Tender Description

SIDA 3 Project on Inclusive Livelihood for Vulnerable Pastoral Groups in Somalia.

TERMS OF REFERENCE (TOR)

REVOLVING LOAN FUND WITH MFIS/BANKS IN LAS’ANOD SOMALIA.

1. Background:

Adventist Development and Relief Agency (ADRA) have maintained a long-standing operational presence in Somalia, implementing integrated humanitarian and development interventions aimed at strengthening community resilience, promoting sustainable livelihoods, and enhancing local economic recovery. Through its programming, ADRA applies resilience-oriented and market-based approaches to address the recurrent socio-economic and environmental shocks affecting pastoral, agro-pastoral, and peri-urban communities, particularly prolonged droughts, climate-induced vulnerabilities, food insecurity, limited access to financial services, and weakened household coping capacities.

Under the SIDA III project, ADRA seeks to enhance the adaptive and economic capacities of vulnerable populations through inclusive financial systems strengthening, social empowerment, and sustainable livelihood support interventions. In line with this objective, ADRA intends to establish a Revolving Loan Fund (RLF) mechanism in partnership with qualified and reputable Microfinance Institutions (MFIs) and/or banking institutions operating in Somalia.

The proposed RLF mechanism is designed to improve access to affordable and flexible financial services for underserved and economically vulnerable groups in Las’anod District, including small and micro-enterprises, Village Savings and Loan Associations (VSLAs), livestock producer associations, and farmer cooperatives. The facility will serve as a catalytic financing instrument aimed at stimulating local entrepreneurship, strengthening productive investments, enhancing business continuity, and promoting financial inclusion among marginalized populations.

This initiative forms part of ADRA’s broader resilience and economic recovery framework, which prioritizes sustainable livelihood development, local market strengthening, and community-based economic empowerment. By facilitating access to inclusive financial services, the intervention is expected to contribute to improved household income generation, increased economic self-reliance, and strengthened long-term resilience of vulnerable communities against future economic and climatic shocks.

1. Introduction:

Through the implementation of the SIDA III project, ADRA is committed to promoting sustainable economic empowerment and strengthening the resilience capacities of vulnerable communities in Las’anod District. As part of this commitment, the project seeks to establish a Revolving Loan Fund (RLF) mechanism aimed at enhancing access to financial capital for community-based economic groups and small-scale enterprises. The initiative is intended to support livelihood diversification, enterprise growth, income generation, and long-term economic stability among targeted beneficiaries.

To operationalize this intervention, ADRA intends to collaborate with a qualified local Microfinance Institution (MFI) or banking institution capable of delivering inclusive and sustainable financial services to underserved populations. The targeted beneficiaries include Village Savings and Loan Associations (VSLAs), livestock producer groups, farmer cooperatives, women-led enterprises, youth groups, and other small and micro-business actors operating within Las’anod District.

The selected financial institution will be responsible for the management and administration of the Revolving Loan Fund, including loan disbursement, savings mobilization, repayment tracking, client capacity support, and financial reporting. In addition, the institution will provide complementary financial products and digital financial services, such as mobile banking and electronic payment systems, to improve accessibility, efficiency, and financial inclusion.

Through this partnership, the project aims to strengthen local economic systems, expand access to formal financial services, and enhance the financial literacy and investment capacities of vulnerable households and community groups. Ultimately, the intervention is expected to contribute to improved household income, strengthened business sustainability, enhanced self-reliance, and increased resilience against recurring economic and climatic shocks.

1. Objectives

The objective of this TOR is to identify a suitable MFI or bank to manage and provide demand-driven, high-quality, and innovative financial services tailored to small and micro-enterprises. 

The key role of the selected financial service provider will be to manage a loan revolving fund on behalf of ADRA. The loan revolving fund will be used to give out loans to agreed cohort between the bank/MFI and SIDA 3 project participants in target villages under Las’anod district. Additionally, the financial service provider will also offer access to other appropriate financial services including savings, and fund transfer to the SIDA 3 cohort. All this will ensure sustainability of the current program.

The specific objectives are:

• Operate and manage a revolving loan fund in Las’anod district.

• Provide tailored financial products and services to VSLAs, livestock groups, and farmer groups.

• Promote financial inclusion by offering savings, loans, and mobile banking services to rural communities.

• Ensure that financial services are accessible to underserved communities, especially women, by developing gender-sensitive loan products.

1. Expected Results:

• Financial Product Development: Design and implement relevant financial products tailored to the needs of micro and small enterprises. This includes bill payment services, money transfers, and women-inclusive loan products. which help ensure the ease and safety of their financial transactions. 

• Increased Financial Access: Enable economic groups such as VSLAs and farmer/livestock groups to access formal financial institutions and services.

• Mobile Banking Accessibility: Ensure that communities, particularly those in remote areas, can access financial services through mobile banking platforms.

• Capacity Building: Strengthen the capacity of MFIs/banks through technical support and gap analysis to improve their service delivery. 

  • NB: The selected MFI/bank will also be supported on capacity gaps identified in the MFIs/ banks.

1. Scope of Work:

The selected financial institution will be responsible for managing the loan fund, facilitating loans to economic groups, and providing additional financial services. The scope of work includes:

• Target Location: We anticipate recruiting MFIs/Bank’s which physical location in Las’anod to support the project target sites including Yeyle, Yagoori, Tuulo-Samakaab, Adhicadeeye, Gambadhe/Dalyare, Waqadari, Kalabaydh and Xidh-Xidh villages of Las’anod District.

• Loan Management: Facilitate loans to VSLAs, livestock groups, and farmer groups in the project area.

• Additional Services: Provide savings accounts, mobile banking, and fund transfer services.

• Financial Inclusion: Develop and deliver women-inclusive loan products.

1. Eligibility Criteria for MFIs/Banks:

• Must be a reputable, legally registered financial institution in Somalia.

• Must have operational presence in Las’anod.

• Relevant experience in facilitating transactions, implemented Revolving Loan Fund activities, and other economic empowerment activities in the past with NGOs.

• Ability to provide alternative banking services, such as mobile banking, for remote areas, whereby remote villages with limited access to physical financial institution could access and do transactions digitally. 

• Experience in implementing Micro-finance related activities or experience working with micro, small, and medium enterprises (MSMEs), with a focus on vulnerable communities (small business owners). 

• The MFI/bank should have capacity to offer gender-sensitive financial products, especially for women-led enterprises, or be willing to develop women friendly loan products.

Skills Required

Attachment

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