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AfDB : Recruitment for a consulting firm for the design of a credit scoring model and pricing framework for guarantees

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Affichage: 34

Date de clôture : samedi 15 septembre 2018

CALL FOR EXPRESSIONS OF INTEREST

“RECRUITMENT FOR A CONSULTING FIRM FOR THE DESIGN OF A CREDIT SCORING MODEL

AND PRICING FRAMEWORK FOR GUARANTEES”

BANQUE AFRICAINE DE DEVELOPPEMENT

GROUP RISK MANAGEMENT FUNCTION (PGRF) Immeuble du Centre de commerce International d’Abidjan CCIA

Avenue Jean-Paul II

01 BP 1387, Abidjan 01

Côte d’Ivoire

TERMS OF REFERENCE

 

  1. BACKGROUND

In August 2015, the UN members approved the Addis Ababa Action Agenda to eradicate extreme poverty and achieve world-wide sustainable development by 2030. The Agenda has 17 ambitious Sustainable Development Goals (SDG), that will require increased financing moving from billions of dollars in Official Development Assistance (ODA) to trillions of dollars of investment in all kinds, including the mobilization of additional resources from the private sector.

Following the adoption in 2013 of its Ten Year Strategy (TYS) with the overarching twin objectives of inclusive growth and the transition to green growth, and in line with of the UN’s SDG, the African Development Bank (AfDB) is set on scaling up its investment commitment to Africa. And, in its 2015 TYS revision (“Scaling Up Implementation of The Ten-Year Strategy – The High 5s Agenda), the Bank focused on five priority areas namely: (1) Light-up and Power Africa, (2) Feed Africa, (3) Industrialize Africa, (4) Integrate Africa and (5) Improve the quality of life for the African People.

Guarantee products were identified as one of the core financial instruments that the Bank would employ, in order to leverage its own resources and help in attracting additional resources from the private sector for the financing of socioeconomic development of its Regional Member Countries (RMCs).

It is within this context that the Bank has undertaken to review and improve its guarantee framework with the objective to mainstream the use of guarantee instruments across the organization operations.

 

  1. SCOPE OF WORK AND KEY OBJECTIVES OF THE ASSIGNMENT
  1. 1. The Scope of Work and Expected Deliverables:

The objective of the assignment is for the Bank to reassess with a view of revising the underlying methodology applied for risk rating and the pricing of its various guarantee products for transactions of non-sovereign operations. The consulting firm will undertake a review of the existing practice within the Bank, complete a detailed benchmarking exercise (external and internal consultations), and is expected to produce a detailed report of their recommendations. The report will include the rationale for the proposed conceptualization and development of a dedicated credit-scoring model and pricing framework for guarantees. It is envisaged that the recommendations for the revised scoring and pricing models for non-sovereign guarantees should:

  • Incorporate a Composite Rating approach in the credit scoring model (taking into account, as appropriate, risk assessments of the Counterparty, underlying Borrower/Sectors, Transaction type, and Country Risks) ;
  • Provide optimal granularity for the tenors of the guarantee transactions in the pricing framework;
  • Assess the feasibility and cost/benefit of an NPV1 approach for the pricing of the guarantees (e.g. pricing of the guarantee based on the Net Present Value of the Expected future Losses/guarantee repayments). If the feasibility and cost/benefit study of an NPV approach is conclusive then the pricing framework should incorporate this approach.
  • Include as annexures detailed comments and calculations on the appropriate models, specific to the Bank and its guarantee products for the Probabilities of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD), etc.

2.2. Expected Activities

Under the guidance of the Group Risk Management Function (PGRF) and in collaboration with the Financial Sector Department (PIFD) and the Financial Technical Service Division (FIST2), the consulting firm will be required to perform the following tasks (but not limited to):

  • Evaluate the suitability of current and proposed scoring and pricing models for guarantees.
  • Prepare a conceptual framework and methodology for a Composite Rating system and pricing model for guarantees.
  • Gather and reassess all reference data to be used in the models (PDs on loans by sectors and countries, EAD, LGD)
  • Run Stress & Sensitivity Tests on each parameters of both the Composite Scoring system and pricing model for guarantees
  • Estimate cost benefits/price impact of the new Composite Scoring and Pricing Models for guarantees vs existing models
  • Benchmark the proposed Composite Scoring and pricing models to competitors
  • Provide recommendations and conclusions with respect to the proposed models validation
  • Prepare a concept document on the Composite Scoring and pricing models for guarantees
  • Prepare a document on the revised pricing policy for guarantees
  • Prepare a risk management policy for guarantees
  • Prepare a monitoring manual that shall define and monitor among others, utilizations, treatment of collaterals, claims, write-offs, recoveries…
  • Conduct ongoing discussions with Risk Officers and the other stakeholders during the course of the assignment

 

  1. THE DELIVRABLES

The expected deliverables of the assignment are:

  • An Inception Report covering the evaluation of the current and proposed new models (within 3 weeks of start date) including annexures.
  • A final Report and Presentation on the Credit Scoring Model (Composite Rating System)
  • A final Report and Presentation on the Pricing Framework for guarantees
  • A pricing policy for guarantees for Non Sovereign Operations (NSO)
  • A risk management policy and monitoring manual for guarantees for Non-Sovereign Operations (NSO)

In addition to the above, the consulting firm shall, as maybe required from time to time to perform and assist the Risk Officers in collaboration with PIFD/FIST on related ad-hoc assignments including preparation of presentations to management.

  1. DURATION OF THE ASSIGNMENT

The duration of the contract will be for a period of six (6) months.

  1. REMUNERATION FOR THE ASSIGNMENT

The Consulting firm will be paid a lump sum per month following the schedule and conditions to be negotiated with the recruiting unit, with a value of up to (6) months, within the total contract period. Field missions might be required. The Bank will cover travel costs in line with its rules and as authorized by the Bank in connection with the contract.

  1. CONFIDENTIALITY CLAUSE

The Consulting firm may not use or disclose the information received as part of his / her assignment.

  1. REQUIRED QUALIFICATIONS AND EXPERIENCE

As this is an integrated assignment, the successful consultancy firm is required to place at the Bank’s disposal a team of consultants who have considerable experience in guarantee products and related credit scoring models and pricing framework conceptualization, development, and implementation. The applicant is required to provide information on its capacity and experience to perform the required services (brochures, description of similar

assignments, experience in similar conditions, availability of appropriate skills among staff, references etc.). Prior experience in providing similar services to a Multilateral Development Bank is highly desirable.

In addition, the team of consultants will be required to have the below qualifications and experience:

  • At least a Masters’ degree in Mathematics/Economics/Finance, or a similar Quantitative discipline
  • A minimum of 10 years of relevant professional experience in financial risk modeling, econometrics, operations research, or related field
  • Good understanding of the African financial sector, instruments and landscape/context.
  • Strong knowledge and expertise in guarantee products
  • Experience in stress testing model development and model validation
  • Programming proficiency in one or more advanced statistical analysis tools.
  • Knowledge of regulatory guidance (Basel) and upcoming regulations affecting models.
  • Critical thinking, problem solving, and creativity.
  • Strong written and verbal communication skills (ability to explain complex ideas in simple, non-technical language).
  • Ability to establish and maintain effective working relationships with peers, business line managers, and colleagues across the bank.
  • Highly motivated with the ability to learn and to understand various business lines and their functions within the organization.
  • Ability to work independently as well as collaboratively within a team environment.
  • Strong organizational skills and the ability to deliver outputs in a timely manner.
  • Fluency in English or French – working knowledge of the either is an advantage.

Please e-mail the applications by September 15, 2018 to the following address:

[email protected]

Cc: [email protected]

 

 

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