Terms of Reference. Mapping the retail payment services landscape in: Malawi, Mozambique and Zimbabwe

Transcription

1 Terms of Reference Mapping the retail payment services landscape in: Malawi, Mozambique and Zimbabwe

2 1. Introduction Page 2 FinMark Trust hereby invites proposals for a study to map the landscape of retail payment services in three countries within the SADC region: Malawi, Mozambique and Zimbabwe. About FinMark Trust. Created with initial funding from the UK s Department for International Development, FinMark Trust ( is an independent trust based in South Africa, working across the African continent. FinMark Trust s purpose is Making financial markets work for the poor, by promoting financial inclusion and regional financial integration. It does this by conducting research to identify the systemic constraints that prevent financial markets from reaching out to unserved and underserved consumers and by advocating for change on the basis of research findings. Thus, FinMark Trust plays a catalytic role, driven by its purpose to start processes of change that ultimately lead to the development of inclusive financial systems that can benefit all consumers. 2. Background Mobile-enabled and other innovative delivery models outside of traditional branch-based banking are seen as a breakthrough in delivering financial services to the poor. They have the potential to overcome the physical access barrier traditionally plaguing the financial sector and can also serve particular transaction needs for customers that do not necessarily find themselves in a position to be full-service banking clients. Given the fact that the bulk of workers remittances in Southern Africa flows through informal channels, innovative cross-border money transfer products potentially have a particularly important role to play. This potential remains largely untapped due to a number of regulatory and market constraints to affordable, readily available cross-border money transfer solutions. Recently, there has been a marked increase in activity in the market for what we broadly refer to as retail payment services in Southern Africa. Such services can fulfill different functions: some will be points for cash-in/cash-out transactions, some may offer a store of value outside of a formal bank account, some a way of transferring money to others in the same or a different country, and some may simply offer a different medium for interacting with a bank account. The landscape of services can be grouped into at least the following categories (noting that these are not necessarily the only categories or the most appropriate groupings): 1. E-money models: to store and spend money electronically without an underlying bank account, for example using an electronic wallet. 2. P2P 1 payment models: enabling money to be sent from one person to another electronically, where one or both of the parties may not have a bank account. P2P payments can be domestic or cross-border. 3. M-banking: using mobile phones as channel for bank account transactions. 4. Mobile-enabled bill payment networks (P2B 2 ), e.g. through different types of agent networks; it includes ad hoc as well as regular payments, for example to pay bills or to buy airtime or prepaid electricity. 5. Mobile-enabled payee solutions (B2P 3 or G2P 4 ) where entities use an electronic wallet, m-payments, stored value card or other agent-based mechanisms to make payments to employees or suppliers (e.g. small farmers delivering produce to a processor) that are unbanked or where traditional banking infrastructure is not available. An important example is government to person payments, for example social cash transfers. Often, the recipients will be unbanked and governments are looking at innovative 1 Person to person 2 Person to business 3 Business to person 4 Government to person

3 Page 3 ways to increase efficiency and reduce costs in making social grant payments. Internationally, retail payment services have achieved varying success, but to date the successful models seem to focus on non-account (even if regular) payment transactions from a person to a business (P2B) as well as P2P transfers (such as M-PESA in Kenya or GCash in the Philippines). There is currently no complete inventory of these models and products, their implications for financial inclusion, their features and the underlying innovation and regulatory developments that have impacted on them in the countries in question. This makes it an opportune time to take stock of the products that are in operation and to map their features. 3. Project objectives Accordingly, FinMark Trust invites you to prepare a proposal to map the landscape of retail payment services in Malawi, Mozambique and Zimbabwe. The goal of the project is to form a holistic understanding of the landscape of retail payment services and products in each country, the scope for enhanced financial inclusion through such products and the market and regulatory challenges experienced, in order to serve as input to regulators and other stakeholders. In addition to focusing on domestic payments solutions, we are particularly interested in understanding the current landscape and scope for increased formal financial inclusion in terms of cross-border money transfers. To achieve this goal, the project will have four core objectives: 1. Scoping and understanding the market: To identify the various models and products/services currently on the market, as well as those that have been discontinued or are still in the pipeline (where such information is available). To document the features (including the documentation and other requirements for accessing the product, as well as the pricing structure) of the various products, and to classify them into an emerging typology based on shared features where appropriate. Domestic as well as cross-border money transfer models and products should be considered. 2. Understanding the demand for services: To consider all available evidence that could illustrate consumer needs and the degree to which these models and products on the market meet these needs (specifically consider the experience of different models and product offerings through mobile channels and whether this reflects the needs of consumers). 3. Understanding the role and impact of regulation: To assess the interplay between market developments and the banking and payment system regulatory framework, giving an overview of the applicable regulation and in what way it shapes the market (for example: the interplay between regulation and transaction limits; the regulatory implications for cross-border money transfers; the implications of the fact that regulation requires partnerships with a bank where non-bank players want to provide certain services; etc). 4. Identifying barriers to/opportunities for development: To identify constraints (regulatory and otherwise) to the development of the retail payment services market in each country as well as in the cross-border payments market for payments to and from each country, and to consider what could be done to address these. The project will specifically consider whether there is a role that FinMark Trust could play to support the development of the market in each country and what this could entail. 4. Project Scope It is proposed that the study should have the following focus: Domestic and cross-border transactions. While many of the retail payment products and models referred to above are domestic, the study should also specifically investigate the scope for and challenges (with a

4 Page 4 specific emphasis on regulatory challenges) to cross-border P2P transfers from and particularly to the country in question (as they are all net receivers of international remittances). The last-mile issues in the money transfer corridor from South Africa to each country will be of particular interest. Transformational rather than additive models 5. The project will cover all existing and emerging retail payment services products as well as cross-border money transfer products aimed at expanding financial inclusion. These can also be referred to as transformational models and products. We take a broad view of financial inclusion meaning any product aimed at expanding the client base into those who previously transacted in cash. Therefore high-end products aimed just at existing bank customers (so-called additive models) or business to business transfers need not be included. Models and Product focus. While the features of all relevant models and products should be documented, consultants may choose a few representative products for more in depth case studies. Consultants are also invited to propose priorities in terms of the sub-categories mentioned in Section 2 on which to focus, or to propose an alternative way of classifying or grouping products into models or categories. Local focus. The products mapped will be limited to those found in the three countries in question. International studies 6 can be used to inform the typology and analysis, as well as for insights into common regulatory and enabling environment issues. Where international products or models are of relevance to illustrate certain aspects of the local landscape, these may be touched on, but the consultants will not be expected to conduct a full international review. Methodology. It is expected that the landscape in each country will be investigated through (i) desktop research and (ii) consultations with various industry stakeholders. No primary research or data analysis is expected, with the exception of the demand side component of the analysis (see below). Market research for demand-side analysis. The demand-side component should include an analysis of available FinScope datasets (available for Malawi and Mozambique, but not yet for Zimbabwe) that will be made available to the consultants by FinMark Trust 7. In addition, qualitative market research in the form of focus group discussions or an alternative methodology will be required to better understand the needs of the target market. The qualitative market research can be sub-contracted to a local market research firm. Consultants should add the market research as a distinct component to their proposal, indicating the budget for this component separately. Structure of report. It is expected that the study will render three separate country reports applying roughly the same methodology, but adapting the methodology and scope where appropriate to the country context. In addition, a cross-country synthesis note will be required to pull out trends across countries and to highlight overarching implications and recommendations to FinMark Trust. Travel. It is expected that the consultants will travel to each country to conduct consultations and gather information and will return to each country for a stakeholder workshop presentation following the completion of the draft report. Consultants are encouraged to comment on and shape this proposed focus in their proposals. 5. Deliverables 1. An interim progress meeting or teleconference with the clients one month after project kick-off to discuss 5 See Bankable Frontier Associates The Enabling Environment for Mobile Banking in Africa. London: Department for International Development (DFID). Also see subsequent studies by the same authors available at 6 Specifically, the consultants are referred to the work of Bankable Frontier Associates ( and CGAP ( 7 See for an overview of the FinScope survey and methodology.

5 the emerging information, insights and challenges. Page 5 2. A draft report for each country covering at least the project objectives and the project scope as set out in Sections 2 and 3 above,, as well as a cross-cutting synthesis note submitted to FinMark Trust for comment. FinMark Trust will provide a set of collated comments to the consultants and a teleconference will be scheduled to discuss the feedback. 3. A set of final reports submitted within one month of receiving the comments on the draft report. 4. A presentation of the findings at a stakeholder event organised in each country. FinMark Trust will give the consultants advance notice of the dates of such presentations and will make all the necessary arrangements for the workshops. In addition, the consultants may be required to take part in teleconferences with the clients from time to time to provide updates on progress made and to allow for inputs and guidance. 6. Timing 6.1. Proposals: Proposals for the project should be submitted electronically to Brendan Pearce at brendanp@finmark.org.za by 12 noon on 10 June Work: It is envisaged that the project will be awarded by 30 June 2011 and be finalised by 30 October Consultants should include a proposed timeline for this project as part of their proposal. Exact dates will be agreed with the consultant upon contracting. 7. Contents of proposal Proposals to undertake this project must include: 7.1. Statement of qualifications of firm(s) (if no previous work record with FinMark Trust) Name and CV of staff members responsible for (i) overseeing the work; (ii) undertaking the work Proposed approach to the work Fee proposal and cost estimate, indicating the basis of calculation of fees. Consultants should clearly indicate travel expenses and other direct costs separately from professional fees, and should give an indication of the number of person-days allocated to the project at different levels of seniority. The budget for the market research component should also be indicated separately. An understanding of a Making Financial Markets Work for the Poor approach will be required. See Porteous D, 2004, Making Financial Markets Work for the Poor, 8. Basis of award FinMark Trust will award the contract based on: 8.1. Relevant, demonstrated competence of firm(s) in this area (15%) 8.2. Demonstrated expertise of key individuals to be involved in this project (25%) 8.3. Use of local professional capacity (consulting, analysis, coordination etc.) (10%) 8.4. Content, quality and originality of proposal (25%) 8.5. Affirmative action scorecard (for proposals by South African firms only. Non South African Firms will be scored on the extent to which local consultants are utilised) (10%) 8.6. Fee basis (15%) Guidance notes to bidders FinMark Trust reserves the absolute right to use its discretion in the interpretation of these award criteria. The following notes are intended to provide broad guidance only on how proposals will be evaluated. Bidders may be required to clarify their proposals by way of a telephone call or presentation. Relevant, demonstrated competence of firm(s) in this area - you should aim to demonstrate how the firm s collective past experience can be applied (or adapted) to address the specific brief set out in the terms of reference. You are welcome to describe the firm s general experience of financial sector development issues (e.g. in other geographies or topical areas) but

6 the evaluation will focus particularly on the application of that experience for the specific task at hand. Demonstrated expertise of key individuals to be involved in this project the evaluation places considerable emphasis on the role and demonstrated expertise (i.e. track record) of the key individuals to be involved on the project rather than on the expertise of the firm itself. Use of local professional capacity (consulting, analysis, coordination etc.) FinMark Trust wishes to ensure that local capacity is used and developed. International firms are therefore encouraged to partner with local organisations. Content, quality and originality of proposal proposals should address the brief set out in the terms of reference in a comprehensive manner. Bidders should aim for innovation as well as professional presentation. Whilst similar, relevant experience in other markets will be an advantage for a bidder, each market is different and so proposals need to reflect the particular characteristics of that market, as well as the challenge set by the terms of reference. Affirmative action scorecard - ownership, management, staff development. Fee basis value for money, as well as absolute cost, will be taken into account. Page 6 9. Contact: Questions or comments in respect of these terms of reference should be directed to: Brendan Pearce at brendanp@finmark.org.za or at Note: All answers to ed questions will be shared with all interested companies in the interest of transparency and fair process. This will require that all interested companies register their intention to submit a bid by sending a short to the aforementioned address immediately on receiving the Terms Of Reference.