Grant Program for

Grant Program for Iraqi Small Business Lending Request for Applications June 30, 2004 Grant Program for Iraqi Small Business Lending Table of Contents Request for Proposals Section I – Background Information Section II -- Program Description and Objectives Section III – Selection Criteria Section IV – Grant Application Format SECTION I – BACKGROUND INFORMATION The purpose of the grant program that will be operated by the Administrator is to provide grants to Iraqi financing institutions (“Grantees”), which Grantees will leverage on a one-to-one basis for small business lending to businesses owned and operated by Iraqis. It is expected to lead to a sustainable commercial lending profile in the Iraqi finance industry with the intention of providing a successful example that would be duplicated in all financial institutions in the country. This is in line with efforts by the Coalition Provisional Authority (CPA) to provide economic rehabilitation and reform in Iraq to stimulate domestic and foreign investment, domestic and international trade, employment, and broad-based prosperity through private capital formation. In Iraq, there is strong demand for small business finance activities. Iraq has a relatively large domestic market and deep entrepreneurial roots. Despite recently undergoing economic turmoil Iraq has the natural resources and infrastructure to support small businesses. A small business commercial lending program delivered by locally present financing institutions, using sound lending methodologies, has great potential to be successful. The country faces large and urgent challenges in revitalizing the economy and creating new jobs. Credit availability is a key factor in revitalizing the economy. The country’s capital stock has been seriously depleted and there has been little investment in plant and equipment for many years. Historically, small-and-medium size businesses have been successfully engaged in trading activities, agribusiness, light manufacturing, and a variety of other sectors. The primary objective of the activities under this grant program is to generate a productive and growing private sector, create rapid employment, and lay the foundation for sustainable growth and economic development. SECTION I I – GRANT PROGRAM DESCRIPTION AND OBJECTIVES IRAQI SMALL BUSINESS LENDING Anticipated Results and Impact The small business loans made possible by these grants will provide businesses, some of which have few other alternatives for obtaining needed capital, with financial resources for investment, expansion, working capital and other legitimate business purposes, thereby stimulating job creation and economic growth. The grants will bolster financial institutions’ balance sheets. The experience gained by the applicants in making loans with grant funds will increase the technical and managerial competence of the applicants. The grant funds also will provide applicants with opportunities to increase their customer base by seeking out new borrowers to lend to. The program has been designed for maximum flexibility and simplicity in order to facilitate a credit flow to small businesses as quickly as feasible in view of the current stressful economic and political situation in Iraq, including high unemployment, large excess manufacturing capacity and severe shortage of medium term credit through the financial system. General Program Description and Focus Objective: Enable funds to be distributed into the economy quickly via small business loans, thus stimulating commercial activity and creating employment in the private sector. Provide impetus and capability to financial institutions to establish medium term lending programs (two years to five years) based on sound financial practices and cash flow analysis. Grantee criteria Private sector financial institutions in Iraq in good standing that engage in lending, including private sector banks and NGOs engaged in microfinance, will be eligible to receive Grants. Grants in the aggregate to an individual Grantee may not comprise more than 50% (giving effect to the grants) of the total loan portfolio of the Grantee. Loan Characteristics: Funding: Each loan made with grant funds (“Small Business Loan”) must be comprised 50% of grant funds and 50% of funds from the Grantee’s own resources. Size: Each Small Business Loan must be between $25,000 and $500,000. Each Grant with respect to a Small Business Loan will therefore be in the range of $12,500 to $250,000. Term: Small Business Loans will have a final maturity within the range of two to five years. Level amortization payments shall begin no earlier than the 12-month anniversary of the loan. Small Business Loans must carry an interest rate that conforms to Iraq financial market standards current at the time of the making of the loan. Borrowers under this program must be majority owned by Iraqis and operated by Iraqis. No state-owned enterprises, but joint ventures are eligible so long as majority owned and operated by Iraqi private sector. Borrowers must utilize the funds for legitimate business purposes. Note that borrowers do not need to be “small businesses”. Grantees may apply their own credit risk standards in making decisions whether or not to extend Small Business Loans. As part of its due diligence and credit analysis process, each Grantee must produce a business plan for each Small Business Loan it intends to make including the following information on the borrower: use of proceeds business description competitive analysis historical financial statements projected future financial statements (giving effect to the loan) projected cash flow debt service coverage ratios description of management description of shareholders Excluded Transactions: Activities related to tobacco Activities related to the production of alcoholic beverages Drug products not certified by applicable health authorities Activities related to gambling Activities related to military Administrator Responsibilities The Administrator and the Grantor shall establish a segregated bank account in a reputable bank for the grant funds (the “Grant Pool”). The Grantor will have signature authority over the account which it will delegate to the Administrator in whole or in part at its discretion. The Grantor at its discretion may transfer all or a portion of available funds at any time into the Grant Pool for onward distribution to Grantees. The Administrator may only transfer funds from the Grant Pool in order to fund Small Business Loans and for no other purpose. The Administrator shall not transfer funds from the Grant Pool to pay any expense or fee or procurement on behalf of the Administrator or any third party. The Administrator shall receive applications for Grants from potential Grantees. Prior to forwarding application to Administrator, Grantee will review application and perform credit investigation on borrower. If Grantee approves loan, then Grantee may forward to Administrator for apply for matching funds. Each such application will include documentary evidence to demonstrate conformance with all items under “Grantee Criteria”, “Loan Characteristics” and “Excluded Transactions” but the Administrator shall not impose onerous or unreasonably burdensome requirements on the Grantee relative to compiling the application. The Administrator will use reasonable judgment in viewing the evidence but will not be required to confirm the accuracy or completeness of the evidence and will not be liable for any mistakes or omissions in the evidence. Upon successful review of an application, the Administrator shall instruct the Grantee to disburse the amount of the Grantee’s own matching funds (50% of the amount of the proposed Small Business Loan) to the borrower. Upon evidence of such disbursement on a timely basis, the Administrator shall transfer the grant portion of the Small Business Loan from the Grant Pool directly into the account of the borrower. Payment of principal and interest on the entire Small Business Loan will be due to the Grantee, and the Administrator shall have no responsibility for ensuring the borrower’s performance under the loan agreement with the Grantee. The Administrator shall require periodic reports from the Grantee on the performance of the Small Business Loans made with grant funds. The Administrator shall be empowered (subject to Grantor’s discretion) to preclude from further participation in the program any Grantee whose Small Business Loan portfolio performance is materially worse than the aggregate Small Business Loan portfolio, excluding the Grantee in consideration. The Administrator shall not give preference in allocating Grants to particular Grantees. Applications for Grants shall be processed in the order received. Any Grantee may not submit more than two applications per week in order to allow all Grantees access to the Grant Pool. The Administrator shall consult periodically with the Grantor on the progress and performance of the program; shall prepare and provide Quarterly Utilization Reports to the Grantor no later than 15 calendar days after the close of a quarter; and shall provide other information whether in the form of reports or otherwise as requested by the Grantor to fulfill Grantor’s statutory and management responsibilities and objectives. The Grantor in its sole discretion shall have the power to exclude any actual or potential Grantee from the program or limit participation in the program. If the Administrator believes that any actual or potential Grantee should be excluded or limited on the basis of financial, legal, moral or other valid reason, it shall promptly consult with the Grantor and carry out the instructions of the Grantor. The Administrator shall not accept applications for grants from any Grantee under common control or ownership with the Administrator. Start-Up, Implementation, Duration and Termination The Administrator should be prepared to begin administration of the program within one week of signing the contract. The Administrator shall promote at its own expense the existence of the program with potential grantees in all areas of the country with the intent of achieving a reasonable geographic dispersion of grant funds. The program will terminate at the end of one year. Any grant funds not expended by that time will be donated to a charitable organization for activities in Iraq, by decision of the Grantor after consultation with the Administrator. The Grantor may terminate the Administrator at any time, with or without cause. If so terminated, the Administrator will be eligible to receive fees, in accordance with the contract, proportionate to its level of activity prior to termination date. Reporting Requirements Quarterly Utilization Reports of the amount of grant funds used in the preceding period are required of the Administrator per information noted above using the chart shown below: Date of Loan Amount of Loan Final Maturity Industry Borrower Grant recipients may be subject to an audit during the 12 months that this facility is available. This audit would be limited to review of the loans made under this program and their general administration and would be paid for by the Grantor using funds from the Grant Pool or otherwise at the Grantor’s discretion. Oversight The Administrator will be accountable to Grantor for achieving tasks set forth in the contract. All tasks under the contract are to be carried out subject to the supervision, direction, and any necessary redirection by the Grantor. SECTION III - SELECTION CRITERIA The Applicant shall furnish a proposal that describes the broad and detailed capabilities it possesses to carry out the tasks and goals described in Section II. The proposal shall contain a work plan that describes the specific measures the Applicant will undertake to achieve the objectives of the program. Describe the program in sufficient detail, to include identification of a clear set of phases. Each phase shall specify realistic and achievable goals and objectives. Proposals will be evaluated on the following criteria: Technical Capability Capability to immediately promote, establish and begin administering the program. This criterion shall also evaluate the proposed program phases to determine if the phases comprise a comprehensive, and complete program, and the degree to which the goals and objectives for each phase of the proposed program are realistic and achievable. Capability to design and implement financial controls and analytical, management and reporting procedures to effectively administer, monitor, assess and report on the grant program. Specific relevant accounting, finance, legal, and business capabilities Capability to operate throughout Iraq. Personnel with demonstrated technical, managerial, legal, accounting, administrative and financial experience and competence, especially with financial institutions and small businesses. Capability to provide agency, trust, fiduciary or other “trusted third party” services. Experience Within the past 5 years, general and specific experience of the organization and relevant personnel in: A) the nature and specific tasks and responsibilities of programs such as the Small Business Loan Grant Program; and B) the Middle East and specifically Iraq. Experience in agency, trust, fiduciary or other “trusted third party” services or transactions Price Applicant may quote a fixed price, a price per service, per transaction, per time period, or any other reasonable metric, or any combination of metrics. For the purpose of analyzing prices, Grantor will assume a disbursement schedule as follows: $7,000,000 total disbursement, average grant size approximately $135,000, disbursement period one year, frequency one disbursement per week. Prices shall be expressed in USD and must separately identify any third party expenses or fees incurred by the Administrator in performance of the services herein, including, without limitation, bank fees, legal fees, travel expenses, agents, advisors, taxes, and other such costs. SECTION IV - GRANT APPLICATION FORMAT PREPARATION GUIDELINES All applications received by the deadline will be reviewed for responsiveness to the specifications outlined in these guidelines and the application format. Section III addresses the technical evaluation procedures for the applications. In the interest of time, applications shall be submitted in electronic format, rather than hard copies. Two files should be sent: one for the technical proposal and one for the cost proposal. Applications and modifications thereof shall be submitted according to the instructions in the cover letter of this RFA, and showing the RFA number, and the name and address of the applicant. The application should be prepared according to the format set forth below. Applications must be submitted no later than the date and time indicated on the cover page of this RFA, to the location indicated on the cover letter accompanying this RFA. Applications which are submitted late or are incomplete run the risk of not being considered in the review process. Technical applications should be specific, complete and presented concisely. The applications should demonstrate the applicant's capabilities and expertise with respect to achieving the goals of this program. The applications should take into account the technical evaluation criteria found in Section III. Preparation of Applications: Each applicant shall furnish the information required by this RFA. In the interest of saving time and reducing expenses, only electronic submissions (email with attachments) will be accepted. Email should be limited to two attachments (one for Cost and one for Technical), up to 2 MB limit. The applicant should submit the Technical Application and Cost Application in separate files attached to the email. The Technical Application should not make reference to pricing or cost data in order that the technical evaluation may be made strictly on the basis of technical merit. Submissions should be made using Microsoft Word and Excel, or software compatible with a Microsoft Windows environment (e.g. Portable Document Format (PDF) file in a MS Windows environment). Applicants should be aware that the CPA may use advisory personnel to review and applications. Applicants who include data that they do not want disclosed to the public for any purpose or used by the CPA and their advisors except for evaluation purposes, should: (a) Mark the title page with the following legend: "This application includes data that shall not be disclosed outside the CPA and its advisors and shall not be duplicated, used, or disclosed - in whole or in part - for any purpose other than to evaluate this application. If, however, a grant is awarded to this applicant as a result of - or in connection with - the submission of this data, the CPA shall have the right to duplicate, use, or disclose the data to the extent provided in the resulting grant. This restriction does not limit the CPA's right to use information contained in this data if it is obtained from another source without restriction. The data subject to this restriction are contained in sheets.” and (b) Mark each sheet of data it wishes to restrict with the following legend: "Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this application." Explanation to Prospective Applicants - Any prospective applicant desiring an explanation or interpretation of this RFA must request it in writing by the date on the cover letter to allow a reply to reach all prospective applicants before the submission of their applications. Oral explanations or instructions given before award of a Grant will not be binding. Any information given to a prospective applicant concerning this RFA will be furnished promptly to all other prospective applicants as an amendment of this RFA, if that information is necessary in submitting applications or if the lack of it would be prejudicial to any other prospective applicants. Grant Award: The CPA may award one Grant resulting from this RFA to the responsible applicant whose application conforming to this RFA offers the greatest value (see also Section III of this RFA). The CPA may (a) reject any or all applications, (b) accept other than the lowest cost application, or (c) accept alternate applications. The CPA may award one Grant on the basis of initial applications received, without discussions. Therefore, each initial application should contain the applicant's best terms from a cost and technical standpoint. A written award mailed or otherwise furnished to the successful applicant within the time for acceptance specified either in the application(s) or in this RFA (whichever is later) shall result in a binding Grant without further action by either party. Before the application's specified expiration time, the CPA may accept an application, whether or not there are negotiations after its receipt, unless a written notice of withdrawal is received before award. Negotiations conducted after receipt of an application do not constitute a rejection or counteroffer by the CPA. Neither financial data submitted with an application nor representations concerning facilities or financing, will form a part of the resulting Grant. Authority to Obligate the CPA - The Grant Officer is the only individual who may legally commit the CPA to the expenditure of funds. No costs chargeable to the proposed Grant may be incurred before receipt of either a fully executed Grant or a specific, written authorization from the Grant Officer. COST APPLICATION FORMAT The Cost or Business Application is to be submitted in a separate volume (electronic file) from the technical application. Certain documents are required to be submitted by an applicant in order for a Grant Officer to make a determination of responsibility. However, it is CPA policy not to burden applicants with undue reporting requirements if that information is readily available through other sources. The following sections describe the documentation that applicants for Assistance award must submit to CPA prior to award. While there is no page limit for this portion, applicants are encouraged to be as concise as possible, but still provide the necessary detail to address the following: Include a budget with an accompanying budget narrative, which provides in detail the total costs for implementation of the program your organization is proposing, including: the breakdown of all costs associated with the program according to costs of, if applicable, headquarters, regional and/or country offices; the breakdown of all costs according to each partner organization involved in the program; the costs associated with external, expatriate technical assistance and those associated with local in-country technical assistance; the breakdown of the financial and in-kind contributions of all organizations involved in implementing this Agreement; and potential contributions of private donors to this Agreement. A current Negotiated Indirect Cost Rate Agreement (NICRA), if available for those applicants from the U.S. Applicants who do not currently have a Negotiated Indirect Cost Rate Agreement shall also submit copies of the applicant's financial reports for the previous 3-year period, which have been audited by a certified public accountant or other auditor satisfactory to CPA. For-profit organizations will not be allowed to charge a fee or earn a profit under this grant agreement. Applicants shall submit any additional evidence of responsibility deemed necessary for the Grant Officer to make a determination of responsibility, e.g. organization’s accounting manual. The information submitted should substantiate that the Applicant: Has adequate financial resources or the ability to obtain such resources as required during the performance of the award. Has the ability to comply with the award conditions, taking into account all existing and currently prospective commitments of the applicant. Has a satisfactory record of performance. Past relevant unsatisfactory performance is ordinarily sufficient to justify a finding of non-responsibility, unless there is clear evidence of subsequent satisfactory performance. Has a satisfactory record of integrity and business ethics. TECHNICAL APPLICATION FORMAT The technical application is the critical item of consideration in selection for award of this Agreement. It should be specific, complete, and presented concisely. Section III addresses the technical evaluation criteria for the application. All Applicants are advised that lack of completeness or superficiality of the application may constitute grounds for excluding it from consideration. The technical application must set forth strategies, results, activities and indicators to best accomplish the objective of the Program. This technical application should not exceed 20 pages, but it should be complete and address the evaluation criteria. The technical application can be supplanted by attachments such as curricula vitae of personnel, work plan, matrix summarizing qualifications, etc. RFA No. W914NS-04-R-0157 PAGE Page PAGE 12 of NUMPAGES 12