February 28, 2025

Shariah Review of Microfinance (Products, Services and Delivery Methodology)

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TERMS OF REFERENCE

This is a detailed Request for Proposal (RFP) from Kashf Foundation, seeking a consultant to help them transition to Shariah-compliant microfinance services. Kashf Foundation is a non-banking MF company regulated by the SECP and registered as a Not-for-Profit entity under section 42 of the Companies Act 2017. Recently, the Parliament of Pakistan has passed a constitutional amendment 26, through which it has been notified that all future banking business in Pakistan shall be based on the principles of Shariah starting from January 1, 2028.

Here’s a breakdown of the key aspects:

Project Objective

Kashf Foundation aims to undertake a diagnostic assessment of its existing microfinance services and develop a Shariah-compliant strategy, covering products, services, procedures, policies, systems, and regulatory requirements.

Scope of Work

The consultant will perform the following tasks:

Phase One

  1. Diagnostic Assessment: Review existing business structure, operations, processes, policies, and regulatory framework to identify gaps between the current system and Shariah compliance requirements.
  2. Branch Level Operations: Collaborate with Kashf team to review and update branch-level policies, manuals, products, and systems to ensure Shariah compliance.
  3. Product Level Redesign: Review products and propose alternative Shariah compliant options for all products (loans, insurance etc). Product redesigning and retro-fitting will be one of the key aspects of this phase which will include both the review of product features, policies and product level manuals.
  4. Branch Level Plan: The consultant will develop and a present a branch level operationalization plan and will ensure the full conversion of five branches to the new Shariah compliant processes, procedures, policies and products, while undertaking regular audits and reviews to ensure that policies are effectively put into practice

Phase Two

  1. Update organizational manuals, policies, and systems, including developing a Shariah Compliance Manual, Shariah Audit Manual, and Charity Policy Manual.
  2. This phase will also involve looking at an institutional Shariah transformation plan, which will include the incorporation of all regulatory and corporate governance requirements. The consultants will develop a detailed step wise plan for the conversion or transformation with clear timelines and steps. The plan shall be clear in all aspects including the regulatory approvals required, if any.
  3. Shariah Compliance Certificate: Assist in obtaining the certificate of Shariah compliance entity from SECP.
  4. Monitoring, Evaluation, and Post-Conversion Technical Services: Provide ongoing support to ensure Shariah compliance.

Key Requirements

  1. Team Composition: Propose team members with relevant experience and expertise.
  2. Timeline: Provide a detailed timeline for each activity.
  3. Financial Proposal: Include a comprehensive financial proposal.

Evaluation Criteria

The proposal will be evaluated based on:

  1. Technical Proposal: Approach, methodology, and understanding of the project scope.
  2. Team Experience: Relevant experience and expertise of proposed team members.
  3. Financial Proposal: Reasonableness and competitiveness of the proposed costs.

Submission Guidelines

Proposals should be submitted in the required format, including all necessary details and supporting documents.

If you’re planning to respond to this RFP, ensure you carefully review the requirements and provide a comprehensive proposal that addresses all aspects of the project.

Important Caveat: Furthermore, it must be highlighted that the proposal should be aligned with the key fundamentals of microfinance. Furthermore, while making the proposals, the consultant must keep in mind the affordability and the efficiency factors and not propose solutions that would unnecessarily add to the costs of operations or the delivery of services to the poor.  In other words, applying a commercial banking lens will not be the best approach to design and develop Shariah compliance policies, procedures or products for low income communities.  There is need for ensuring that the consultant comes with the ability to first fully understand the needs, requirements and principles of MF and then build within this very concept the notion and requirements of Shariah compliance.