Disaster Liquidity Fund – Operational and Legal Design Consultant

SCOPE of WORK 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 Consultant Objectives: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.Consultant Activities: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. Consultant Deliverables:·        
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.

  Activities Number
of Days
1 Meeting with ILFAD Team on ILFAD program and scope work 1
2 Desk Study on current ABSIGAB governance on liquidity facility
(pooled resource) and on legal and institutional arrangement relevant for the
liquidity facility.
2
3 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.
3
4 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
6
5 Finalization of paper incorporating input from Mercy Corps 3
  Total 15

 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. Job LocationSumatra and Jakarta (assume 60% in Sumatra and 40% in
Jakarta)Position TypeConsulting  Interested
applicants are requested to submit their CV and application to: [email protected]
by 15 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.

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