Consultant: Evaluation of The Regulatory Framework for Digital Financial Services

NGO Jobs / UN Jobs Vacancy



Organization: Alliance for Financial Inclusion
Closing date: 24 Dec 2020

1. Background:

The Alliance for Financial Inclusion
The Alliance for Financial Inclusion (AFI) is an innovative member-driven organization that enables policy makers in developing countries to share their knowledge on financial inclusion policies that have yielded positive tangible results. The network currently comprises more than 110 central banks, government ministries and other financial policy-making institutions from some 95 emerging markets and developing countries.

AFI provides members the opportunity to learn from peers and supporting technical knowledge sharing on key aspects of financial inclusion policy. AFI works with its members to influence policy reforms, which result in scaling up. of reaching quality financial services to low-income populations and disadvantaged groups.

Project background
According to a special report on "The Ecosystem of Digital Financial Services in Latin America and the Caribbean" by the Alliance for Financial Inclusion, there is broad consensus on the part of governments and regulatory authorities in Latin America and the Caribbean (LAC) on the importance of promoting the provision and acceptance of digital financial services.

The DFS sector in the region has seen rapid growth in recent years, albeit from a low base. This has incorporated both the digital financial provision of traditional banks and the services of non-bank providers, including retailers, mobile money transfer companies, and public sector agencies.

Research has identified the following key regional trends related to DFS, including:
⇒ There is a general consensus on the link between the expansion of DFS and the drive for financial inclusion.
⇒ Regulatory agencies must respond to the new challenges of an evolving DFS ecosystem.
⇒ The supporting infrastructure is expected to improve, but only gradually.
⇒ A marked rural-urban divide has slowed the expansion of the DFS in some areas.
⇒ The preparation of the population, in particular, is a challenge.
In Ecuador, the Savings and Credit Cooperatives (COAC) have a greater presence in rural areas, their products and services are diversified and they place more than 60% of the microcredits in the country. While in 2012 its assets were USD 6,027 million, at the end of last year (2019) its assets reached USD 15,569 million and the number of partners (clients) also increased, from 5 million to 7.8 million in 2019. Seven years ago, these entities granted USD 4,562 million in loans to their partners and in 2019 they reached USD 11,861 million, equivalent to around 30% of all formal credit granted in the country.

In Ecuador, 49% of all adults do not have a bank account and the gender gap in account ownership is 18%. 31.5% of the population of Ecuador lives in rural areas. The high costs of developing the physical, technological and communications infrastructures necessary to support new branches have prevented financial institutions from expanding into rural and remote areas of Ecuador.

The Ecuadorian regulatory framework is still in an early stage regarding DFS's regulatory policies. The authorities are aware that the growth of this market depends largely on the existence of regulations, that allow FinTech industry players to provide their services without fear of being sanctioned by a control entity in the future. Thus, in May 2017, the Monetary and Financial Policy and Regulation Board, the highest regulatory body in monetary and financial matters in Ecuador, issued a regulation, approving and defining the actions that make up the operations in charge of the financial institutions that carry out auxiliary services for the public and private financial sectors.

However, there is no law or other regulation that specifically regulates FinTech. The different actors in the financial industry must observe the regulations applicable to any company that carries out financial activities. Likewise, the development of FinTech activities must be carried out under an entity accepted under the Ecuadorian jurisdiction.

2. Goals:

The general objective of the consultancy is to investigate the development of financial inclusion and Digital Financial Services (DFS) in Ecuador, focusing on the adoption and use of financial services by the excluded segments from the formal financial system. This will require developing a thorough understanding of the DFS ecosystem, the existing regulatory framework for DFS, and assessing the factors that are supporting DFS growth or creating barriers that impede it. This would also include regulatory dimensions related to innovation, competition, demand, digital literacy, interoperability, partnerships, digital identification, etc.

While the assessment will look at the enabling regulatory environment for technology-enabled financial services as a whole to form the basis for the necessary innovative regulatory approaches (i.e. Sandbox, Innovation Hub), the scope of this assessment will revolve around the following three objectives:

Objective 1: Present the perspective and progress of financial inclusion made by the DFS industry supported by regulation.

This will be achieved by first developing a comprehensive overview of key DFS players (i.e. banks, COAC, NBFIs, payment service providers, FinTech players, etc.) along with trends, growth drivers, and roadblocks impacting the DFS market, and the potential size of the future market. In addition, regulatory interventions that focus on increasing the use of DFS will be presented along with its background and purpose. The assessment will measure the progress of digital financial inclusion against a 2014 baseline as established by Findex.

This objective will be achieved by answering the following key questions:
 What are the key drivers for DFS growth and financial inclusion in Ecuador?
 What are the key challenges facing the DFS industry, more particularly technology-enabled financial services?
 What is the interaction between the actors of the DFS ecosystem?
 Are the available services / products appropriate and effective to drive digital financial inclusion? If not, what products / services do the unbanked and underserved need to drive digital financial inclusion?

Objective 2: Present the existing regulatory framework for digital financial services, including the FinTech industry.

This will be accomplished by answering the following key questions:
 Is the direction the industry has taken supported by the existing regulatory framework and to what extent?
 How has the current regulatory / regulatory framework impacted (positively or negatively) on the acceptance and use of digital financial services?
 Is the regulatory environment for DFS and FinTech conducive to growth?
 What are the key regulatory challenges facing the industry in terms of licenses and operations?
 How are different government / regulatory bodies interacting with the DFS and FinTech sector? How do they interact with each other?
 Are there barriers to entry for DFS and FinTech providers?
 Are there gaps in the existing regulatory framework? If so, how are these gaps affecting the growth of the DFS and FinTech industry?
 What are the different policies / regulations that govern and have an impact on DFS and FinTech providers?
 How do regulators perceive innovative regulatory approaches for Sandbox and Innovation Hub?
Objective 3: Develop a roadmap to take advantage of potential opportunities to overcome existing challenges.

This will be achieved in two steps, the first will be to analyze the objectives of the relevant regulators in terms of how they want to develop the DFS and FinTech market in Ecuador. In this step, all barriers and challenges that have the potential to prevent regulators from achieving their goal will be consolidated.

In the second step, desk research will be conducted to compare the regulatory response to overcome barriers in other countries that have faced similar challenges. The feasibility of the responses will also be analyzed from the perspective of the local context.

Finally, a comprehensive roadmap will be developed that will guide you through the process of identifying the innovative regulatory approaches needed in Ecuador and how to implement them. The roadmap will also include recommendations on policy packages that could be implemented to enhance the adoption of innovative regulatory approaches.

3. Tasks and Deliverables:

The development of the project objectives, will lead to establish and identify the composition of integral elements of the ecosystem for the use of digital financial services in Ecuador and should focus on policies and regulatory measures in order to establish the regulatory framework to promote the use and access to digital financial services.

Key deliverables:

  1. Assessment Report of FI and DFS in Ecuador
    For the development of this deliverable, the designated consultant must perform at least the following activities:
    • Carry out an analysis of the current initiatives in Ecuador regarding the use and access to digital financial services
    • Conduct desktop research of the existing data in Ecuador in this regard
    • Write and develop a qualitative methodology on the ecosystem of digital financial services (methodology to be defined by the consultant: survey, interview, etc.)
    • Identify and document the best practices of AFI members in promoting the use of digital financial services.
    • Deliver a final report of Financial Inclusion and Digital Financial Services in Ecuador
    • Develop a presentation on the final document

    The document to be delivered will consider at least the following content:
    • Lifting of barriers for the implementation and use of Digital Financial Systems
    • Analysis of the best practices of AFI members in promoting the use of digital financial services.
    • Results obtained from the qualitative methodology on FI and DFS
    • Assessment that measures the progress of digital financial inclusion against a 2014 baseline as established by Findex.

  2. Develop an analysis of the DFS ecosystem and the existing DFS regulatory framework
    For the development of this deliverable, the designated consultant must perform at least the following activities:
    • Hold meetings with stakeholders
    • Determine the responsibilities and obligations of each stakeholder
    • Analyze the interrelationships and mechanisms used by each one
    • Review the regulations that regulate each stakeholder
    The document will contain at least:
    • A comprehensive overview of key DFS players (i.e. banks, COAC, NBFIs, payment service providers, FinTech players, etc.) along with trends, growth drivers, and roadblocks impacting the DFS market and potential size of the future market.
    • Existing regulatory framework for digital financial services, including the FinTech industry, and its impact on the adoption and use of DFS.

  3. Proposed regulatory framework for Digital Financial Services, including the FinTech industry
    For the development of this deliverable, the designated consultant must perform at least the following activities:
    • Analyze the needs of the regulatory environment
    • Propose the regulatory framework required by the SEPS to regulate the digital financial services of its regulated entities, as well as the protection of the user of that services.
    The document will contain at least:
    • Key regulatory challenges facing the popular and solidarity economy in terms of licensing and operations, among others.
    • Recommendations on the implementation mechanism (regulatory sandbox or innovation hubs, etc.)
    • Proposal for a regulatory framework.

  4. Roadmap
    For the development of this deliverable, the designated consultant must perform at least the following activities
    • Analysis of the objectives of the relevant regulators regarding how they want to develop the DFS and FinTech market in Ecuador
    • Desk research to compare the regulatory response to overcome barriers in other countries that have faced similar challenges. The feasibility of the responses will also be analyzed from the perspective of the local context.
    • Review of the rules of regulators that require reform
    The document will contain at least:
    • The roadmap should constitute a guide for the process of identifying the necessary innovative regulatory approaches in Ecuador and how to implement them.
    • Recommendations on policy packages that could be implemented to enhance the adoption of innovative regulatory approaches

  5. Training Calendar
    For the development of this deliverable, the designated consultant must perform at least the following activities
    • Develop a program of training workshops
    • Training for Superintendence personnel regarding the study carried out and the proposed regulations
    • Conduct a capacity building workshop for key stakeholders regarding the implementation of the relationships and interactions required for the implementation of Digital Financial Services
    The document will contain at least:
    • Objective
    • Workshop content
    • Methodology
    • Participants
    • Expected results

4. Qualification:

The consultant performing this task must have the following qualifications:

  • Higher degree in a field related to Economics, Finance, Public Policy, International Development or other related discipline.
  • Knowledge and experience in development and financing policies.
  • Deep expertise and experience in financial inclusion policies, fintech regulations and innovative regulatory approaches.
  • Significant experience in conducting research, assessment and evaluation in the area of financial inclusion and more particularly digital financial services.
  • Fluency in English (oral and written) is mandatory and will be additionally valued if the consultant also speaks Spanish.
  • Writing experience. If possible, send related working papers or research on the topic.

5. Timeline:

The consulting work will begin on the 1st week of January, 2021. The final draft of the study must be completed no later than last week of June, 2021. Following is indicative timeline for activities to be carried out under the assignment

6. Evaluation Criteria:

  • The proposals submitted will be evaluated based on the following criteria:
  • Academic qualification
  • Provider or consultant experience working with digital financial services, policies and regulations.
  • Knowledge and experience of the provider or consultant related to the assignment:
  • If the proposed methodology provided is applicable in accordance with the Terms of Reference and if there are additional and important suggestions, tools, concepts and / or processes proposed by the supplier or consultant;
  • The conceptual framework of the proposal includes a demonstration of a logical and clear planning to execute the tasks and complete the deliverables.

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 rfp2063@afi-global.org by 24th December 2020.

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.



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