Consultant: Developing a Guideline Note on Stress Testing and Crisis Resolution for E-Money Providers

NGO Jobs / UN Jobs Vacancy

Organization: Alliance for Financial Inclusion
Closing date: 24 Feb 2021

1. AFI & Project Background

The Alliance for Financial Inclusion (AFI) is an independent, member-owned and member-driven organization that enables its members to develop and implement innovative financial inclusion policies and regulations, and through these efforts contribute to the Sustainable Development Goals. Currently 101 member institutions make up the AFI network, including central banks, ministries of finance and other financial policymaking and regulatory authorities from 90 developing and emerging countries.

AFI empowers policymakers to improve access, usage and quality of financial services for the underserved through formulation, implementation and global advocacy of sustainable and inclusive policies. AFI members set their own agenda and harness the power of peer learning and friendly peer pressure to develop practical and tested policy reforms that enhance financial inclusion with strategic support from the both public and private sector partners.
AFI has 7 Working groups (WGs): Consumer Empowerment and Market Conduct Working Group (CEMCWG), Digital Financial Services Working Group (DFSWG), Financial Inclusion Data Working Group (FIDWG), Financial Inclusion Strategy Peer Learning Group (FISPLG), Global Standards Proportionality Working Group (GSPWG), Inclusive Green Finance Working Group (IGFWG) and SME Finance Working Group (SMEFWG). WGs are the key source of policy developments and trends in financial inclusion and serve as "communities of practice" on key financial inclusion issues. They are the primary mechanism for generating and incubating knowledge in the AFI network and provide a platform for knowledge exchange and peer learning to allow policymakers to share, deliberate and deepen knowledge and understanding on key financial inclusion issues.

While AFI’s working groups provide leadership and expertise in clearly defined traditional policy fields, the AFI network is constantly monitoring new developments and maintains a commitment to supporting financial inclusion efforts in emerging fields and regions. The AFI network is engaged in various dedicated regional initiatives: African Financial Inclusion Policy Initiative (AfPI), Latin America and the Caribbean (FILAC), Pacific Islands (PIRI), Eastern Europe and Central Asia (ECAPI) and Arab Region (FIARI)

The impact of AFI’s work over the past decade has been substantial. Since AFI’s launch, members have attributed their participation in AFI with the development and implementation of over 680 financial inclusion policy improvements which have enabled access to formal transaction accounts for over 650 million unbanked people worldwide.

2. The AFI Global Standards Proportionality Working Group (GSPWG)

The GSPWG is a platform that provides technical support to developing and emerging country policymakers to implement global standards for financial stability (e.g. the Basel Framework) and financial integrity (e.g. Financial Action Task Force (FATF) 40 Recommendations) proportionately and without unintended negative consequences for financial inclusion.

The working group supports AFI’s Global Standards and Policy Committee with respect to strategic engagements with global standard-setting bodies and leverages on AFI’s partnership with the FATF Style Regional Bodies and the International Association of Deposit Insurers.

Members also exchange information on the opportunities and risks associated with new technologies, such as digital identity innovations, regulatory technology solutions, and the growing use of virtual assets, which could potentially impact the effectiveness of global standards and regulatory compliance.

3. Guideline Note on Stress Testing and Crisis Resolution for E-Money Providers**a. Introduction and Background**

Since the origins of M-Pesa in Kenya in 2007, mobile money platforms provided by mobile network operators (MNOs) and other non-bank issuers of electronic money (e-money) have become an increasingly important part of the financial sector landscape in developing countries, particularly in regions such as Sub-Saharan Africa and South Asia where formal banking penetration remains low. According to the GSMA, as of 2019, there were over $1 billion registered mobile money accounts with more than &1.9 billion processed daily, and a total of $22 billion circulating within mobile money systems across 95 countries.2 E-money products issued by MNOs and other non-banks can provide a vital gateway to both digital payments and broader financial inclusion for underbanked communities.
At the same time, given the growing scale of mobile money systems, and the fact that such services are relied on by individuals and communities who may not have access to bank accounts, it is vital for policymakers and regulators to ensure adequate safeguarding of customer funds held in mobile money accounts and other e-wallets. For this reason, the AFI GSPWG has partnered with the International Association of Deposit Insurers (IADI) to understand the different models for protection of customer funds held as e-money.

Stress testing and crisis resolution tools have been deployed extensively across the banking sector to enhance financial stability, particularly since the global financial crisis of 2008-09. For example, the International Monetary Fund (IMF) has established a compendium of financial stress testing approaches and tools, and observed that between 2008 and 2014, more than 50 countries applied stress tests to the banking sector, however the application of such tools to the non-bank sector is relatively underdeveloped, as noted by the IMF: “The need to stress test the vulnerabilities of the nonbank financial sector has become clear during the global financial crisis… but much more remains to be done compared with the banking sector”.

The COVID-19 pandemic has lent added urgency to ensuring that non-bank e-money issuers, are able to carry out stress tests, and that adequate regulatory frameworks are in place to safeguard customer funds and manage an orderly wind down in the event of failure. For example, in July 2020 the UK Financial Conduct Authority (FCA) published additional guidance for payment and e-money firms on ‘Coronavirus and safeguarding customers’ funds’, requiring authorized e-money institutions to carry out stress testing ‘appropriate to the nature, size and complexity of the firms’ business and the risk it bears’, as well as requiring them ‘to have a wind-down plan proportionate to the size and nature of the firm’, reviewed annually.

b. Overall objective

The AFI GSPWG therefore wishes to develop a guideline note and regulatory toolkit which, informed by AFI member country experience, will: • Map current potential regulatory gaps in stress testing and crisis resolution in respect of non-bank e-money providers; • Assess the applicability of currently available tools and guidance for regulators on these topics, and the need for modification and tailoring to support proportionate regulatory approaches; and • Develop initial guidance and policy toolkit for regulators on these topics to support practical application of regulatory frameworks which encompass a proportionate approach to risk whilst ensuring adequate steps are taken to safeguard customer funds.
The products developed should take account of the additional stress on bank and non-bank financial institutions posed by COVID-19, and include recommendations on appropriate regulatory responses for non-bank e-money issuers.

c. Key Deliverables and Activities

The consultant is expected to: (i) Undertake a literature review to document currently available tools and guidance pertaining to stress testing and crisis resolution for non-bank e-money providers; (ii) Work with a subgroup of approximately 5 members of the AFI GSPWG (and GSPWG technical advisers from the IADI membership) to map their current regulatory frameworks, and identify potential regulatory gaps in each of the five countries; (iii) Develop a draft guideline note, building on these country experiences, to include the rationale for stress testing and crisis resolution procedures for non-bank e-money issuers; the detail of potential policy approaches that can be taken, and highlight relevant tools and resources available to support implementation; (iv) Present a draft of the guideline note to the AFI GSPWG (including technical advisers to the GSPWG from the IADI membership) at a date to be agreed with the AFI Management Unit. (v) Following a review of the draft guideline note by AFI GSPWG members, AFI staff, and any external reviewers identified by AFI, submit a final draft taking account of comments and feedback received, and a comment tracker detailing how comments received have been responded to.

During the consultant’s work on this project, AFI Management Unit will support these deliverable by: reviewing the report outline and drafts produced, and facilitating contact with AFI’s members and partners for arranging interviews and focus groups.

4. Consultant Experience:

• 10+ years of professional experience in broad financial regulatory and policy interventions, with 5+ years specific experience in regulatory approaches to digital financial services and financial technology innovations;
• Previous solid experience working with Central Banks and other financial regulatory entities, particularly in developing countries.
• Sophisticated understanding and experience in analyzing the issue of regulatory oversight and supervision around financial inclusion, stability, integrity, and consumer protection through the lens of growing digital technology.
• Strong knowledge and understanding of legal and regulatory frameworks related to digital finance.

5. Timeline:

This work would be undertaken between 10th March 2021 to 31 May 2021.

6. Reporting:

Throughout the contract period, the Consultant will report to the AFI Policy Analysis team.

7. Criteria for Evaluation:

  1. Academic Qualification; 10%
  2. Experience and competence of the key staff for the assignment related; 50%
    • Adequacy for the assignment - 25%
    • Regional/Global experience - 25%
  3. Adequacy of the proposed work plan and methodology in responding to the Terms of Reference; 30%
    • Technical approach and Methodology - 15%
    • Workplan - 15%
  4. Sample work – Writing experience and English - 10%

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 by 24th February 2021.

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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