Kyrgyz Republic: Bai Tushum Bank - SME and Corporate Lending and Risk Management Capacity Building

Country:Kyrgyz Republic

Business sector:Financial institutions

Funding source:EBRD Donor Funds

Contract type:Consultancy Services

Notice type:Invitation for expressions of interest (CSU)

Issue date:13 Dec 2016

Closing date:11 Jan 2017   at  17:00   Bishkek

Executing Agency (Client): Bai Tushum Bank

The Client Contact Person:
Bolot Kalmatov, Head of Credit Department
BaiTushum Bank
76, Umetaliev str.
Bishkek
Kyrgyz Republic
Email: Bolot.Kalmatov@baitushum.kg
Phone: +996 312 – 905 791 ext. 1051
Fax: +996 312 – 905 800 

The EBRD Contact Person:
Sophie Medert
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN
Tel: + 44 20 7338 7371
Fax: +44 20 7338 7451
E-mail: MedertS@ebrd.com

Project Description: Bai Tushum Bank (the “Company”, the “Client” or “BTB”) is the leading microfinance provider in Kyrgyz Republic with the largest MSME portfolio in the country. As of January 2016, BTB is the 7th largest bank by gross loan portfolio and 9th largest bank by total assets in Kyrgyz Republic. BTB was the first microfinance institution in Central Asia to have successfully transformed into a full-fledged small business bank at the end of 2012.  Historically, BTB specialised in lending to micro, small and medium enterprises as well as individuals primarily in the rural areas of the country, with a focus on agricultural finance.  However, with the transformation into a bank BTB has diversified its portfolio and expanded the range of financial services offered to its retails as well as corporate clients: deposits, remittances and currency conversions. BTB has a large customer base of about 31,000 borrowers and ca. 115,000 deposit accounts serviced through an extensive network of eight branches and 46 outlets across the country. With transformation into a fully pledge bank and continue to serve targeted clientele group in rural remote area.

The Project will help Bai Tushum to build internal capacity and strengthen its SME/Corporates lending capacity by implementing updated, internationally recognised best practices and procedures, rather than existing approach which may be more suitable to MSEs.

Assignment Description: The Client intends to engage a consultant (the “Consultant”) with the EBRD’s support to assist the Client to expand its capacities in SME/Corporate lending effectively and efficiently provide SME/Corporate loans to enterprises across Kyrgyz Republic on a sustainable basis (the “Assignment”).

The selected Consultant is expected to provide the following services:

A. SME/Corporate lending and risk management functions:
1) Conduct an overall assessment of BTB's existing SME/Corporate  business functions and processes, SME/Corporate products specifications and exposure limits, SME/Corporates loan underwriting process and criteria, policies and procedures of respective credit risk management, and related IT systems. The Consultant shall then identify potential areas of improvement in each procedure, recommend changes, and provide support in their implementation. This would include reviewing, and suggesting improvement to the template for assessing historical financial performance, cash flow appraisal and future capital expenditure, future financial performance and financial ratios for SME/corporate customers. The improvements and new methodologies should take into consideration any lessons learned from BTB’s existent MSME business. 
2) Conduct interviews of key members of management and staff involved in the product development and management process (Deputy CEO, Risk Manager, Head of SME, Head of Sales, IT Manager, Marketing Manager, and other members of staff as necessary)
3) Review existing, and introduce new policies and procedures for risk mitigation techniques for SME/Corporate loans;
4) Currency devaluation stress-tests: Support BTB in introducing and complying with best-practice requirements of (i) performing stress tests assuming various currency devaluation scenarios, to test the debt service capacity of unhedged Sub-borrowers, if a loan provided by BTB is denominated in a currency other than Kyrgyz Som and (ii) preparing a standard numerical example of a devaluation scenario shown on a generic sub-loan case, to be provided to borrowers, in order to ensure that borrowers are informed in writing of the risks involved in such foreign currency borrowing.
5) Review existing, and introduce new policies and procedures for:
a) stronger monitoring mechanisms for SME/Corporate  loans on both an individual basis (including review of the SME borrowers’ reporting requirement), as well as an on a portfolio basis; and
b) credit portfolio stress-testing methodology for SME/Corporate loans. This may include, but not be limited to:
       i) Assessment of existing data base and recommendations for improvement;
       ii) Definition of stress scenarios and underlying assumptions, if possible based on BTB’s historic data and, if applicable, in line with Central Bank requirements;
6) Review existing, and introduce new policies and procedures for restructuring, bad-debt collection, work-out procedures and recovery techniques for SME/Corporate loans;
7) Review existing, and introduce strengthened SME/Corporate loan sales, marketing, and product development process;
8) Assessment and upgrading of the existing SME/Corporates rating:
     i) Review and assess volume & quality of current data available and lending methodology; 
      ii) Review adequacy of management information system (MIS) with BTB credit scoring/rating  system implementation and assess opportunities for further improvements;
       iii) Develop and automated application processing system (APS) within existing MIS.
      iv) Provide support with the implementation
9) Develop manuals and training material related to the topics identified above, to be used in the training workshops and in the on-job coaching;
10) Reporting: the Consultant shall assist BTB to improve, or introduce an internal system for reporting on the overall SME loan portfolio of BTB, including number and volume of SME loans, and their geographic breakdown by main regions, and shall advise BTB on the content and quality of the bank’s reporting to EBRD.

B. Training:
The Consultant will assist in enhancing the skills of BTB's SME/ Corporate staff, and will provide training as follows:
1) Undergoing a “training needs” assessment with management and staff to identify the training needs for strengthening the entire transaction cycle for SME/Corporate lending and associated risk & control functions.
2) Coordinate and agree with BTB the detailed outlines, and the schedule of all training and coaching programmes
3) Delivering on-the-job coaching to a selected number of SME and Corporate loan officers of BTB, on for all those areas where training needs have been identified. This shall include training on the areas listed under SME/Corporate lending and risk management functions. This may also include training with regards to the entire transaction cycle for SME and Corporate lending, i.e. understanding of business and risk profiles and operating environments of SMEs/Corporates; assessing commercial viability; development of income statement and cash flow forecast based on the borrower’s past performance and assumptions for future performance; ratio analysis; evaluation and mitigation of risks; preparing a proposal for the Credit Committee;
4) Designing and implementing a ‘training-of-trainers’ (ToT) programme for the items listed under (2), to insure the sustainability of the TC project through internal capacity building.
5) Organising a training workshop for credit risk officers which are involved in SME and Corporate lending, on the improvements and changes to the policies and procedures listed under SME /Corporate lending and risk management functions
6) Organising a training workshop for selected key senior management, including those located at Head office as well as branch managers, which are involved in SME/Corporate lending, on the improvements and changes to the policies and procedures listed under SME /Corporate  lending and risk management functions

All training courses shall be conducted in Russian. The Consultant will provide comprehensive training materials (handouts) used during the training in Russian, in the number of copies corresponding to the number of trainees.

The detailed Terms of Reference for this Assignment can be found here.

Status of Selection Process: Interested firms or groups of firms are hereby invited to submit expressions of interest.

Assignment Start Date and Duration: The Assignment is expected to start in February and have an estimated overall duration of 16 months.

Cost Estimate for the Assignment: EUR 200,000 exclusive of VAT.
The Consultant must determine whether any indirect taxes/VAT are chargeable on the proposed services and state the basis for such. If any indirect taxes/VAT are payable, the Client will have to pay indirect taxes/VAT element to the services directly to the Consultant unless otherwise agreed.

Funding Source: It is anticipated  that the contract will be partially financed by the EBRD Special Shareholder Fund and other EBRD Donor Funds. Please note selection and contracting is subject to the availability of funding.

Eligibility: There are no eligibility restrictions.

Consultant Profile: Corporate services are required. The Consultant will be a firm or a group of firms preferably with previous project experience related to:

• assisting commercial banks or similar financial institutions with the development of SME and Corporate business including the strengthening of their credit and risk management, particularely in Central Asia;
• building internal capacity in Banks or similar financial institutions on SME/Corporates lending and the implementation of train-the-trainer programmes.

The Consultant’s expert team is expected to include the following experience:

• experience and expertise in assisting banks with development of SME and Corporate  business;
• experience in strengthening credit and risk management of Banks, proven ability to help banks with devising and implementing SME/Corporates lending policies;
• understand, recommend and implement appropriate training programmes for staff and preferably experience in or exposure to emerging markets and specifically of their banking sectors;
• capability to operate and provide training in Russian, as most of the bank’s target personnel do not have good command/knowledge of English.

Submission Requirements: In order to determine the capability and experience of Consultants seeking to be selected the information submitted should include the following:

1. Company/group of firms’ profile, organisation and staffing (max. 2-4 pages).

2. Details of previous project experience or similar assignments particularly undertaken in the previous five years, including information on contract value, contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided (if different from duration) , main activities, objectives.

3. Proposed approach, work plan and methodology.

4. CVs of the Consultant’s expert team who could carry out the Assignment detailing qualifications, experience in similar assignments, particularly assignments undertaken in the previous five years, including information on contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided, assignment budget, main activities, objectives.

5. Financial proposal presented in the breakdown of costs format using the template via the following link.

6. Completed Consultant Declaration Form and Contact Sheet, the template for which is available from the following web-link:

http://www.ebrd.com/pages/workingwithus/procurement/notices/csu/contact_sheet.doc.

The above information shall not exceed 25 pages (excluding CVs, Consultant Declaration, Contact Sheet and Financial Proposals).

The expression of interest (including Section 1 – 4 and 6 of the Submission Requirements above) WITHOUT THE FINANCIAL PROPOSAL should be submitted, in English via clearly named email (pdf) to the Client’s contact person, to reach the Client not later than the closing date and time. One additional copy shall reach the Bank’s contact person by the same due date. The document shall be one file (pdf). The Client reserves the right to reject applications of firms submitting more than one file. Only if any limitation on the permissible file size is exceeded, the Consultant may split the expression of interest into further files.

In a separate email, the Financial Proposal should be submitted, in English via clearly named email (pdf) to the Bank’s contact person only, to reach the Bank not later than the closing date and time.

Please note that a breach of this submission procedure may lead to exclusion of the selection process.

Notes:
1. The selection will normally be made from responses to this notification only. The highest-ranked Consultant will be selected from a shortlist and be invited to negotiate the contract, subject to availability of funding.
2. The Evaluation for the Expressions of Interest are as follows:
• Firm’s previous project experience assisting commercial banks or similar financial institutions with the development of SME and Corporate business including the strengthening of their credit and risk management, particularly in Central Asia – 15%
• Firm’s previous project experience building internal capacity in Banks or similar financial institutions on SME/Corporates lending and the implementation of train-the-trainer programmes – 15%
• Proposed approach to the assignment, work plan and methodology - 20%
• Proposed composition of team and CVs of experts – 30%
• Financial Proposal – 20%

The lowest evaluated Financial Proposal (Fm) is given the maximum financial score (Sf) of 20.

The formula for determining the financial scores (Sf) of all other Proposals is calculated as following:

Sf = 20 x Fm/F

in which “Sf” is the financial score, “Fm” is the lowest price, and “F” the price of the proposal under consideration.