MESPT-CREDIT-15-2025 – Development of a Sustainable Credit Pricing Model for MESPT 87 views0 applications

ELIGIBLE TO KENYAN REGISTERED FIRMS ONLY

Terms of Reference (ToR)

MESPT-CREDIT-15-2025 – Development of a Sustainable Credit Pricing Model for MESPT

Aligned with MESPT’s 2026–2030 Strategic Plan

1. About MESPT

Micro Enterprise Support Program Trust (MESPT) is a development organization that was established in 2002 by the government of Kenya and the European Union. In 2007 the EU bequeathed its Founder Rights and Status to DANIDA.

The main goal of the Trust is to promote economic growth, employment creation and poverty alleviation through the provision of financial services to financial intermediaries’ development of agricultural value chains and market systems which is underpinned by the principles of sustainable natural resource management (green growth) and enhancing food safety systems. MESPT has implemented its mandate through two segments; grant development & implementation and financial services. grants have largely focussed on value chain and market systems development while financial services has been geared towards the wholesale lending with a focus on creating financial inclusion in value chain development.

Key workstreams include building the capacity of value chain actors, increasing agricultural productivity and food safety, facilitation of access to markets and finance and Green Transformation. MESPT promotes the uptake of green technologies and services that contribute to a greener economy as well as advocating for an enabling environment in the food safety sub sector in Kenya. Our vision is to build a more prosperous society, while our mission is to provide sustainable business development and financial services to smallholder farmers and Agri enterprises in Kenya.

1. Introduction

Since its inception, the Micro-Enterprise Support Programme Trust (MESPT) has been a key development actor in Kenya’s agricultural and enterprise landscape. Guided by a mission to build a more prosperous society, MESPT has leveraged its dual mandate of financial and technical assistance to support smallholder farmers, agri-SMEs, and green enterprises across the country.

In its 2021–2025 Strategic Plan, MESPT set ambitious goals to deepen its development impact while strengthening institutional effectiveness. Key targets included:

• Facilitating the growth of 100 sustainable agri-enterprises and integrating over 75,000 smallholder farmers into inclusive agricultural value chains;
• Expanding its financial services portfolio from KES 1 billion to KES 4 billion, thereby increasing access to finance for underbanked segments;
• Enhancing agricultural productivity and food safety standards for smallholder producers;
• Promoting the adoption of green technologies and climate-smart practices to advance a low-carbon, resilient rural economy;
• Mainstreaming gender equality, youth inclusion, and social equity in all programming and partnerships.

As the current strategic cycle draws to a close, MESPT is preparing for its 2026–2030 Strategic Plan a forward-looking framework that places stronger emphasis on institutional sustainability and scalability, innovation, climate resilience, and financial sector alignment. The plan also reflects a maturing development finance environment in Kenya, characterized by increased regulation, heightened risk awareness, and a transition from donor-driven aid to more market-based finance mechanisms.

In this context, MESPT recognizes the need to stress-test the current model and develop a modern, data-driven, and mission-aligned credit pricing framework.

A model that enable MESPT to Achieve its sustainability and scale strategy.

This Terms of Reference (ToR) sets out the objectives, scope, deliverables, and technical requirements for engaging a qualified consultant or firm to lead the development of a comprehensive and sustainable credit pricing model for MESPT. The model will serve as a strategic tool to guide lending decisions, risk management, and long-term financial planning, and will be fully aligned with MESPT’s evolving mandate and its commitment to inclusive, green growth.

1. Background & Rationale for the Assignment

3.1 The Challenge of the current Pricing Models

MESPT’s current credit pricing framework is based on conventional, mostly fixed models that fail to adequately reflect borrower risk, differences across loan segments, industry-specific factors, or changes in cost structures and donor requirements. Given the rising demand for impact financing, economic volatility, heightened risk exposure, and MESPT’s growth strategy, this approach is no longer sufficient.

Moreover, there is a clear movement within the regulatory landscape and the broader financial sector toward Risk-Based Pricing (RBP) / KESONIA (K), with an emphasis on integrating alternative data sources to enhance risk evaluation and enable credit automation

3.2 Rationale

MESPT’s current pricing framework is static, donor-driven, and insufficiently responsive to market realities or borrower diversity. To remain relevant in Kenya’s evolving development finance landscape where inclusive green growth, climate resilience, and social equity are paramount MESPT must design a flexible, Risk based, evidence-based, and mission-aligned credit pricing strategy. Such a framework is essential to enable the organization to:

• Responsively serve marginalized and higher-risk borrower segments, including smallholder farmers SACCOS, and enterprises advancing green innovation.
• Sustain its strategic positioning and value proposition within a competitive ecosystem of development finance institutions and Wholesale loan providers.
• Maintain regulatory compliance and reflect emerging norms in responsible lending and risk management.
• Safeguard MESPT’s long-term financial health while advancing its broader mandate of social impact, environmental stewardship, and inclusive economic development.

1. Objectives of the Assignment

To transform MESPT’s credit pricing framework into a dynamic, scalable, Risk Based and data-driven model that promotes financial inclusion, aligns with international and regulatory standards, accurately reflects borrower and market risk, enhances institutional resilience through robust stress testing and credit scoring mechanisms, and builds internal capacity to sustainably manage pricing, governance, and loan performance monitoring.

Specific objectives include:

1. Develop a dynamic, scalable, and risk-based credit pricing framework that not only ensures MESPT’s financial sustainability but also maximizes development impact by promoting financial inclusion, job creation, and equitable access to capital for marginalized smallholder farmers, youth, and women-led enterprises.
2. Design a pricing model that integrates robust stress testing, macro- and microeconomic risk assessments, and regulatory compliance (Basel III/IV, IFRS, CBK/SASRA). This will enhance MESPT’s institutional resilience, align it with global Development Finance Institution (DFI) practices, and ensure long-term competitiveness.
3. Embed climate-smart, green growth, and ESG-linked incentives into the pricing model to reward intermediaries and enterprises adopting sustainable practices in agriculture, natural resource management, and clean energy.

5. Scope of Work

The consultant will undertake the following:

a) Diagnostic Review

• Analyze MESPT’s current pricing methodology, assumptions, tools, policies, Borrowers segmentation and credit performance data.
• Identify gaps and bottlenecks in governance, credit appraisal methodologies, loan monitoring, default management, market alignment and pricing structures that constrain financial inclusion

b) Benchmarking

• Benchmark inclusive wholesale-Retail lending practices against regional and global standards (Basel III/IV, IFRS 9/17, CBK/SASRA/IRA regulations), highlighting innovative practices and scalable models.
• Provide evidence-based recommendations for strengthening wholesale lender–intermediary relationships to increase outreach to underserved client segments.
• Conduct a comprehensive market survey to map lending practices of financial intermediaries (FIs) including SACCOs, MFIs, co-operatives, microfinance banks, and digital lenders that serve SMEs and smallholder farmers.

c) Incorporate ESG and Climate Incentives
Embed pricing incentives for green practices and ESG compliance to align lending with MESPT’s climate and sustainability goals.

d) Conduct Stress Testing and Scenario Analysis
Validate the model using economic and portfolio stress scenarios to assess robustness, sensitivity, and institutional risk exposure.

e) Develop Tools and Policy Guidelines
Deliver a functional pricing tool and draft a credit pricing policy outlining methodology, governance, pricing bands, and review protocols.

5. Duration of the assignment

The assignment will begin with an inception meeting at MESPT Head Office and conclude with a debriefing meeting with the Credit management team. In overall the exercise is expected to take a maximum 60days from the date of signing the contract. The breakdown is stipulated in the table below.