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The UN Capital Development Fund (UNCDF) is inviting applications to engage an NGO to support financial institutions in Uganda to increase access to finance for agri-business SMEs under the START Facility Phase II through deployment of derisking instruments including portfolio guarantees.

The SME sector in Uganda accounts for approximately 90% of the entire private sector, over 80% of manufactured output and contributes about 75% to the gross domestic product (GDP). The sector employs more than 2.5 million people, equivalent to 90% of total non-farm sector workers, and comprises about 1,100,000 enterprises which makes the sector one of the largest employers in the country. Most SMEs are largely concentrated in the major urban and peri-urban areas of Uganda and rely on rural communities for raw materials. Agri-business SMEs are pivotal to the growth and transformation of the country to the middle-income status.

UNCDF is looking for NGOs that have existing relationship / networks with financial institutions/lenders in Uganda to leverage their network of partner financial institutions/lenders to unlock financing to risky but high impact agri-business SMEs under the START Facility. This will ensure that START Facility Phase II works with more financial lenders compared to START Phase I that had one financial partner.

The selected partner is expected to work with UNCDF in the delivery of Outcome 3 of this project: Unlock affordable medium-term finance for agri-business SMEs in value addition and responsible agro processing.

The implementation of the START Facility mechanism is well aligned to the UNCDF’s Strategic Framework 2022-2025. The Facility fully integrates the UNCDF investment continuum concept which is critical in enhancing the holistic approach conceived within START I. The intervention will mainly contribute to outcome 2, additional finance mobilised and catalysed (in particular OC 2.1 a) US$ value of finance mobilized in association with UNCDF investments) and output 2.1, the number and estimated US$ value of opportunities that are investment-ready following UNCDF support. The proposed action will support implementation of key priorities of New European Consensus on Development, i.e. Planet and Prosperity and will support achievement of Agenda 2030 through the following Sustainable Development Goals (SDGs): SDG1, SDG2, SDG5, SDG7, SDG8, SDG13 and SDG 17.

The overall objective of the work described in this call is to incentivise accredited financial institutions/lenders to extend credit to high impact agri-business SMEs across the country to further value addition and agro processing.

Specific Objectives

• Onboard at least 10 lenders to support agribusiness SMEs under the START Facility.

• Develop/customise an incentive structure for accredited financial institutions including portfolio guarantees and any other incentives that will unlock US$ 20m in financing to at least 250 loans or more to agribusiness SMEs while creating/retaining jobs and market for smallholder farmers.

• Approve eligible loans in accordance with the START Facility criteria and evaluate default claims submitted by accredited lenders to determine eligibility to benefit from financial incentives, including first loss cover (FLC).

Thematic Scope and Areas of Intervention

• The proposed grant aims to address the following key areas of intervention: 

  • Activity 1: Onboard at least 10 lenders to support agribusiness SMEs under the START facility. 

    • The activity includes identifying, accrediting and contracting the appropriate lenders/financial institutions under the START facility. Additionally, it involves capacity building of lenders/financial institutions together with their teams to understand the requirements/qualifying criteria of agribusiness SMEs under the START facility and the applicable incentive structure and instruments.

  • Activity 2: Develop/customise an incentive structure for accredited financial institutions including portfolio guarantees and any other incentives that will unlock US$ 20m in financing to 250 loans to agribusiness SMEs while creating/retaining jobs and market for smallholder farmers. 

    • The activity includes proposing an appropriate portfolio guarantee structure and any other incentives to financial institutions to help unlock the US$20m in commercial loans to agribusiness SMEs. The incentive structure should be calibrated to prioritize agribusinesses that pay particular attention to vulnerable groups and green practices.

  • Activity 3: Approve eligible loans in accordance with the START facility criteria and default claims submitted by accredited lenders to determine eligibility to benefit from financial incentives, including first loss cover (FLC).

    • The activity involves reviewing and undertaking field verification missions to ensure that submitted loans meet START facility criteria, approving loans submitted by accredited lenders for financial incentives, including FLC, providing any other incentives in addition to technical assistance(TA) for SMEs and lenders, monitoring among others timely approval and payment of acceptable default claim submitted by lenders and results reporting.

Funding Information

• The total budget for this grant is USD 2,000,000 to the successful applicant. Applicants are requested to submit a financial proposal with costs broken down.

• The implementation of the Agreement to be signed between UNCDF and the selected applicant is expected to have a 3span-month duration. Activities are expected to be completed by September 2027, with the final report should be submitted by December 2027.

Outcomes

• To enhance access to finance for agribusiness SMEs, the START facility has identified areas requiring improvement and recognized three key outcomes:

  • Outcome 1: Strengthen institutional capacity of agribusiness SMEs and FIs to conduct sustainable business and business operations (including digital solutions);

  • Outcome 2: Improve technical capacity of agribusiness SMEs to develop bankable green investment proposals acceptable by financial institution;

  • Outcome 3: Unlock affordable medium-term finance for agribusiness SMEs in value addition and responsible agro processing. 

Geographical Scope 

• The geographic coverage for START phase II is countrywide (cover all regions of Uganda) as part of scaling up START phase I (2018-2023), whose geographic focus was 40 districts in the Northern Uganda sub-regions. Special consideration will be given to agribusiness SMEs that empower vulnerable groups, from rural geographies and SMEs that encourage green practices.

Eligibility

• The NGO must have a minimum of 5 years of overall experience to work with UN agency or INGO or donor or GoB under different ministries.

• The NGO and/or its consortium member must demonstrate direct experience working with the target beneficiaries in Uganda.

• The NGO must have carried out at least two assignments in any of the following fields: access to finance technical and BDS support.

• The NGO must have prior experience of collaborating with relevant government institutions, private institutions and local government bodies in the applied zone. 

• The NGO must have operational presence in Uganda.

• The organisation must have the experience of implementing projects with a cumulative value of USD 2,000,000 of within last 03 (three) years. 

• The company is not in the UN Security Council 12span7/1989 List, UN Procurement Division List or Other UN Ineligibility List.

  Post Date: August 30, 2024