Call for Proposals - International Consultant to Support an Assessment of the Microfinance Sector in Lebanon within PROSPECTS-Lebanon

Following October 17th, 2019, Lebanon has plunged into a deep political and financial crisis coupled by thousands of people in the streets protesting the poor economic conditions and pervasive corruption, which was further exacerbated following COVID 19 pandemic and the Beirut blast.

With a total population of 6.77 million (2021) , Lebanon hosts the highest per capita concentration of refugees in the world, including 1.5 million displaced Syrians  (879,598 of whom are registered as refugees with UNHCR ).

Poverty levels have steeply increased amongst both Lebanese citizens and refugees, alongside an overall increase in vulnerabilities both in terms of income and other social indicators. A recent World Bank study on poverty levels in Lebanon end of 2023 indicates that the compounding crisis has led to an unparalleled reduction in income levels and consumption across its population. Poverty rates have more than tripled from a decade ago from 12 percent in 2012 to 44 percent in 2022 . The study also showed that more than 90 per cent of Syrian refugees live in poverty by the end of 2022.  In response, the study calls for a multi-faceted approach to increase the share of formal jobs available in the country through regulatory reforms, improving access to finance, better labour market information, enforcement of labour standards and support for entrepreneurs.

ILO’s follow up Labour Force survey in Jan 2022 indicated that unemployment rates have increased dramatically since 2019, driving job seekers into informality. Available data indicates increasing shares of Lebanese in the private, informal sector from 23 percent in 2018/2019 to 34 percent in 2022/2023 and growing informality of employment from 40 percent to 60 percent over this period. The unemployment rate increased from 11.4 percent in 2018-2019 to 29.6 percent in January 2022, and the youth unemployment rate (15–24 years old) increased from 23.3 percent in 2018-2019 to 47.8 percent in January 2022 .

Since 2020, Lebanon’s protracted economic and financial crisis had led to a dearth of available sources of finance in the country, especially that all banks stopped lending, while few financial institutions remained in operation providing limited credit amounts for their old customers. Beyond dwindling grants, absence of sustainable access to capital is further stifling growth potential for MSMEs across various sectors.

Historically, Lebanon had a stable and growing microfinance industry with an annual portfolio increase of 13% on the client side and circa 20% in outstanding portfolio. It counted a dozen institutions, legally formed as Non-Banking Financial Institutions (NBFIs), NGOs, or cooperatives. The sector catered to a significant portion of the low-income population, including refugees with around 15% of the total portfolio serving refugees in Lebanon prior the crisis. Concretized with an outreach to 170,000 clients by the end of 2018, the microfinance sector hereby directly and indirectly impacted over 760,000 people or around 17% of the Lebanese population, mostly vulnerable and low income.

The crisis hit the microfinance (MF) sector hard leaving it insolvent. The latest available statistics from the Lebanese Microfinance Association (LMFA)  indicated that from October 2019 till the end of 2021, the sector has been steadily shrinking reaching around 50,000 active clients, featuring a significant decrease in the number of clients (more than 70% portfolio decline) and an increased sector double digit Portfolio at Risk (PAR); in parallel, outstanding portfolio value has been depreciating massively (lost 95% of its value since the crisis started) due to the high LBP currency inflation rates. Other repercussions include currency mismatches between assets and liabilities causing huge foreign exchange losses, accounting hurdles caused by multiple currency rates (fresh dollars, Lollars and LPB), tough negotiations with MFIs lenders to waive or reach no settlement of debt. Some MFIs remained active with different configurations, many resorted to non-financial services to cover some of their costs and few managed to resume lending to selected customers in foreign currency.

CGAP/World Bank documented with Al Majmoua, a market leader in the MF sector in Lebanon, the freefall and survival of the MFI after the crisis showing the sustained impact on their operations. Another recent study was also issued by Economic Development Policy Unit (EDPU) by the end of 2023 on financing mechanisms for Lebanese MSMEs, which provided a summary of possible approaches/tools to finance MSMEs recommending support towards the MFI’s recapitalization.

At the end of 2022, and despite a withering microfinance sector, ILO - through the PROSPECTS programme - engaged in a partnership with Al Majmoua to enhance access to finance in the agriculture sector. The initiative was launched as part of ILO's broader efforts to support the development of the agriculture sector that was hit hard by the economic crisis through provision of financial and non-financial services to farmers and agriculture workers. The partnership with the MFI came in to contribute to the revival of the microfinance sector, as a key contributor to economic recovery, development and growth. ILO injected capital into Majmoua’s portfolio reaching over 1.3 M USD in loans to farmers and agriculture workers; demand was much higher than expected and a total of 370 clients benefitted from the newly piloted product while the PAR remained at zero level after 18 months of kicking off the lending.

The impact of the crisis on the sector was not measured collectively after four years, neither a comprehensive study was commissioned to assess the current situation and provide updated data on its current performance and recommend exit strategies that would respond to the needs of the MFIs while aligning with international donors and DFIs’ agenda.

The microfinance sector should be supported as it will accompany MSMEs to get back on their feet while the economy is weathering the protracted crisis.  It is against this backdrop that the ILO is seeking to hire an international consultant to conduct an in-depth assessment to provide insights on the current market situation and help inform access to finance (A2F) interventions.

Objective

The International Labour Organization is currently seeking to hire an international expert for 30 workdays to support the assessment of the microfinance sector in Lebanon and recommend a set of strategies that would lead to attracting foreign capital injection into the MF sector. Recognizing the difficulties in foreign investment return to Lebanon, the study should investigate market enablers and de-risking strategies and potential opportunities/partnerships including those that support access to finance for refugees and displaced communities. As such, the assessment will also look into experiences of other countries that have used microfinance to serve vulnerable populations, including forcibly displaced people.

Key Deliverables

• A revised work plan to kick off the assessment including summary of the desk research
• A detailed agenda of scheduled interviews with a list of stakeholders along with interview guide/form; this will result in at least 18 conducted interviews (KIIs)
• Sector data collection tool reviewed and approved by ILO, filled in with all active MFIs
• Disaggregated (per MFI) and consolidated (per sector) data analysis results and PPT summarizing main findings and recommendations presented at the roundtable
• Final assessment report including the key sector information, challenges, risks, opportunities for donor engagement and market enablers in addition to validated actionable recommendations/strategies to guide sector’s interventions

Eligibility

To be considered as an eligible candidate, the international consultant should have the following qualifications:

• An Advanced University degree in relevant field of study (finance, Accounting, business management, etc..)
• Previous working experience of minimum 10 years in the financial sector with focus on microfinance sector recovery in post crisis displacement contexts.
• Knowledge of the Lebanese MF sector is important and provides the candidate a strong advantage. 
• Strong communication, organization, and inter-personal skills.
• Excellent analysis and reporting skills.
• Fluency in spoken/written English. Knowledge of Arabic language is an asset.
• Ability to travel to Lebanon.