered positively.
The call will target initiatives that have the ultimate objective of providing financial access to poor and vulnerable populations, otherwise excluded from access to adequate financial services. This exclusion can be due to lack of accessibility (people living in remote and difficult to reach areas…), the peculiarities of main activity (agricultural activities with irregular income, activities subject to changing or extreme weather conditions…), or more general social exclusion (disabled, very poor or otherwise discriminated communities because of gender, ethnic origin…)
For this reason, particular attention will be paid to cross-cutting issues contributing to the achievement of the global objective of poverty reduction, such as the promotion of human rights, gender equality, rights of children and elderly people, rights of persons with disabilities, environment and climate change, as well as fight against HIV/AIDS and other disabling conditions. Whenever relevant, actions clearly have to demonstrate how these issues were and will be taken into account in their design, implementation and monitoring.
The call will target specialised service providers that act to favour the social and financial inclusion of the abovementioned communities by encouraging and supporting their empowerment and participation, their access to basic services (water, health, sanitation…), their productive activity and business development.
The call will target initiatives that address the issue of ACP microfinance clients’ capability to understand and deal with financial services, a safeguard against bad practice on both client and MFI sides.
Through this call for proposals, the EU/ACP Microfinance programme opens its offer of support to a variety of actors, recognising the multiplicity of factors for successful access to finance by micro-entrepreneurs, and considering the Programme’s priority of reaching out to the poorer and more vulnerable populations. Applicants can include microfinance providers that cater for the most remote areas, specialised supporting structures and institutions that deal with client empowerment.
The precise criteria for eligible institutions and activities for this call for proposals are detailed in 2.1.
Added value elements
- Multi country and regional approach: As an intra-ACP programme addressed to 77 eligible ACP countries, the Call will favour initiatives that impact more than one country, either from the start or progressively during the contract period. The multiplying effect will be particularly appreciated when it favours cross-regional perspectives.
- Replicability of initiatives:, the Call will favour the initiatives that can easily be replicated in further ACP countries for extended outreach over time.
- Complementarity and leverage: The call offers limited financing, which can be used as a lever to access further funds and carry out extended action. Various sources of funds should be used in a complementary way, avoiding overlap and maximising resource allocation. Proposals that demonstrate the ability to leverage other fund sources and build complementarity among them will be positively valued.
1.3 FINANCIAL ALLOCATION PROVIDED BY THE CONTRACTING AUTHORITY
The overall indicative amount made available under this Call for Proposals is EUR 7,500,000. The Contracting Authority reserves the right not to award all available funds.
Size of grants
Any grant awarded under this Call for Proposals must fall between the following minimum and maximum amounts:
• minimum amount: EUR 250,000
• maximum amount: EUR 800,000
Any grant awarded under this Call for Proposals must fall between the following minimum and maximum percentages of total eligible costs of the action:
• Minimum percentage: 20% of the total estimated eligible costs of the action.
• Maximum percentage: 80% of the total eligible costs of the action (see also section 2.1.4).
Any grant awarded under this Call for Proposal must be limited to 80% of the estimated total accepted costs
The balance must be financed from the applicant's or partners' own resources, or from sources other than the European Union budget or the European Development Fund
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