Consultancy - Engagement of a Microfinance Institution (MFI) to Co-Design and Implement a Financial Empowerment Pilot for Young Entrepreneurs

Engagement of a Microfinance Institution (MFI) to Co-Design and Implement a Financial Empowerment Pilot for Young Entrepreneurs

1. Background

CAFOD Zimbabwe, in partnership with Caritas Gweru and Caritas Chinhoyi, is implementing a Financial Empowerment for Women Entrepreneurs Pilot Project aimed at increasing access to inclusive financial services for underserved young entrepreneurs operating in Zimbabwe's informal economy.

Young entrepreneurs often face significant barriers to accessing finance due to limited collateral, low financial literacy, informal business operations, short business histories, and perceived lending risk. While many possess viable enterprises and strong social networks, they remain excluded from formal financial services.

CAFOD seeks to work through an existing regulated Microfinance Institution to develop an innovative and sustainable loan product that demonstrates commercial viability while expanding financial inclusion. The pilot will test how targeted grant support can de-risk lending and enable an MFI to sustainably serve an underserved market segment.

2. Purpose of the Assignment

CAFOD invites Expressions of Interest from licensed Microfinance Institutions interested in partnering to:

• Co-design and implement an inclusive loan product for young entrepreneurs.
• Pilot innovative approaches that reduce barriers to finance for underserved clients.
• Test sustainable lending models supported through smart grant financing.
• Generate evidence on financially viable approaches to serving higher-risk informal entrepreneurs.
• Build a scalable model for responsible financial inclusion.

3. Project Objectives

The partnership seeks to:

• Increase access to affordable finance for youths operating informal businesses.
• Strengthen business resilience and enterprise growth.
• Improve financial inclusion among excluded entrepreneurs.
• Demonstrate commercially sustainable lending approaches for underserved market segments.
• Generate learning for scaling inclusive financial products.

4. Scope of Work

The selected MFI will work closely with CAFOD and Caritas Gweru and Caritas Chinhoyi to:

Product Development

• Co-design an inclusive loan product tailored to underserved young entrepreneurs.
• Develop flexible lending criteria appropriate for informal businesses.
• Design loan products that minimise reliance on traditional collateral.
• Introduce innovative risk mitigation mechanisms.

Lending Operations

• Manage client appraisal and loan approval.
• Disburse loans.
• Monitor repayments.
• Manage portfolio performance.
• Maintain appropriate KYC and regulatory compliance.
• Undertake client visits and portfolio monitoring.

Financial Sustainability

The MFI should demonstrate:

• How the revolving fund will operate.
• Sustainability beyond grant support.
• Financial projections under different pricing scenarios.
• Pathways toward reduced client costs over time.

Data and Learning

Provide regular reporting on:

• Outreach
• Portfolio performance
• Default rates
• Client progression
• Business growth
• Lessons learned

5. Expected Loan Product Characteristics

The proposed loan product should consider:

Target Market

Young entrepreneurs:

• Below 35 years
• Operating informal businesses
• Sole traders
• Minimum three months in business
• Weekly sales up to approximately USD 500
• Loan requirements up to USD 1,500
• Businesses aligned with ethical and environmentally responsible principles

Priority will be given to women entrepreneurs.

Product Features

The proposed loan product should include:

• Affordable interest rates.
• Reduced administrative fees where feasible.
• Flexible repayment schedules.
• Cash-flow based lending.
• Individual lending supported by innovative guarantee mechanisms.
• Practical KYC arrangements.
• Financial literacy integration.
• Digital repayment options where possible.

6. CAFOD's Role

CAFOD will not operate as a lender.

Instead, CAFOD will provide strategic support through:

• Client mobilisation
• Financial literacy
• Business development support
• De-risking investments
• Behaviour change interventions
• Learning and documentation
• Monitoring and evaluation
• Support to vulnerable entrepreneurs in meeting selected onboarding requirements

Risk Mitigation Measures

The selected MFI will be expected to propose practical risk mitigation measures that protect both the revolving fund and participating entrepreneurs. These may include cash-flow-based appraisal, graduated loan sizes, alternative guarantee mechanisms, financial literacy support, flexible repayment schedules, portfolio monitoring, early warning systems, responsible default management, client protection standards, and regular joint portfolio reviews with CAFOD and implementing partners. Grant funding should be used strategically to de-risk lending without undermining sound credit assessment, repayment discipline, or long-term sustainability.

7. Expected Deliverables

The selected institution will produce:

• Final co-designed loan product
• Product implementation plan
• Credit risk management framework
• Revolving fund management plan
• Financial sustainability model
• Three pricing and outreach scenarios
• Client monitoring framework
• Monthly implementation reports
• Quarterly performance reports
• Final learning report

8. Eligibility Requirements

Interested MFIs should demonstrate:

• Registration and licensing with the Reserve Bank of Zimbabwe.
• Minimum five years of lending experience.
• Experience lending to MSMEs or informal enterprises.
• Strong portfolio management systems.
• Presence in Midlands Province (or ability to operate in Gweru).
• Experience serving women and youth entrepreneurs.
• Commitment to financial inclusion.
• Sound financial management systems.
• Strong governance arrangements.

9. Evaluation Criteria

EOIs will be assessed using the following indicative criteria:

10. Required Submission

Interested MFIs should submit:

Technical Proposal

Including:

• Understanding of the assignment
• Proposed approach
• Preliminary loan product concept
• Risk management approach
• Revolving fund concept
• Sustainability strategy
• Implementation methodology

Financial Proposal

Including:

• Proposed use of CAFOD grant funding
• Budget narrative
• Operational cost assumptions
• Pricing assumptions
• Interest rate proposal and justification
• Administrative fee proposal and justification

Institutional Information

• Company profile
• Registration documents
• RBZ licence
• Audited financial statements (last two years)
• Organisational structure
• Relevant experience
• Three references

11. Indicative Partnership Principles

CAFOD is particularly interested in institutions willing to:

• Co-create rather than simply offer an existing product.
• Test innovative lending approaches.
• Reduce barriers facing excluded entrepreneurs.
• Balance commercial sustainability with social impact.
• Generate evidence for scaling inclusive finance.
• Share learning openly throughout implementation.

12. Duration

The pilot partnership is expected to run for 12 months, with an inception phase dedicated to joint product development before loan rollout.

Closing date for submissions is 15 September 2026. Send submissions to general@cafod.org.uk