European Bank for Reconstruction and Development (EBRD)



TERMS OF REFERENCEKazakhstan: Forte Bank –MSME Lending Capacity Building1. BACKGROUNDForte Bank (“Forte” or “the Client”) is the 8th largest bank in Kazakhstan with assets of just over USD 3 billion and equity of USD 0.5 billion at end-1Q16. The bank offers a wide range of retail, corporate and SME products via its distribution network of 19 branches and 145 outlets in 39 cities and rural settlements of Kazakhstan. Through subsidiaries, its services also include leasing and asset management. Forte’s operations are overseen by a banking team of eight members of the management board with substantial experience in the areas of lending, accounting, risk management and treasury operations. Its Board of Directors consists of six members, of which three are independent directors with local and international banking background, and one is a representative of the principal shareholder.Following the recent merger with Temirbank and Alliance bank, Forte launched an integration plan in an effort to improve operating efficiency. Among other things, management has reduced headcount, optimised Forte’s branch network, introduced a new motivation and remuneration system, and implemented an integrated IT system.In the near term, the Client emphasises automatisation as a key strategic focus, gradually moving toward a more remote and self-service oriented approach to Client management. This is expected to translate eventually into further headcount reductions and more modest branch network needs. Forte will also continue to retain focus on recovery of its legacy portfolio and strengthening of the risk management and HR functions. EBRD is planning to provide the Client with a five-year Senior MSME loan of USD 50 million in KZT equivalent, in two equal tranches. The proposed TC project (‘Assignment’) aims to support Forte Bank to improve the efficiency of its MSME lending operations. Results of a Due Diligence undertaken in June 2016, found weaknesses in the MSME Lending practices and transaction cycle of the Client. MSME credit risk management and underwriting techniques were areas noted that would need improvements and modernisations.The TC will assist the Client address these weaknesses by strengthening the MSME Lending procedures bringing them in line with international best practices. As a recently (re)formed entity, Forte is still in the process of cementing its market position among other banks in Kazakhstan, and introduction of best practices and streamlined processes could strengthen substantially its position in the MSME segment.2. OBJECTIVES The objectives of the Assignment are to support the Client with advice and practical information concerning:improvement in MSME credit risk management and underwriting techniques; training of specialised bank staff in areas pertaining to MSME lending; andenhanced performance measurement and reporting methodology aimed at continued operational strength in the face of an evolving business.3. SCOPE OF SERVICESTo achieve the Assignment’s objectives, the Consultant will carry out the following tasks:Risk management and underwritingConduct an assessment of the current MSME operations at Forte, including both origination procedures and monitoring, to identify key weaknesses and impediments to further development of MSME lending operations.Provide practical recommendations aimed at improving Forte’s procedure to MSME lending:Optimise existing strategic approach to MSME lending with focus on: a) selection of target segments and product lines; b) choice of optimal pricing strategy; and b) seamless incorporation of the MSME lending strategy within Forte’s general mid-term strategic goals.Improve the Client’s MSME loan approval and monitoring processes aimed at enhancing the quality of its MSME portfolio.Develop monitoring of environmental and social aspects of projects in line with EBRD’s Environmental and Social Policy.Assess and propose improvements to the methodology that concerns problem loan workout procedures. 3. Assist in implementing these recommendations.TrainingOffer three types of training to Client personnel involved in MSME Lending:Generalist training: Train the Client’s loan officers on general business management topics such as key customer service skills, public speaking and time management.Specialist training: Provide training to specialised Client personnel in the following topics: financial analysis;project valuation (with particular focus on oil & gas, mining and agricultural business);best practices in liquidity and market risks modelling and stress-testing; Basel III and its applications; modelling methodology design under IFRS 9;assessment of instruments used to hedge financial risks; stress-testing with multifactor models.Train-the-trainer: Ensure sustainability of training measures by coaching members of the Forte Bank staff who will be responsible for delivering internal training to new loan officers. Help prepare training materials and curriculum for future use by the Client for internal training on identified topics. Oversee first training sessions in each identified subject conducted by the trained trainers for Forte’s staff to provide feedback. The Consultant will liaise with EBRD’s Environment and Sustainability (“E&S”) Department to obtain training and guidance materials for the inclusion of the EBRD’s Environmental and Social Risk Management Procedures for MSME lending into the design of the training and the Train-the-Trainer programme. The Consultant should also undertake the EBRD’s E&S E-learning online training programme specifically the module on MSME lending which also includes case studies. Access to the training is free of charge and can be requested via the website . The Consultant should also encourage Forte Bank staff to register for access to the on-line training programme for their reference.Performance measurement and reportingUndertake a review of internal reporting and advise whether its format is appropriate and quality sufficiently high to give Client management a detailed and accurate picture of bank operations and outlook. Assist with implementation of additional elements into the reporting package to ensure cost- and time-efficient generation of data, strong quality and high value to management.Post-Assignment SurveyUndertake a post-assignment survey six months after completion and provide evidence that the Client has applied the new or updated MSME Lending procedures. 4. IMPLEMENTATION ARRANGEMENTS The estimated duration of the Assignment is eighteen (18) months.The Consultant will report to the Forte Bank management. A copy of each report will be sent to the EBRD project team. Forte will designate an employee to co-ordinate the day-to-day activities under this Assignment and will provide the Consultant with access to all relevant documentation/information to successfully complete the Assignment.Forte will also provide the Consultant with office space, including access to telephones, computers, printers, and internet. The Client will also be responsible for providing internal training facilities and catering requirements. Furthermore, the Client will be expected to provide local transportation necessary for the Consultant to fulfill its duties. 5. DELIVERABLES AND REPORTING5.1. DeliverablesThe following deliverables are envisaged to be achieved and outputs reported on: Recommendations for improvement of MSME credit risk management and underwriting techniques;At least 30 loan officers, 15 specialised staff and 3 trainers received coaching and on-the job training;Review of internal reporting and updated strategy on management reporting;Post-assignment survey undertaken with the Client six months after the Assignment to assess application of new or updated procedures.5.2. ReportingThe Consultant is expected to report directly to Forte Bank management, copying the EBRD Operation Leader. At a minimum, the Consultant will prepare and review with Forte management the following:Activity plan – within 10 days from the start of AssignmentThe plan is expected to be agreed with Forte management within 10 days of start of Assignment. It is to include data on the resources necessary for the implementation of the tasks under each objective, deadlines, names of Forte staff that will liaise with the Consultant, formats of communication and reporting.Inception report – within 3 weeks from the start of AssignmentThis report should include a detailed work plan, further defining the objectives outlined in the ToR and all related tasks and responsibilities. Any revisions should not affect the larger goals of the Assignment and should aim to fine-tune tasks to achieve maximum efficiency. This report is to be discussed in detail at a subsequent meeting between Forte, the Consultant and EBRD.Quarterly performance reports – within 2 weeks from the end of each respective quarterThe reports should include:an executive summary of outputs from the beginning of the Assignment to date for each of the objectives outlined in the ToR;a comparison of actual results with the expected results established for the period and reasons why the goals were not met;any problems with the implementation of the Assignment and a revision plan, if needed; and an indicative plan for the next quarter.Final report – within 3 weeks from the end of AssignmentThe report is expected to include an assessment of the Assignment objectives, and conclusions and recommendations for future steps to be taken to cement the changes introduced during the course of the Assignment. It should also include a one page ‘Executive Summary’Additional ad-hoc reports may be requested by the Bank. All reports should contain a balanced mix of quantitative and descriptive data, and should be as specific as possible about the tasks performed and results achieved. The reports are expected to be produced both in Russian and English, and should be presented in electronic format (Word / Excel / PDF) without passwords or copy protection.6. DONOR VISIBILITYThe donor funding the project requires adequate visibility for its contribution. The Consultant shall collect evidence of donor's visibility, such as media coverage, official notices and press releases, reports and publications referring to the project. The Consultant’s reports, particularly the Final Report, shall detail the ways in which the donor's visibility requirements were adhered to.It is expected that the donor for this assignment is the European Union. The Consultant will ensure that all reports, documentation, marketing and publicity materials have clear references to the support of the European Union and the EBRD. The form of such references must be agreed with the EBRD. All reports prepared by the Consultant for this project should display the European Union’s logo (to be provided by the EBRD) and must carry the following disclaimer: “This document has been produced with the financial assistance of the European Union. The views expressed herein are those of the Consultant and can therefore in no way be taken to reflect the official opinion of the European Union”. For further details regarding donor visibility requirements, the Consultant should refer to the EU website, currently at: ................
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