Responsible Inclusive Finance Facility in Central America and Caribbean (RIFF-CAC) Application Form

Upgrade Project

OVERVIEW OF AN UPGRADE PROJECT Background information: The Swiss Agency for Development and Cooperation (SDC) and

the European Investment Bank (EIB) fund the Responsible Inclusive Finance Facility in Central America and Caribbean (RIFF-CAC or FFRI-CAC in Spanish), which launched operations in November 2017 and is working to build capacity and improve practice in social performance management (SPM) in Central America and the Caribbean. The Social Performance Task Force (SPTF) is managing the RIFF-CAC, in collaboration with REDCAMIF. One type of funding that the RIFF-CAC offers is co-financing to financial service providers (FSPs) who would like to implement an "upgrade project." See below for a description of this activity.

Description of an "upgrade project" : An upgrade project is a project designed and managed by a financial institution in order to improve its social performance practices. An upgrading project can also be a crucial step for addressing remaining gaps before passing a Smart Certification or to achieve a higher social rating. Before an institution is ready for an upgrade project, it must do an assessment, either an SPI4 or a client protection assessment, of its current state of practice. This helps to identify strengths and weaknesses. After the assessment, the institution analyzes the results and prioritizes areas for improvement. It then develops an action plan for implementing improvements. Once the action plan is created, the institution is ready to implement changes. The implementation of the action plan to address priority gap areas is the upgrade project. Because the actions taken during an upgrade process vary according to the need of the institution, the RIFF-CAC cannot specify what activities will comprise your institution's upgrade project. They should, however, be activities that would result in improved performance on some or all of the poorly scored indicators of the SPI4 or client protection assessment. The following are examples of common actions taken during upgrade projects: developing and putting in place a client complaints system, providing additional social performance training to employees, surveying clients, developing new product delivery mechanisms, and investing in new infrastructure such as buying a new management information system.

Technical assistance for upgrade projects : All financial institutions implementing an upgrade project must include in their budget at minimum three days of time from an expert TA provider to offer coaching to the institution as it makes changes.

o Please consult the database of TA providers maintained by SPTF for information on TA providers that your institution might like to hire for your upgrade project. The database of TA providers contains contact information and information on each TA provider's qualifications, including what SPM-related trainings s/he has

Page 1 of 12Updated 2017-11-22

attended, whether s/he is an accredited Smart assessor or Smart approved TA provider, and whether s/he is a qualified SPI auditor. The database also provides reference names and contact information so that you can check references. SPTF does not check references for you, nor does it endorse one provider over another.

It is the responsibility of each FSP to contact possible candidates, and/or to contact their references, in order to choose which candidate is the right fit for your project.

o You may also in some cases select providers that are not in the SPTF TA provider database. In these cases, you will have to submit the person's CV and a short description of why you would like to work with them, and the RIFF-CAC will review this information and then approve or deny this selection.

Value added of working with a Smart-approved and/or SPI4-qualified TA provider . When selecting TA providers to work with, please keep in mind that those who are Smart approved and/or SPI4 qualified have participated in a carefully designed training and mentoring process that ensures strong knowledge of client protection (those who are Smart-approved) and the Universal Standards for SPM (those who are SPI4-qualified).

Duration of upgrade project : The timeframe will depend on each project and the action plan or gaps identified. Typically, an upgrade project takes between 6-18 months, but some may be shorter and some may take longer.

Sharing experience from your upgrade project : The RIFF-CAC requires all financial institutions who receive co-financing for upgrade projects to share information on their experiences, results, and lessons learned, with the RIFF-CAC. Peer learning is essential to advancing practice in the responsible inclusive finance sector. These deliverables will be treated as confidential.

Eligibility : All financial institutions are welcome to apply. Language : See the TA provider databases for the language abilities of the various TA

providers. The reporting you do to the RIFF-CAC on the results of your upgrade project must occur in Spanish, English ideally or French (if your only option).

Cost : The cost of an upgrade project varies by project, according to the gaps identified and actions planned to address them. The RIFF-CAC will co-finance no more than 50% of the total cost of your upgrade project, up to a maximum of US$18,000. Your institution will be responsible for the remaining 50% of the cost of the upgrade project. Your institution may contribute its share of the cost through providing funds and/or through in-kind contributions.

RIFF-CAC procedure to disburse co-financing grant : The RIFF-CAC will not disburse the co-financing grant to an institution on the date when its application is approved. Instead, it will wait until the institution begins paying for, or using in-kind contribution to implement, its 50% share of the cost. This is to avoid problems that might occur if the RIFF-CAC contributes 50% but the financial institution is ultimately not able to contribute its 50% share of the cost. Additionally, RIFF-CAC will pay third-party vendors

Page 2 of 12Updated 2017-11-22

directly. This means that a portion, or all, of the co-financing may be paid directly to a third party instead of deposited in the account of the institution. In cases where it is not possible for the RIFF-CAC to pay third-party vendors directly, the institution may pay those vendors directly and then submit receipts to the RIFF-CAC for reimbursement.

Project start and end dates : A question in the application form below asks you for your preferred start date of the project, and also to describe any time constraints you have. The RIFF-CAC will review applications and do its best to make grants at a time that fits your schedule. You will also provide the expected end date of your project, according to the specific upgrade activities you will be implementing.

Deadline to submit application : None. RIFF-CAC accepts applications on a rolling basis.

QUESTIONS FOR THE APPLICANT1. Please provide the following information about you:

o First name: o Last name: o Email address: o Skype name (optional): o Phone number, with country code (optional): o Country of residence: o What is your preferred language to work in (please answer Spanish, English,

French)? o How many years have you worked in the responsible inclusive finance sector? o Briefly describe your responsibilities at your current job (1-2 sentences):

2. Please provide the following information about the institution you work for:o Name of your institution: o Country(ies) where your institution works: o Please list all networks or associations of which your institution is a member:

3. Organizational information . Please submit information on your institution to the RIFF-CAC in any one of the following formats:

o Did your institution report to MIX last year? If yes, please submit the data you reported to MIX.

Page 3 of 12Updated 2017-11-22

o Has your institution filled out a Factsheet/MICROFACT? If yes, please submit the Factsheet.

o Has your institution filled out the SPI4? If yes, please submit the information from the Organizational Information page of the SPI4.

o Did your organization receive a social rating last year? If yes, please submit the report you received from the rating agency.

o Have any of your investors asked you to provide them with information on your institution that answers the questions listed below? If yes, you may submit the information you sent to your investor.

o If you do not have any of the above available to submit to the RIFF-CAC, please answer the questions listed below:

What is the legal structure of your organization (e.g., NGO, NBFI, bank)?:

In what year was your institution founded?: What is your institution's mission?

How many open savings accounts does your institution have?:

How many active borrowers does your institution have? [NB: "active borrower" = borrower with at least one outstanding loan]:

Products and services . Please list all types of products and services that your institution offers:

4. General financial information . Please submit, along with your completed application form, copies of your institution's income statements and balance sheets for the past year. If this will not be possible, please explain why:

5. Prior SPM assessments . What assessment(s)of your institution’s client protection and/or SPM practices has your institution done? Please describe what type of assessment, in what year it happened, and who conducted the assessment:1

1 Possible types of assessments include but are not limited to the QAT, the SPI3, SPI4, Smart Campaign Getting Started Questionnaire, Smart Campaign accompanied self-assessment, Smart Assessment conducted by an external third-party, as well as more informal assessments such as comparing your institution's practices to the "essential practices" in the Universal Standards for SPM. To answer who conducted the assessment, please list whether it was a self-assessment, one you did in collaboration with an auditor or TA provider, or one conducted by an external auditor or TA provider. Please also list the names and organizations of the auditor or TA provider who worked with you, as relevant.

Page 4 of 12Updated 2017-11-22

6. Social data : Have you reported data on social performance indicators to the MIX for the past year? If yes, please submit those data. If your institution also collects data on social indicators different from those monitored by MIX, please submit your data on these additional indicators from the past year as well. Write "not applicable" below if your institution does not collect social data.

7. Define the Upgrade Project . Please answer the following questions:o Project description. Please describe the upgrade project that you would like to

do:

o Project objectives. What are the expected results? How will this benefit your institution? How will it benefit your clients? What are the results/indicators from your assessment that you seek to improve?

o Institutional buy-in. Please describe the level of support and engagement of the leadership of your institution (e.g., board, senior management) in this project:

o Possible constraints. Please note any assumptions about the project (e.g., what needs to be in place to achieve deliverables) and what constraints that might get in the way of the project's success:

8. Declaration of ability to co-finance . Explain specifically which funds or resources your institution will use to pay its share of the overall cost. Note that in-kind contributions are permissible.

Page 5 of 12Updated 2017-11-22

9. When would you like to begin the upgrade project? Please indicate your preferred month(s) and year:

10. Are there any weeks or months in the upcoming twelve months when you would NOT be available to implement your proposed upgrade project? Please explain:

11. Please note that is your responsibility to select and contact the technical assistance (TA) providers with whom you would like to work on this project. Several options are available to you:1) See the SPTF TA database website for possible candidates. The SPTF database provides information on TA providers' experience and skills, as well as contact information for references, but SPTF does not contact references, nor does SPTF comment on the relative strengths and weaknesses of one provider versus another. It is the responsibility of your institution to vet references, interview candidates, and select the person(s) best suited to your institution's needs.

2) Contact CERISE at spi4@cerise-microfinance.org for a list of qualified SPI4 auditors.3) Refer to the Smart Campaign website here and here for lists of accredited lead and support Smart assessors. 4) You may choose someone who is in none of these databases, subject to the approval of the RIFF-CAC.

o When is this TA provider (are these TA providers) available? Please ask them for times when they would potentially be free, and times when they know they are unavailable, and report their responses here. Note that this information is not binding, as RIFF-CAC understands that availability may change:

o [Answer this question only if you are proposing to hire someone who is not in the SPTF, CERISE, or Smart Campaign databases. Otherwise, you may leave this question blank.] Please provide a short explanation for why your institution would like to work with this particular TA provider:

Page 6 of 12Updated 2017-11-22

12. All other external vendors . In addition to external TA providers, list any other external vendor your institution plans to purchase something from, or work with, to complete the project. Provide contact information for each vendor, along with a brief description of this vendor's organization and your rationale for working with this particular vendor. If you have worked with them before, please state when that was, and the context of your previous interaction with them.

13. Action plan : Along with this application form, please submit the action plan connected with this upgrade project. At minimum, this action plan should include the list of activities you plan to do, estimated timelines for starting and finishing each step, and the person(s) responsible for implementing each activity. Any additional detail you wish to provide is welcome. If the assessment your institution conducted was a client protection assessment, please see Annex 1 for the specific type of assessment results, action planning, and other supporting documentation that you must submit.

14. Budget . Please create and submit, along with this application form, an itemized budget for your upgrade project that includes an estimated level of effort (LOE) for everyone within your institution who will be working on the upgrade project. For costs to be incurred related to external parties, please provide documentation supporting your cost estimates. For example, for the TA providers you propose to use, please submit letters or emails from these providers that state the amount of days they will be involved, their daily rate, and their estimated expenses that you will pay for (e.g., lodging, travel, per diem). If you propose to purchase items from an external vendor, please submit a quote from the vendor stating the cost of the item(s) you will be purchasing.

15. Monitoring implementation . Please answer the following questions:o Internal monitoring. Describe how your institution will monitor the project and

with what frequency (ex., status reports communicated to management during monthly meetings):

o RIFF-CAC monitoring. To assist the RIFF-CAC in monitoring your progress in implementing this upgrade project, please list some specific achievements that

Page 7 of 12Updated 2017-11-22

will occur in each phase of your project and describe what data will demonstrate that the project is being successfully implemented:

16. Project outcome indicators . Describe the indicators that you will use to monitor whether the upgrade project is producing the desired effect, and any other results/outcomes of the project over time. This is not the same as the deliverables and the timeframe will probably be longer than the project itself. These indicators should measure outcomes, i.e., the changes that have come as a result of your project. These indicators will be different for every project, depending on the objectives. They should be specific, measurable, achievable, relevant, and time-bound (S.M.A.R.T.) Annex II gives some examples of possible indicators. A single objective may have several indicators. You may answer this question here, or attach your responses in a separate Excel file:

17. Learning from peers is a valuable tool to help the responsible inclusive finance sector advance practice throughout the world. For this reason, the RIFF-CAC will require all financial service providers who receive RIFF-CAC grants to commit to giving feedback to the RIFF-CAC on their experience implementing RIFF-CAC-funded activities. The feedback mechanism will include both speaking to RIFF-CAC staff about your experiences, either virtually or in person, as well as submitting written responses to a project evaluation form. Please write your initials at the end of the following statement, to confirm you understand this rule and agree to it.

o I agree to provide feedback to the RIFF-CAC on my institution's experiences implementing an upgrade project co-financed by the RIFF-CAC. I understand that I am required to provide feedback through two channels: a) conversations with RIFF-CAC staff, and b) written responses to a project evaluation form. I understand that RIFF-CAC will not share this information publicly without my consent. [Your initials]:

18. Instructions for submitting the application:o Please type (preferred) or write neatly answers to all questions in this

application.o Once you have completed the application, please email the following

documents to ffricac@sptfnetwork.org and put "Application to RIFF-CAC for Upgrade Project" as your subject line:

your application form, filled out your CV your institution's income statements for the past three years your institution's balance sheet statements for the past three years

Page 8 of 12Updated 2017-11-22

organizational information described in question 3 (NB: this will either submitted as a separate document, as explained in question 3, or you may provide the requested information directly in this application form in response to question 3)

social data you have collected from the past two years (see question 5) results of the assessment (see question 4), and the corresponding action

plan (see question 10), related to this upgrade project an estimated budget for your upgrade project CV of the TA provider you propose to hire letter or email from the TA provider you propose to hire, stating his/her

fee, dates of availability, and interest in doing the project

_______________

Please note that RIFF-CAC will reply to you upon receipt of your application, to confirm that we have received it. The RIFF-CAC steering committee meets quarterly to review applications. Therefore, you will receive notice of whether your application was approved no later than three months after the date when you submitted it. Thank you for your interest.

Page 9 of 12Updated 2017-11-22

Annex 1Additional Application Questions for Client Protection Upgrading Project

i) Gap analysis from assessment All client protection-related upgrade projects should be based on a client protection assessment. Self-assessments, accompanied assessments, and third-party assessments are all permissible. Please note below the type of assessment and date. You must attach to the upgrading proposal a completed Key Indicators Table, and Gap Analysis from the Smart Assessment Tool (see examples below).

Type of assessment

Date of assessment (month/year) Did you attach the Key Indicators table? Did you attach the Gap Analysis from the assessment report?

Example of a Key Indicators table

Page 10 of 12Updated 2017-11-22

----- Benchmark

Key indicators 2012 2007 2008 2009 2010 2011 2012

Gross Loan Portfolio (USD) 20,807,910 2,733,925 2,766,190 6,290,577 21,495,065 30,652,097 51,055,028Portfolio growth n/a 1% 127% 242% 43% 67%Number of active borrowers 9,973 3,818 4,587 8,148 25,888 36,526 52,857Average loan balance in % of GNI per capita 81.3% 17.5% 12.9% 16.6% 13.7% 13.9% 16.0%PAR30 6.1% 0.7% 0.9% 0.3% 0.4% 1.9% 1.8%Write-off ratio 1.6% 0.5% 1.1% 0.3% 0.1% 0.8% 1.5%Operational Self Suffi ciency / OSS 127.1% 79% 97% 102% 112% 129% 130.1%Return on assets / ROA 3.8% -8.1% -0.7% 0.0% 2.2% 5.0% 5.6%Return on equity / ROE 18.6% 307.5% -3.5% 0.0% 9.1% 28.6% 24.0%Yield on gross portfolio (nominal) 22.2% 26.1% 36.0% 39.5% 40.9% 43.2%Operating expense ratio / OER 13.4% 23.9% 21.0% 25.8% 21.4% 19.1% 23.8%Cost per client (USD) 516 176 138 183 175 160 220Loan Officer productivity ratio / Borrowers per LO 378 347 382 281 454 410 295Staff productivity ratio / Borrowers per staff member 103 147 158 131 212 182 128

Example of a Gap Analysis from a Smart Assessment report

ii) Activities and expected outputsDescribe the approach to implement the project: the process, the expected output, the staff involved, any Smart Campaign tools you may use, and timeline for completion (add lines as needed). May be attached in separate Excel file. When planning activities, keep in mind that anything related to policy should be addressed first because generally developing policy needs Board approval, which means institution-wide implementation takes more time.

Page 11 of 12Updated 2017-11-22

Planned activities List proposed activities in sequence of completion

CPP to be addressed

Deliverable per activityEx. Expected outputs form the activity, such as reports, training materials, workshops, documents

Person /committee responsible

LOE (# of days needed for activity)

Smart Campaign resource/tool to be leveraged

Timeframe

iii) Smart Campaign FeedbackNote any steps of the project that may require Smart Campaign feedback [OPTIONAL]:

Annex IIExample outcome indicators

Objective S.M.A.R.T. indicator

Ensure clients know about their right to complain and how to use the complaints mechanism

% of complaints registered and treated increases over YY period

Create a code of conduct to guide ethical staff behavior

% of client complaints related to staff behavior decreases by XX over YY period

Improve repayment capacity analysis to better prevent over-indebtedness

% of PAR decreases by XX over YY period

Design an incentive system that encourages good repayment capacity analysis, ethical collections practices, good customer service.

% of staff retention improves by XX over YY period

Page 12 of 12Updated 2017-11-22