Azerbaijan_Support for the Development of Non Bank Finance and Alternative Financial Instruments to Develop Economic Diversification

Scope of Work:

The expert will work closely with the team leader and FIMSA to improve understanding of the enabling environment for rural economic activities in regions outside Baku, the range of bank and non-bank financial instruments being used to improve intermediation and inclusiveness and draw from international best practice to highlight options for reform. The expert will also assess FIMSA’s institutional and organizational capacity to regulate and supervise these services. Key findings and recommendations will be included in the action plan and in designing financial education and literacy programs.

2. Detailed Tasks. Major responsibilities will include, but not be limited to the following:

(i) Review and assess the policy, legal, and regulatory environment for bank and non-bank rural financing (current laws and regulations).

(ii) Review of the supply and demand data for rural financing.

(iii) Review consumer and creditor protection policy and laws.

(iv) Identify current financing options and financing constraints at all stages and across all scales of enterprises in the sector.

(v) Interview and review existing financial institutions (public and private) to define constraints in product innovation, new financial instruments and mechanisms including but not limited to supply chain financing, leasing, working capital finance, term finance, and ease in buying systems for plant and equipment.

(vi) Identify financing needs and current sources of financing and characterize the financing gaps for different sets of actors.

(vii) Develop five priority alternative financing instruments and work with FIMSA to address policy and risk issues including the options relating to uncollateralized lending and financial institution guarantee to underwrite or share risk of new products.

(viii) Based on all the above tasks, prepare an assessment of levels and characteristics of profitability in the rural economy and identify rural financial innovations that can facilitate sector specific value-addition, that is, from farming to financing to markets.

3. Deliverables

(i) Assessment report on bank and non-bank rural financing.

(ii) Inputs to the overall prioritized and sequenced action plan.

(iii) Inputs to the development of financial education and literacy programs.