Assess the Existing Implementation Challenge and Lessons Learned from Credit Guarantee Scheme and to Product the Operational and Financial Modality of the Credit Guarantee Scheme in Ethiopia
Area of Operation: Ethiopia
Duration of Assignment: October 2022 – April 2023
Name of Client: Fair and Sustainable Ethiopia (F&S) (contracted by First Consult)
The Ministry of Labor and Skills of Ethiopia was seeking technical support from partners to develop detail technical proposal and implementation modality for successfully establishing the scheme in Ethiopia to support its endeavor of unlocking access to finance challenge and resource optimization opportunities for job creation agenda of the country.
The Ministry of Labor and Skills in collaboration with FC-BRIDGES mapped out the workplan in regards to establishing CGS nationally and one of the milestones was to provide Technical Assistance through a Credit Guarantee Adviser to provide their expertise regarding the institution’s governance structure, financial and operational modalities, working procedures, Final business plan and operational procedures etc.
- LANDT assessed the implementation challenges and lessons learned in the pilot CGS by evaluating the market to identify existing market failures and the value added from the usage of a guarantee instrument.
- Conducted a macroeconomic ecosystem diagnostic study to assess the supply side and demand side actors on their respective constraints in providing and accessing credit.
- Mapped key stakeholders including targeted interviews with key institutions to identify compatibility and competitiveness with the future CGS’s offering, understood the terms and conditions shaping market expectations, and determined the gaps and niches in the coverage of segments.
- Assessed potential sources of finance based on the stakeholder identification and taking into consideration the targeted beneficiaries and products.
- Produced the operational and financial modality of the CGS which will include the rationale of the scheme, the product design, the approach to the selection of financial intermediaries, policy-level recommendations on the guarantee approval processes and guarantee claims, the CGS international monitoring and reporting requirements, core principles of the risk management framework, and a roadmap for the establishment of the scheme.
- Developed a business plan that is linked to a pricing and credit risk model while also considering the development mandate of the CGS and the preferred delivery approach.
- Collaborated with and supported the legal advisor in identifying the regulatory gaps that can be translated into regulatory framework recommendations for a better enabling environment, reviewing the specific laws governing credit guarantee funds, licensing for a new financial institution if needed, determining the sources of finance and investment restrictions, and evaluating the governance models and features relevant for the CGS’s partner FIs.