Terms of Reference Bangladesh Financial Sector and Regulations Specialist (34 views)

A. BACKGROUND

ABOUT IFC

IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. IFC’s vision is that people should have the opportunity to escape poverty and improve their lives by engaging in economic activity. To achieve this goal, IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides advisory services to businesses and governments. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. For more information, visit www.ifc.org.

The IFC 3.0 strategy aims to stimulate more investment activity across emerging markets, especially in Low Income Countries (LICs) and Fragile and Conflict affected States (FCS). Our goal is to create, deepen, and expand markets and design and develop impactful investment projects.

PROJECT Background

Bangladesh, with an estimated population of 173 million, is one of the most densely populated country in South Asia. Population growth is skewed towards urban areas; urban population has doubled in less than 2 decades, (from 31 million in year 2000 to 63 million in 2019), and currently comprises almost 40.9 percent of the total population of the country. A significant increase of rural to urban migration coupled with the rising threats of climate change along the coastal belt is putting pressure on the housing situation in urban areas, resulting in growing informal housing, overcrowding and creation of slums. Half of the Bangladesh population are estimated to live in urban areas by 2030. Bangladesh needs to provide adequate housing at a pace fast enough to meet this growing demand, particularly in urban areas.

Affordable Housing – The Gap in Housing Sector

According to an assessment of the housing sector undertaken by IFC, approximately 11.9 million urban households (69 percent) reside in informal or inappropriate housing unit sizes; more than half the urban population resides in rented premises, with an aspiration to shift to larger and owned units. Existing demand for affordable housing from middle and lower middle-income households (Type A and B households) is 6 million units . By 2030, this demand is estimated to increase to 10.5 million housing units. Hence on average, 249,000 housing units will be required annually to meet the growing demand. In contrast, the total housing supply was 31,500 units (2019), out of which 17,000 were provided by the private sector developers – 93% supply gap. To meet the growing demand for affordable housing, home loans worth USD 2.52 billion will have to be disbursed annually. The estimated existing commercially viable financing requirement for 3.5 million affordable housing units is USD 58.8 billion or BDT 4.9 trillion.

Key Challenges for Sector Development

a. Government’s lack of vision: Despite the large market gap, urban affordable housing has not been at the forefront of Government’s development plan. Moreover, despite Government’s attempt to catalyze private sector climate investment for lending to enterprises that invest in green technologies, there are no incentives or guidelines for affordable or green affordable housing. Housing is not a separate “industry” or a “priority sector”.

b. Supply: Delivery of housing units is limited by:

  • Availability of land in urban areas and rapidly increasing land prices.
  • Land ownership and transparency of records.
  • Non-conducive enabling environment for developers and poor regulatory delivery i.e. issuing “land use clearance” certificates—registration and approval can take up to six months.
  • Lack of demand for smaller units, including in peripheral areas. Limited success of small unit projects due to connectivity and infrastructure issues.
  • Rapidly increasing prices of construction materials.

c. Demand: Affordable housing finance is limited by:

  • Non-availability of long-term deposits, refinance schemes and capital market instruments to enable FIs to offer long term housing loans.
  • Non-existent foreclosure practices, misleading property valuation and complex legal procedures; low prices of houses at auction.
  • More than 50% of the potential borrowers work in the informal sector; they have no proof of income or savings to contribute equity portion of 30% as required by FIs.
  • Restrictive regulations on banks and NBFIs – with caps on housing finance portfolio of 10%, debt-equity ratio, and foreign borrowings to fund housing portfolio.

Affordable housing and green and resilient housing sector development in Bangladesh is a priority for IFC. Over the past two years, IFC implemented a series of thematic Affordable Housing Roundtables to sensitize the Government and the private sector on large market gap and potential in this sector. Upon conclusion of the Housing Roundtables, an Affordable Housing Sector Development Roadmap was presented by IFC (derived from the recommendations at each Roundtable), which was mutually concurred by all stakeholders. IFC is now implementing a project to improve the enabling environment for the development of a thriving affordable housing sector in Bangladesh by supporting the core regulatory bodies to establish key conditions (for FIs and building developers) that underpin the creation of an affordable housing sector in the country.

  • OBJECTIVES/PURPOSE OF ASSIGNMENT

The purpose of this assignment is to provide modifications/amendments/ improvement to Prudential Regulations of the Bangladesh Bank to support offering of Affordable Housing Finance and Green and Resilient Housing/Affordable Housing Finance by Banks and NBFIs in Bangladesh.   

This exercise would enable IFC to present views and recommendations as well as international best practices to the Bangladesh Affordable Housing and Green Housing Working Committee to implement policy reforms.

  • SCOPE OF WORK AND DELIVERABLES

Based on the best practice experiences of similar economies, Prudential Regulations for affordable housing finance and green and resilient affordable housing finance would be reviewed and thereafter revised or formulated.

a. Most specifically, regulatory framework in respect of the following would be reviewed: 

  • Inclusion of “Affordable Housing” and “Green and Resilient Affordable Housing” (subject to the amendment and inclusion of green and resilient housing in the Bangladesh National Building Code by the MoHPW) as a Priority Sector for the financial sector.
  • Review and consolidate existing Housing Finance Regulations, Policy Framework, Regulators’ Guidelines prevailing in other regional countries in Asia to draw comparisons, and identify best practices, which can be adapted/replicated to derive Housing Finance Regulations for the Bangladesh market. IFC Global Industry Team would provide support in consolidating experiences from other countries, where IFC has similar experience.
  • Regulations for home-buyers i.e. Debt-equity ratio, minimum monthly income requirement, individual per party financing limits (maximum loan size), collateral/security requirements, reserve allocations to include women-headed households and women home-buyers, etc.
  • Regulations for financing for housing developers.
  • Total exposure of FI and NBFIs in housing finance.
  • Adjusted risk weighting on green housing loans.
  • Pricing policy on affordable housing and green affordable housing loans for home-buyers and developers.
  • Long-term borrowing by NBFIs and banks from DFIs for housing, affordable housing and green affordable housing. Currently, “housing” is clubbed under ‘real estate’ for NBFIs, and “consumer loans” for banks. NBFIs are permitted to borrow foreign loans with prior approval of the BB to raise Taka loans thereagainst from local banks and use the proceeds for lending to manufacturing and infrastructure sectors (other than real-estate) but not in “housing” as it is not defined as an independent sector. Although BB has no restriction for NBFIs to issue local currency housing bonds, these can only be subscribed by domestic investors and require dual approval process i.e. approval from Bangladesh Securities and Exchange Commission (BSEC) and BB. The process for issuing local currency social bonds for affordable housing needs to be reviewed for simplification for banks and NBFIs.
  • Incentives for banks and NBFIs to extend affordable housing loans and green and resilient affordable housing loans for home-buyers and builders/developers.
  • Any other relevant clause of the existing Regulations and Guidelines.
  • Conduct a stakeholder consultative session (Government, Regulators, Developers, Financiers, etc.) to share and deliberate on the appropriate Policy Framework, Regulations, and Guidelines for Bangladesh.

b. Consolidate feedback and comments from secondary research review and stakeholders’ consultation to formulate the recommendations for “Affordable Housing Finance Regulations” and “Green and Resilient Housing/Affordable Housing Finance Regulations/Guidelines” for Bangladesh.

c. Coordinate with the Ministry of Housing and Public Works (MoHPW), Ministry of Finance (MoF), and Prime Minister’s Office (PMO) as required, to finalize and present recommendations to the Bangladesh Affordable Housing and Green Housing Working Committee and to announce “Housing/Affordable Housing” as a “Priority Sector” in Bangladesh.

PROJECT DELIVERABLES

a. A detailed Pitch Deck on the assessment undertaken and comments/feedback taken from stakeholder consultative session to draw recommendations for “Affordable Housing Finance Regulations” and “Green and Resilient Housing/Affordable Housing Finance Regulations” for Bangladesh, and inclusion of “Housing/Affordable Housing” as a “Priority Sector” for the Bangladesh Bank.

b. Presentation of the report (PPTX format of the report) to the IFC team and other stakeholders at the Bangladesh Affordable Housing and Green Housing Working Committee Meeting. The format of the PPTX would also be pre-agreed with the IFC Team.

  • PROPOSED ASSIGNMENT TIMELINE

The assessment is expected to be initiated by in July 2024 and must be completed within 45 days from the date of the award of the contract, which will be considered as the start date of the assignment for all reporting purposes.

  • DELIVERABLES AND TIMELINES

The consultant will work closely with the task team to carry out all activities and periodically inform the task team. The consultant will deliver the following:

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Deliverables

Timeline

1

Partial Pitch Deck covering requirements mentioned in C – a above.

25 days from the start of the contract

2

Organize and hold Stakeholders Consultative Session

By 30th day from the start of the
contract

3

Submission of Draft Pitch Deck

By 35th day from the start of the
contract

4

Submission of Final Pitch Deck

By 45th day from the start of the
contract

5

Presentation of findings to the Working Committee (dissemination of PPTX of key findings and Recommendations)

As required

Upon completion of the project, all source materials must be delivered to the IFC, and will become the property of IFC. IFC will continue to hold copyright to the developed materials. The consultant should ensure that all materials provided by the IFC are returned and/or destroyed per the direction of IFC.

IFC will remunerate the consultant upon successful negotiation of the costs and pricing, and the subsequent delivery of Scope of Work items. Payment will be made in installments as per deliverable dates, pending acceptance and approval by IFC of satisfactory completion of assignments and receipt of appropriate invoices.

  • SPECIFIC ELIGIBILITY CRITERIA

This assignment is intended for a Senior Consultant (part of a Firm or individual), a Bangladeshi national based in Bangladesh.

  • University degree in Finance, Business Administration, Economics or equivalent.
  • Have strong reputable local experience (at least 15 years) and solid track record in financial/banking sector in Bangladesh. Experience of working on housing finance portfolio in a bank/NBFI would be preferred.
  • Experience, knowledge and understanding of the financial sector regulatory environment and regulatory authorities in the country.
  • Demonstrated track record of working with senior private sector stakeholders and regulators within financial sectors in Bangladesh on policy and regulatory reforms would be preferred.
  • Experience of undertaking similar/relevant assignments in the country, region or globally.
  • Strong verbal and written communications skills in English and Bengali.
  • LANGUAGE

The final report shall be in English. The PPTX shall be in English.

  • REPORTING

The consultant will closely coordinate with IFC. The consultant will share regular progress updates and submit the relevant reports and project documentation to the Project Leads. The Consultant is solely responsible for the quality and timely completion of all tasks and deliverables.

  • ARRANGEMENT

All logistics, scheduling and other support must be arranged by the consultant. The Stakeholder Consultative Session would be organized by IFC’ Project Team and would be moderated and driven by the Consultant.

  • CONFIDENTIALITY STATEMENT

All data and information received from IFC for the purpose of this assignment are to be treated confidentially and are only to be used in connection with the execution of these Terms of Reference. All intellectual property rights arising from the execution of these Terms of Reference are assigned to IFC. The contents of written materials obtained and used in this assignment may not be disclosed to any third parties without the expressed advance written authorization of the IFC. 

  • Duration of the Assignment

The contract is for 25 (Twenty-Five) billable days from July 2024 to September 2024 and is subject to renewal based on availability of funds and business need.