81297709-Enhancing the capacities to access credit and financial services from financial institutions for small-scale farmers

Description of work and services Under ILGU phase I, a partnership with the Ugandan Bankers Association (UBA) and six FIs has been initiated to start the dialogue on their needs with regard to land documentation and the potential value LIPs and CoOs could create for improved access to loans and loan product development. However, this work is only at its beginning and needs to be advanced. Tenants on the other hand are often small farming households only, lacking the financial literacy needed for sustainable business plan development and calculation of cost-benefit options. Therefore, it is important that farm households are accompanied in the process to develop viable business plans as foundation for loan requests and to avoid new fragilities and risks due to challenges in loan repayments. The focus of this tender is related to Output 4 which focuses on the improved financial inclusion of households in rural areas. The Output covers a set of measures to sensitise the FIs for the potential use of LIPs and/or CoOs for the assessment of loan worthiness of households. This process is accompanied by capacity building measures for bank staff and the establishment of a loan management system. Additionally, it builds the capacities of small-scale farmers to utilize financial services for sustainable business development. This includes aspects of financial literacy, the development of sustainable and viable business plans, and aspects of sustainable land-use. This is with the aim to render agricultural financial services available for rural households to increase their business opportunities and agriculture productivity. Safeguards are established to minimize risks of tenants losing their lands in case of failure to repay loans. Here it is important that land-use rights cannot serve as collateral as is the case on freehold. But it must be taken as information on income indication and calculation of repayment capacity in the risk assessment for loan provision by the FIs only. This does not affect the potential of this output, while loan products, which refer to the productive capacity of the land, already exist in the Ugandan banking system. The key interest of FIs is to reduce information asymmetries in the assessment of their clients. This lending scheme further provides a risk mitigation strategy, particularly if loan products are bundled with climate insurances, so that in the case of failed season the loan default risk for small-scale farmers remains manageable. Work on such safeguards will be supported through field research. Possibly, the FIs could play a key role in issuing land certificates, which they could prefinance as a condition for accepting loans for smallholder farmers. This workstream will be further explored in collaboration with UBA and the FIs. The contractor will be asked to deliver the following work packages (WPs) divided according to the approximated resource allocation per WP. The personnel concept includes 1 team leader, 1 long term expert and a pool of 3 short term experts. 1. Support to Financial Service Providers (FSPs): FSP assessment, Awareness raising related to LIP/CoO for the financial sector. Tailored trainings to 6 FSPs (approx.50% of ressources) 2. Support to small-scale farmers: Survey among small-scale farmers, Adapt FL training material with LIP/CoO and safeguard measurement input. Conduct training-of-trainers (ToT) (approx. 30% of ressources) 3. Other support measures: Provide technical input to 3 multi-stakeholder dialogues, Road map on LIP/CoO integration. Incopration of safeguard elements for small-scale farmers (approx. 20% of ressources) The duration of the assignment is envisaged to be 20 months. Within the contract duration, the contractor is responsible for achieving the indicators described below: - Specific objective indicator 3: 6 FSP accept LIPs or CoOs as criteria for loan provision. - Output indicator 4.1: 6 FSPs, which are familiar with LIPs or CoOs as an assessment tool for credit worthiness. - Output indicator 4.2: 30 trainings conducted for small-scale farmers to develop sustainable business plans (incl. e.g., financial literacy) in the targeted districts. The contractor is responsible for providing the work packages and the accompanying milestones as described in the Terms of reference.