1. Background:
The Alliance for Financial Inclusion
The Alliance for Financial Inclusion (AFI) is an innovative, member-driven organization that enables policymakers in developing countries to share their knowledge of financial inclusion policies that have delivered positive tangible results. The network currently comprises over 110 central banks, government ministries and other financial policymaking institutions from about 95 emerging markets and developing countries.
By providing members with the opportunity for peer learning and supporting technical level knowledge exchange on key aspects of financial inclusion policy, AFI works with its members to influence policy reforms, which result in expanding the reach of quality financial services to low-income populations and disadvantaged groups.
AFI Consumer Empowerment and Market Conduct Working Group
Since its launch in April 2011, the Consumer Empowerment and Market Conduct Working Group (CEMCWG) examines how consumer empowerment and protection can help to secure access to financial services and improve the quality of these services. Approaches taken by the CEMC Working Group to achieve its objectives include promoting transparency and disclosure, encouraging effective sales and marketing practices, promoting the harmonization of international initiatives, creating avenues for help and redress and financial education.
Previous CEMCWG publications on Risk-Based Supervision:
- Guideline Note 21: Market Conduct Supervision of Financial Services Providers – A Risk-Based Supervision Framework (Link)
Project Background
Risk-Based Supervision
The concept of risk-based supervision (RBS) has been used by developed countries and a growing number of developing countries in prudential supervision over the last two decades[1]. Until recently, the main objective of an RBS approach was ensuring the safety and soundness of the financial system.
Originally used for prudential supervision of banks and insurance companies, RBS has been modified for use in pensions and is now being considered for market conduct supervision. The challenges of supervising consumer protection are the same: deploying sufficient resources, focusing on both present and future risks, preventing risks from escalating and taking early corrective actions. However, market conduct is unique, especially given the new national financial inclusion policies emerging alongside more traditional financial stability concerns. For example, a payment institution may not be systemically important from a financial stability perspective, but it may play an important social role in government-to-people (G2P) payments in rural areas, creating ‘high impact’ in terms of market conduct supervision, but not prudential supervision.
[1] www.afi-global.org/sites/default/files/publications/2016-08/Guideline%20Note-21%20CEMC-RiskBased.pdf
Market Conduct Risk-Based Supervision (MC-RBS)
Since consumer protection is about the relationship between a financial services provider (FSP) and its customers, it has different criteria than prudential risk assessment (number of individual retail clients, the nature of consumer complaints, distribution channels, geographic coverage, etc.). Supervisory tools can also differ from those traditionally used in prudential supervision, such as mystery shopping, market monitoring and focus group research are more prominent in market conduct. The nature of market conduct requires a specific RBS framework to be elaborated for market conduct. Several FSAs have integrated market conduct in their prudential RBS frameworks, either as a separate inherent risk or as part of other inherent risks. However, market conduct in general, and RBS issues in particular, have not been sufficiently addressed and elaborated, at least in public documents.
Impact Assessment
Impact assessment is the second pillar of the MC-RBS framework. It allows supervisors to separate systemically important FSPs and prevent the risks they pose by watching closely and intervening early. It also allows them to allocate supervisory resources effectively—first to systemically important and risky FSPs and only afterward to others. Impact rating measures the potential impact of the significant
failure of an FSP’s market conduct outcomes on consumer confidence and trust in a well-functioning financial market. This in turn would have a negative effect on financial inclusion, economic growth and the reputation of a country. Impact ratings can be measured through several sets of indicators: consumer coverage, nature of products, market power, intermediation, interconnectedness, etc.
A special focus is needed to assess the impact of an FSP that belongs to local or international financial groups and more guidance is needed on how to assess the impact of an FSP.
Challenge and rationale
There is a need to assess the effectiveness of CEMC supervision by regulators especially as it relates to planning and implementation of onsite examinations. The application of CEMC supervisory tools – namely onsite examinations – is critical in fostering a consumer-focused culture among FSPs: assessment and determination of an appropriate set of indicators for impact assessment, calculation and interpretation of impact ratings, and its relationship with FSP’s risk rating as it pertains to the MC-RBS framework.
2. Objective:
The objective of this consultancy assignment is to support the Impact Assessment of FSPs subgroup of the CEMCWG to publish a knowledge product that will assist AFI member countries to assess the effectiveness of impact assessment as part of the MC-RBS framework. Specifically, the guideline note aims to:
a) Complements the work done by AFI Market Conduct Supervision of Financial Service Providers – A Risk Based Supervision Framework – GN.21;
b) Showcase AFI member countries’ experiences in impact assessment of FSPs;
c) Understand the importance of impact assessment;
d) Develop indicators, formulate calculations, determine interpretation and relationship with FSPs risk rating (first pillar of MC-RBS);
e) Provide a guide on its application and interpretation;
f) Helps FSAs to measure MC risks and make effective decisions.
3. Scope of Work:
This assignment is expected to involve extensive desk research and key informant interviews, emphasizing the importance of best international experience (including developed countries). The consultant will be supported and advised by the AFI Management Unit throughout the assignment and will have access to AFI’s extensive knowledge database related to and for the purposes of this assignment. AFI will facilitate and arrange any interviews with members and partners. There is no travel associated with this assignment.
Key Activities
The appointed consultant is required to:
• Submit a metholody proposal.
• Inception meeting: preliminary consultation on the scope, expected deliverable and related timeline.
• Conduct a comprehensive review of all AFI products and services related to risk-based supervision, thus complementing the existing knowledge products and link/map these with member-reported evidence/case study.
• Submit the final draft version of the deliverable by 19th February 2021.
• Including the reviews and comments from the CEMCWG members, submit the final version of the deliverable by 17th March 2021.
Additional information:
Branding and Communications
The Guideline Note will be branded with the logos of AFI and Consumer Empowerment and Market Conduct Working Group (CEMCWG) on the front page of the document.
4. Consultant Experience:
The consultant undertaking this assignment should have the following qualifications:
• Advanced degree in a field related to Economics, Public Policy, International Development or another related discipline.
• Knowledge and experience in market conduct, risk based supervision, impact assessment.
• Global experience of the topic across various regions represented by CEMCWG Members. Fluency in English (oral and writing) is compulsory.
• Writing experience. Please submit related working papers or research around the topic.
5. Timeline:
The consultancy work will begin in February 2021 until March 2021 (tentatively). The final draft of the deliverable should be completed no later than 19th February 2021.
Proposal submission – Jan 2021
Start the project – 1st week Feb
Submit Final Draft for Review – by 19th Feb
Document commented by CEMCWG members – 5th March
Finalizing document – 17th March
6. Reporting
The consultant will work closely with the Policy Programmes and Regional Initiatives (PPRI) Unit and with the AFI’s Consumer Empowerment and Market Conduct Unit, and other key staff. The consultant will report directly to Head of the PPRI Unit / CEMC Policy Manager.
7. Criteria for Evaluation
The proposals submitted will be evaluated based on the following criteria:
- Academic Qualification
- Experience and competence of the key staff for the assignment related;
• Adequacy for the assignment
• Regional/Global experience - Adequacy of the proposed work plan and methodology in responding to the Terms of Reference
• Technical approach and Methodology
• Workplan - Quality of the submitted sample work
How to apply
Interested applicants are expected to submit a proposal with updated CV and using template given by email to AFI’s Procurement & Contracts Office at [email protected].
The final decision on selection of a consultant/consulting firm for this project rests with AFI management team and with the Inquiry. Only shortlisted and successful consultants will be contacted.
To help us with our recruitment effort, please indicate in your email/cover letter where (ngotenders.net) you saw this job posting.