SME Workout and Collection Volunteer Expert

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SME Workout and Collection Volunteer Expert

Location: Dar es Salaam,Tanzania

Level of Effort: 3 weeks (approx.)

Anticipated State Date: July 2017

Problem Statement

Part of a financial institution’s ability to profitably lend to SMEs is its ability to effectively manage non-performing loans (NPLs)-both to prevent incidents of default and to reduce the costs associated with recovery. Persistently high NPLs inhibit economic growth. Banks with high NPLs are likely to devote resources to improving asset quality rather than making new loans. For the bank, this can cut into profitability. For many firms, the reduction in credit access can discourage investments and threaten liquidity.

The purpose of this training is to build the capacity of bank staff by highlighting best practices of NPL management, including early identification of NPLs and workout strategies for both individual loans and loan portfolios.

Background

The Tanzania Enabling Growth through Investment and Enterprise (ENGINE) program is a four-year USAID-funded Feed the Future program awarded through the Volunteers for Economic Growth Alliance (VEGA) that aims to streamline and enhance many of the regulatory, informational and financial systems to encourage domestic and foreign investment in the southern agricultural regions of Mbeya, Morogoro, and Iringa, and in Zanzibar.

ENGINE will focus at the district level, using a broad-based approach that works with district councils, private sector associations, business development service providers, financial institutions and micro, small and medium enterprises. The program’s activities are divided into three main components:

1. Implement policies for growth. Build the capacity of the private sector to effectively dialogue with the government to set the policy agenda and improve the capacity of the public sector to implement policies.
2. Equip businesses for growth. Strengthen SME capacity and foster the growth and capacity of a sustainable market for business development services (BDS) in Tanzania.
3. Access to finance for growth. Broaden access to finance for small and medium-sized enterprises (SMEs), specifically women and youth entrepreneurs and those working within agricultural value chains, to facilitate increased investment and growth.

Assignment Overview

The volunteer expert will conduct up to four workshops of 2-3 days in duration on SME loan workout and collection. Workshops locations are still TBD but will likely include Dar es Salaam and one or two regional cities.

This training will help to address identified gaps at problem loan resolution (both individual and portfolio) and present international best practices for managing loan portfolios. The volunteer expert will also address internal controls and operations related to non-performing loan management and how to coordinate workout and collections management practices between central management and field/branch staff. The workshop will include group exercises to apply concepts learned. The primary audience will be credit officers, relationship managers, collections officers, and managers within MSME lending units. The workshop may also include risk officers and other field staff responsible for administering loans and working directly with MSME clients. The volunteer expert is also expected to recommend follow-up trainings if needed.

ObjectivesParticipants in the course will come away with:

• A comprehensive understanding of how non-performing loans (NPL) impact a financial institution’s performance;
• An understanding that defining problem loans effectively facilitates identification and resolution;
• Understanding of the overall process of problem loan management, including roles of involved parties and sequence and timing of activities;
• The techniques of classifying causes of non-performing loans and developing mitigation strategies;
• The knowledge of financial analysis approaches used assess distressed companies and strategies for resolving non-performing loans;
• Skills to negotiate a loan restructuring, collateral perfection and fundamentals of bankruptcy;
• An ability to contribute to their institution’s problem loan policies and procedures.

Assignment Tasks1. U.S.-based.Prior to departure, the volunteer should coordinate with the ENGINE field team, prepare training materials, and identify any country or institution-specific information needed to tailor the materials to the local context. The volunteer is encouraged to bring any media or training materials such as manuals, journals, literature, DVD/video that will serve as good resource materials for training and for the library of the host organizations and IESC Tanzania office. 2. In-country activities/tasks.The volunteer will complete the following activities in-country:a. Attend orientation meeting with Tanzania ENGINE staff.b. Make final edits to training materials (e.g., PowerPoint presentation, handouts).c. Provide training for groups of trainees. This training should focus on being as interactive and relevant to the Tanzanian context as is feasible. During the training, the volunteer expert should plan to cover the following topics:

• Defining NPL and assessing their cost on institution’s soundness and reputation (cost and impacts of NPL, characteristics of NPL, objectives of NPL management);
• Causes of problem loans, prevention, and early detection (causes, profile of problem companies, macro level issues, early detection and warning signs, information gathering, interview and monitoring process)
• Analyzing and solving the problem loan (Analyzing problem (big picture), analysis (of management, financials, strategy), solving the problem, situation analysis)
• Loan classification and provisioning
• Developing a plan to improve the bank’s position (Preliminary considerations, stages to payout, discounting, preparing a wish list, assessing your strength and weaknesses)
• Fundamentals on loan restructuring (Collections methods, loan structuring and restructuring, purpose of workout, liquidating collateral, reviewing collateral and ensuring perfection, fundamentals of bankruptcy, resolving and/or restructuring problem loans, negotiating a loan restructuring, follow up written of loans.)
• Administrating NPL and policies and procedures (Preventing problem loans, strengthening credit administration, prioritizing tasks, consideration when developing a workout department, good bank vs bad bank case study.)

d. Provide recommendations to the ENGINE program staff on potential follow-up assignment with the hosts.e. Write a final report summarizing observations and recommendations, as well as follow-up plans. The final report is discussed in the section on deliverables below.f. Attend a debriefing session with ENGINE COP and host organization staff members to provide feedback and discuss the recommended future to follow up on volunteer recommendations and capture impact.DeliverablesEach volunteer must track their days and time spent on the assignment. Volunteers should also submit a final report to the ENGINE program, which includes the following sections:1. Training materials;2. A list of 5-7 specific and actionable recommendations for the host organization(s). These recommendations will be reviewed during the debriefing session with ENGINE staff at the end of the assignment and the volunteer may revise them in their Final Report;

1. A section listing the assignment objectives above and how they were met or why they were not met.

Volunteer Qualifications

The ideal volunteer expert is expected to have the following skills and qualifications:

• University level of education in banking, finance, economics, agricultural economics or relevant subject.
• At least 15 years of professional banking experience, with at least 10 years in credit risk management.

• Extensive knowledge of workout and collection, sound MSMEs lending knowledge, particularly for banking products and services.
• Excellent interpersonal, communication and training skills, including training in group settings.
• Flexibility and adaptability to cross-cultural environments.
• Experience working in developing countries is preferred.