Background

UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. UNCDF is supporting an expanding portfolio of programmes that provide capital resources to local governments to enable them to meet the challenges of poverty reduction, climate change, and meeting the Sustainable Development Goals.

UNCDF programmes focus on local public financial management and decentralized governance as responses to these challenges. UNCDF's Asia-Pacific Regional Office covers the following programming countries: Bangladesh, Bhutan, Cambodia, East Timor, Lao PDR, Nepal, Solomon Islands and other Pacific Islands. In Africa, UNCDF is currently active in the following countries: Senegal, Guinea, Sierra Leone, Liberia, Cote d'Ivoire, Ghana, Togo, Benin, Mali, Burkina Faso, Niger, Chad, Cameroon, the Central African Republic, the Democratic Republic of Congo, South Sudan, Ethiopia, Somalia, Uganda, Rwanda, Burundi, Tanzania, Malawi, the Comoros Islands, Mozambique, Madagascar and Lesotho.

UNCDF's work focuses on enhancing good governance and service delivery at the local level, and access to a wide range of affordable financial services. UNCDF builds on its mandate and capacity to provide a mix of capital grants, credits and guarantees, and capacity-building services to important public and private sector actors, while looking to catalyze additional capital flows from development partners, national governments and the private sector.

The Municipal Investment Finance Initiative. The Municipal Investment Finance (MIF) Initiative was introduced in the context of UNCDF’s Strategic Development Plan and as part of a new generation of projects in accordance with the capital mandate of UNCDF. The MIF approach is focused on establishing country level frameworks for municipal finance and sustainable funding mechanisms, such as investment funds and market borrowing, which would increase capital investment flows for priority investment needs of sub-national governments, whether medium-sized towns or metropolitan cities. A range of instruments for raising capital investment finance are being considered, including debt financing through municipal loans and bonds and the provision of credit enhancements. The goal is to facilitate access to domestic private capital and to increase the options available to subnational governments for investment purposes.

MIF goes beyond the delivery of grants to link domestic private capital with local public sector development needs, thereby strengthening domestic capital markets and regulatory frameworks, facilitating sustainable development, and enabling municipalities and cities to carry out their mandated functions.

The Bangladesh Municipal Investment Finance project. The Bangladesh Municipal Investment Finance (BMIF) project is designed to help establish a new source of financing for urban local bodies (ULBs) in Bangladesh for environmental improvement, energy, and climate resilience at the sub-national level.

Bangladesh's elected Pourashavas (city councils) receive income from local taxation and fees and from fiscal transfers. Most urban infrastructure is financed through grants from the Annual Development Programme (ADP) allocated to ULB projects, and managed by central government agencies. A small amount of debt financing is also available from the Bangladesh Municipal Development Fund (BMDF).

Even though the demand for investment financing far exceeds what can be provided from these two sources, there is currently no avenue for local governments to access private financing. While Bangladesh has emerging debt and stock markets, the fundamentals that would allow market financing of this kind to be raised are not all in place.

To address this situation, the BMIF project is intended lay the groundwork for providing market access for infrastructure financing to urban local bodies, including addressing the legal and regulatory constraints that currently prevent private market access.

The project also aims to develop a structure called "EcoBOND" to address the gap in financing for local governments. If successful, such a structure would:

• Provide an enabling environment for the private sector and individual investors to invest.
• Leverage ULB revenue sources and apply the proceeds to priority long-term urban investment needs.

Legal analysis to date. Two prior studies of the legal and policy framework for municipal borrowing in Bangladesh have been carried out to date, in an effort to identify relevant laws and regulations and to collect necessary documentation. These studies also identified a number of the key impediments to the issuance of municipal bonds or other private market financing by municipalities. The key legal instruments identified to date are:

• The Local Authorities Loans Act, 1914
• The Public Debt Act, 1944
• Local Government (City Corporations) Act, 2009
• Local Government (City Corporation) Ordinance, 2009
• Local Government (Municipality) Ordinance, 2009
• The Securities and Exchange Commission Notifications No. SEC/CMRRCD/2009-194/138/Admin/46 (October 29, 2012)
• Bank of Bangladesh circulars regarding eligibility of bonds as an investment security for banks and applicability of its capital investment regulations to them, as well as definition of statutory liquidity ratio (SLR) securities
• IDRA notifications/circulars making bonds an eligible investment for insurance companies.

This initial research, including discussions with regulatory authorities and the government, suggest that the following acts and ordinances may need to be amended by Parliament.

• The Local Authorities Loans Act, 1914, need to be revised to raise limits on the quantum of ULB loans (now BDT 2,500,000 or approximately USD30,000) and on the tenure beyond 12 months.
• Clause 2 (iv) of The Public Debt Act, 1944 needs to be amended to include municipal bonds.
• Section 91 (iv) of The Local Government (Municipality) Ordinance, 2009 may need to be changed so that debt servicing is given priority over other non-statutory payments.
• Section 3 of The Local Authorities Loans Act, 1914 needs to be revised to allow municipal bodies to create a charge on their immovable properties.
• Section 5 of The Local Authorities Loans Act, 1914 needs to be amended to allow an investor or lender to enforce the charge created using civil laws and civil courts.

Other laws may need to be amended, or a specific law may need to be approved that would supersede and/or reframe existing laws, in order to permit long-term municipal financing and public sale.

Further, a number of notifications and circulars would need to be issued by regulators to facilitate issue of municipal bonds, including:

• SEC Issue, Listing and Disclosure regulations for municipal bonds.
• Bank of Bangladesh circulars regarding eligibility of municipal bonds as an investment for banks and applicability of its capital investment regulations to them.
• IDRA notifications/circulars making municipal bonds an eligible investment for insurance companies.
• MLGRDC and Ministry of Finance to issue guidelines for municipal financial reporting.

Bangladesh Municipal Development Fund. Lastly, UNCDF has established a partnership with the Bangladesh Municipal Development Fund (BMDF) to carry out the BMIF. BMDF is a 100% Government-owned company formed under the Ministry of Finance in 1999. In 2002, it was registered under the Companies Act, 1994.

UNCDF views BMDF as a strategic partner because of its experience lending to Pourashavas, and because it may be able to serve as a market intermediary for the issuance of municipal debt.

Under its Memorandum and Articles of Association, BMDF is empowered to, among others: (i) arrange and receive loans; (ii) provide and render financial and technical assistance and advice to ULBs; and (iii) undertake training for ULBs.

Objective of the Assignment

The general objective of this consultancy is to support policy and legal reforms that will allow municipalities in Bangladesh to access market-based capital investment financing through one or more market channels. The assignment needs to focus on which act, law, rule to be changed (including specific section) in the medium term, can be a useful addition to take necessary steps such as suggesting a strategy which may include immediate to medium term steps and what change in which law can enable such change.

The specific objectives of engagement are the following:

• Identify and synthesize legal issues associated with market financing options for municipal capital investment, using research conducted to date, and additional research, as needed.
• Evaluate the options available in Bangladesh for providing market access, and recommend the option or options to utilize in the BMIF project.

Develop a plan of reforms to be undertaken to allow financing by municipalities, including preparing draft revisions to laws and/or draft laws

Duties and Responsibilities

In collaboration with the BMIF team, the Consultant will lead the effort to:

Activity 1:   Prepare synthesis of legal issues associated with market-based financing options

Using the research conducted to date as a starting point, the Consultant will present a coherence analysis of the current legal constraints on municipal borrowing, strategy for reducing these impediments and for risk management, and justification for carrying out these reforms.

1. Review legal research conducted to date.
2. Conduct additional legal research, as needed.
3. Prepare a strategy and justification for reducing legal impediments and identify corresponding risk management approaches.
4. Work with UNCDF to present the strategy to key public and private sector stakeholders and gain feedback.

Activity 2:  Evaluate the options available for providing market access

Several channels may exist for gaining market access, including but not limited to: private borrowing, issuance of bonds, or access via BMDF or another government-sponsored intermediary.

1. Develop the criteria for evaluating various means of market access (cost, efficiency, degree of legal reforms required, etc.).
2. Analyze each option and evaluate according to agreed criteria.

1. Present a recommendation on the preferred strategy for gaining market access and review with key stakeholders. (This recommendation may include both short-term and long-term options. The short-term option would be the most feasible option for carrying out a financial transaction under BMIF project (2016). The long-term option might open up additional channels of market access or improve upon the short term approach.)

1. Submit a final strategy that incorporates feedback from stakeholders.

Activity 3:  Present a plan of policy and legal reforms

The plan presented by the Consultant must cover policy, legal, and regulatory reforms needed on both the demand and supply side of the transaction, i.e. related to borrowing and lending activities, and reflect any requirements associated with the preferred option or options identified in Activity 2.

• Prepare a draft policy, legal, and regulatory reform plan, which may include both short-term and long-term phases. (The short-term phase would include the minimum reforms that would make it possible to carry out a financial transaction under BMIF project. The long-term phase might include a roadmap of other policy and legal reforms that will require additional time.)
• Assist UNCDF with reviewing the draft reform plan with key government and private sector representatives.
• Submit the final reform plan based on feedback from stakeholders.
• Identify additional technical assistance requirements to facilitate the implementation of reforms.

Deliverables

The outputs to be produced under this consultancy, to be developed in collaboration with the BMIF team, are the following:

• Deliverable 1:  Legal synthesis and strategy, including the justification for reducing legal impediments and proposed risk management approaches. Evaluation of alternative means to market access and recommendation on the preferred approach - 15 Days;
• Deliverable 2:  Draft policy, legal, and regulatory reform plan - 15 Days;
• Deliverable 3:  Final policy, legal, and regulatory reform plan, including identification of additional technical assistance - 10 Days.

Supervision and Reporting

The Consultant will work under the direct supervision of Programme Analyst, UNCDF Bangladesh, Senior Advisor for MiF, UNCDF and in collaboration with the BMIF project team and international consultants. UNCDF Bangladesh will ensure access to key government counterparts and assist consultant with identifying key private sector counterparts.

Duration of Assignment

A total of 40 working days over a period of 6 Months.  A period of two weeks should be allowed for review by stakeholders after the submission of any report or other output. Review of feedback from key stakeholders should take place in presence of the Consultant.

The assignment will be home based but intermittently the consultant may have to come to UNCDF Bangladesh office.

Competencies

• Ability to work in a collaborative manner with a diverse group of stakeholders in the design and development of policy reforms.
• Demonstrate cultural, gender, religion, race, nationality and age sensitivity and adoptability.
• Ability to conceptualize and convey strategic vision with excellent writing skills, editing, and oral communication skills in English; and in Bangla.
• Responds positively to feedback and differing points of view, consistently approaches work with a positive and constructive attitude.
• Skills in the usage of computers and office software packages (MS Word, Excel, Power point etc)
• Knowledge of legal and regulatory issues associated with capital market development in developing countries.
• Knowledge of institutional options for financing infrastructure investments in emerging markets, including municipal development funds, public development authorities, local government borrowing, public/private co-financing, etc.

Required Skills and Experience

Academic Qualifications:

• Must have Master’s Degree in Law/ Barrister or Attorney at Law.

Years of experience:

• Practicing Lawyer with at least 8 years’ experience in corporate finance both revenue-based and general obligation-type structures.
• 5 years of experience as advisor on financial transactions of private companies/ bank/financial institutions/public agencies/ and public/private partnership projects, particularly those related to energy/climate adaptation and other municipal services.

Evaluation of the Candidates:

Individual consultants will be evaluated based on the following methodology

Cumulative analysis

The candidates will be evaluated through Cumulative Analysis method. The award of the contract will be made to the individual consultant whose offer has been evaluated and determined as:

• Responsive/compliant/acceptable; and
• Having received the highest score out of a pre-determined set of weighted technical and financial criteria specific to the solicitation.

Only candidates obtaining a minimum of 49 points in the technical evaluation would be considered for Financial Evaluation.

Technical Evaluation Criteria (Total 70 marks):

• Demonstrate knowledge on Corporate Finance and related regulatory issues - 20 Marks; 
• Experience and skills in conducting legal analysis/ research in the field of financial transactions of private companies, bank/financial institutions, public agencies, and public/private partnership projects, particularly those related to energy, climate adaptation, and other municipal services - 30 Marks;
• Demonstrate excellent knowledge of corporate law - 20 Marks.

Financial Evaluation (Total 30 marks)

All technical qualified proposals will be scored out 30 based on the formula provided below. The maximum points (30) will be assigned to the lowest financial proposal. All other proposals received points according to the following formula:

p = y (µ/z)

where:

• p = points for the financial proposal being evaluated;
• y = maximum number of points for the financial proposal;
• µ = price of the lowest priced proposal;
• z = price of the proposal being evaluated.

The financial proposal shall specify a total lump sum amount, and payment terms around specific and measurable (qualitative and quantitative) deliverables (i.e. whether payments fall in installments or upon completion of the entire contract). Payments are based upon output, i.e. upon delivery of the services specified in the TOR. In order to assist the requesting unit in the comparison of financial proposals, the financial proposal will include a breakdown of this lump sum amount (including travel, per diems, and number of anticipated working days).

Financial Milestone:

• 1st Installment: 20% of the total contract amount will be paid after completion of Legal synthesis and strategym, and evaluation of alternative means to market access.
• 2nd Installment: 40% of the total contract amount will be paid after completion of Draft policy, legal, and regulatory reform plan.
• Final Installment: 40% of the total contract amount will be paid after completion of Final policy, legal, and regulatory reform plan, including identification of additional technical assistance.

Candidates are requested to submit their financial proposal using the template from the below link;

http://www.bd.undp.org/content/dam/bangladesh/docs/Jobs/Interest%20and%20Submission%20of%20Financial%20Proposal-Template%20for%20Confirmation.docx

Documents to be include when submitting the Proposals

Interested individual consultants must submit the following documents/information to demonstrate their qualifications. Please group them into one (1) single PDF document as the application only allows to upload maximum one document:

• Cover letter explaining why s/he is the most suitable candidate for the work
• Detailed methodology and conceptual framework with expected deliverables and timelines, man days required etc (max 4-5 page)
• Recent CV – Relevant Experience (max 5- 6 page)