Notice of Funding Opportunity (Private Sector Partnerships to Innovate Business Models) at Mercy Corps

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We invite applications for:

Title: Notice of Funding Opportunity - Private Sector Partnerships to Innovate Business Models

Ref. Code: RRA/LM/01
Locations: Adamawa, Borno, Gombe & Yobe
Subject: Notice of Funding Opportunity (NOFO)
Reference: Issued Under USAID Feed the Future/Nigeria #72062020CA00002RFA01

Background

• Through this Notice of Funding Opportunity (NOFO), the USAID-funded Feed the Future Nigeria Rural Resilience Activity (or the “Activity”) aims to identify potential partners and innovative approaches that leverage USAID resources to develop practical and market-driven solutions to implement innovative business models targeting smallholder farmers, youth, women and micro-enterprises who have been affected by the protracted conflicts in North eastern Nigeria.
• The Rural Resilience Activity is a Feed the Future initiative funded by the United States Agency for International Development (USAID), implemented by Mercy Corps in partnership with Save the Children International (SCI) and International Fertilizer Development Center (IFDC). The goal of the Rural Resilience Activity is to facilitate and protect economic recovery and growth in vulnerable, conflict-affected areas and sustainably move people out of chronic vulnerability and poverty via expanded opportunities’. This goal will be achieved through the following four major components. The Activity seeks to increase incomes, improve the livelihood and resilience of households through market-led growth in 4 States in North-Eastern Nigeria (Borno, Yobe, Adamawa and Gombe).
• Layered on the principles of broadened and inclusive growth through agricultural competitiveness; the Activity objectives of a) inclusive and sustainable agriculture-led economic growth; b) strengthened resilience among people and systems; and c) a well-nourished population, especially women and children, thereby contributing to sustainable reductions in global hunger, malnutrition and poverty.
• Through this NOFO, the Activity seeks partnerships with private sector players such as input distributors, contract buyers, agri-services providers, established farmer network, etc. with a presence or interest to permanently expand a presence in all or any of the 4 States. The private sector players should demonstrate that they are capable of operationalizing a profitable business model that benefits individuals, households and communities whose ability to secure better livelihoods has been compromised by the protracted conflict in North Eastern Nigeria (NEN). RRA understands that resilience capacities of people has been weakened, constraining economic activities in their communities.
• The Activity seeks to offer opportunities that will yield partnership to a least 60,000 smallholder farmers in the project locations as a strategy for reactivating their recovery and deepening their resiliency to the impact of conflict. These partnerships may be through distribution networks, buyer-led out grower scheme, etc.
• This partnership is expected to improve farmer’s access to quality production inputs, access to markets, access to services etc. Where possible, private sector players can leverage technology and ICT communications and payment platforms to strengthen their relationships with smallholder farmers as product customers. These relationships must be built on increased trust, transparency, and accountability, which is made possible by improved use of technology and advanced input distribution models that offer embedded services to farmers at the last mile.
• The NOFO offers interested parties the opportunity to submit grants applications for implementation. Responses to the grants application should identify how actions proposed, with the support of USAID, would promote the target farmer’s recovery from the shocks and stress induced by conflict and mutually deepen the farmers and other value chain actors’ resiliency and positioning for commercial growth and profit.
• Subject to the availability of funds, RRA intends to award 10 - 20 grants to eligible companies, as defined in Section D, up to a maximum amount of US $150,000 per award. Amounts above this value may be approved if one applicant works in more than one State. The expected duration of Rural Resilience Activity support or the period of performance is twelve (12) months. Mercy Corps, as the primary implementer of the Feed the Future/Nigeria Rural Resilience Activity, reserves the right to fund any or none of the proposals submitted.

Section A: Statement of Objectives

• The Rural Resilience Activity aims to increase smallholder household incomes and reduce poverty in North eastern Nigeria through their improved participation in inclusive agribusiness value chains and market opportunities. The Activity interventions are delivered in line with the market systems development framework placing at the center the need to unlock bottlenecks that weaken market relationships and limit inclusive profitable participation.
• The Activity seeks to improve the resilience capacities of conflict-affected households, communities, and market systems using market-led approaches layered with complementary investments in humanitarian assistance in order to contribute to economic recovery and growth.
• Working closely with public, political civil society and economic actors, seeks to broaden, and support inclusive and resilient growth through agricultural competitiveness. The Activity objectives include 1) inclusive and sustainable agriculture-led economic growth; 2) strengthened resilience among people and systems; and 3) a well-nourished population, especially women and children, thereby contributing to sustainable reductions in global hunger, malnutrition and poverty. The Activity seeks to reinforce practices that move away from dependency on non-market driven initiatives. In addition, the Activity seeks to facilitate the growth of firms that are committed to investing in inclusive agricultural business models and support services in the areas of finance and provision of agri-enterprise related interconnected services in North eastern Nigeria.
• The Activity’s vision for north eastern Nigeria is a process by which the region achieves a step-change in scale driven by competitive, inclusive and resilient growth.

Figure 1: The Market Systems Continuum:

• The Activity encourages private sector firms to adopt innovative business models that leverage technology to reduce transactional costs, improve supply chain management, and support farmers on how to use products and services. Digital platforms and record management will also support transparency and accountability under awards. The Activity anticipates that if the private sector, and rural households, farmers, and communities in NEN will subsequently adopt improved business models, increase farm productivity, expand economic options and revenues.
• The Activity approach seeks to address systemic barriers to women and youths’ participation in the inclusive markets. The Activity takes a gender-responsive approach to sustainable livelihoods development that requires that the needs and realities of both men and women are recognized and adequately addressed in the design and application of inclusive interventions. The program approach emphasizes interventions that promote equity rather than mere equality. Interventions that merely focus on gender equality without attention to the need to promote equity continue to propagate differences in the market opportunities that men and women secure. In this respect, the Activity supported interventions seek to support women’s leadership and enabling policies at the firm level, position women and youth beyond production as inclusive agents and lead farmers as well as promote inclusive marketing strategies which target marginalized groups: women, youth and communities for instance in IDPs and host communities as customers.

Problem Statement

• The collapse of northern Nigeria’s industrial base, the erosion of rural livelihoods based on agriculture, pastoralism, and fisheries, hikes in prices of commodities, the depreciation in the value of the Naira, and rising inflationary trends have all contributed to a complex and compounding risk environment and the deepening of poverty.
• These economic weaknesses have also influenced social processes which in turn have eroded social capital and social cohesion, undermined gender norms and child rights, and created power shifts between generations.
• The protracted conflict in the region brought a widespread devastation of infrastructure and socio-economic activities in the Northeast.
• The economic recovery efforts to date have been limited to small-scale livelihood activities that meet only short-term survival needs. Economic recovery has yet to tackle the rehabilitation of farmland, storage facilities, other key infrastructure, or the revitalization of markets.
• The revitalization of non-farm agriculture-related businesses is also needed to ensure input supply, aggregation, other pre- and post-harvest services, and market access.

Weak formal and formal institutions:

• Strong institutions are critical for building resilience of an economy. In a context like north eastern Nigeria, institutions play pivotal role in supporting youth and non-farm, non-agriculture-related livelihoods.
• Analysis of markets and market opportunities highlighted the importance of stronger institutions toward economic recovery. Moreover, a vision for economic transformation and inclusive prosperity for future generations is required to move the Northeast beyond the prior state of vulnerability and fragility that gave space to the current crisis.
• Formal and informal producers organisations in NEN are weak, they are poorly organised and skilled. Formal institution such as TVETs are not well capacitated to offer employable and marketable skills. Absence of strong farmer organisations constrain their access to information, extension, technology and markets easily, consistently and cheaply. The illustrative business models here may include:
  • Building institutional capacities of farmer organisations;
  • Strengthening producer groups to have their own responsibilities to improve the operation and market positions. Options for improving margins at the farm level include: higher production, reduction of (transaction) costs, reducing post-harvest losses, and better marketable quality leading to a higher-price realisation. The farmers can decide to join forces to strengthen specific activities and develop a producer organisation.
  • Strengthening informal savings groups through formation, training, establishing constitutions, etc.
  • Business models proposed by Technical and Vocational Education and Training (TVETs), Vocational centers, business incubators hubs, mentorship, and craftsmen to reduce constraints such as access to technical information, work readiness, entrepreneurship and market information, access to finance, access to market, and other constraints.

Constraints on agri-input, limited availability, and raising prices:

• The market systems assessment identified poor-performing seed system and ineffective input system as factors that constrain the performance of most crop and livestock value chains in NEN. One of the most difficult challenges for smallholder farmers is finding a reliable source of high-quality agricultural inputs, such as seed, fertilizer, farm equipment, veterinary supplies and services, and sustainable extension services.
• Access to these farm services directly results in higher quality and quantity farm production, which in turn yields higher profits and promotes increased on-farm production. However, smallholder farmers often have to travel far to get inputs, pay high prices for them and face limited choices in input availability. Illustrative business models include:
  • Building capacities of commercial seed growers and multipliers in NEN
  • Strengthening the agro-dealer network capacities,
  • Facilitating access to sustainable mechanization

Limited outreach to customers and out-growers, embedded services available to smallholders:

• Access to output market is a very pressing need in the context of North Eastern Nigeria (NEN). The Activity will build output market chain to break supply and demand bottlenecks between commercial areas and NEN.
• Strengthening linkages between larger traders; the Activity will seek opportunities create new streams of income generation (e.g., new categories of jobs) or transform the benefits accrued from an economic activity.
• It will introduce new business models or governance structures that disrupt the status quo, create structural change, drive inclusion firm-up resilience capacities. Through expanding output market options, the Activity will jumpstart and intensify the economic multiplier effects from growth in a manner that facilitates inclusive and resilience capacities objectives for households, communities and market systems. Illustrative business models include:
  • Business models that include input purchasing, collection and post-harvest processing, and selling (marketing) products.
  • Contract farming models that engage in a range of other enhanced post-harvest operations, input supply, and other activities needed to ensure that the farmer is able to produce the market-desired products at the right quality, time and price.
  • Commercial models that facilitate trade and off-taker arrangement, grain aggregation, agency network etc.
  • Buyer-driven supply chains with commercial forms of coordination and integration, and rules of participation. The main drivers are to control the supply volume, price and quality.

Limited and uncompetitive value addition and processing:

• Agro-processors operating and sourcing from NEN are high-cost producers and are characterized by high excess processing capacity (i.e., installed capacity is underutilized), with majority operating below 50 percent of the installed capacity. Value addition through nutrition-sensitive processing such as fortification of processed foods do not exist.
• Investments and growth in quality management services, trade and processing generate additional off-farm income opportunities, particularly relevant for women, youth and other internally displaced persons (IDPs) through micro-enterprise, new or better employment. Illustrative business models include:
  • Commercial models for on-farm storage and post-harvest handling.
  • Business models that scale up food fortification, preservation, conditioning and marketing of nutritious foods in NEN.
  • Commercialising of ready-to-eat therapeutic foods and higher food-quality and safety standards that can be competitive in the marketplace.
  • Strengthening supply chains for raw materials through village agent model etc.

Limited and undiversified financial and business services in NEN:

• Access to finance and business services Innovative financial and business services are vital for unlocking growth potentials and managing risk in NEN agricultural market. Access to finance, in particular credit, is a critical enabler for their growth and development. In the context of NEN, the problem is amplified by difficulty accessing loans due to high collateral and or complexity of loan conditions, especially around providing identity documents, credit scores and collateral necessary to access loans.
• During Year 2 implementation, the Activity piloted models such as agency banking, mobile money and other forms of digital finance. Early lessons show that this could enable financial services to reach large numbers of farming households and integrate them into the formal financial markets. Agency banking could, for example, offer immense benefits to the agricultural markets through easy payments, lowering transaction costs, building bankable business transactions and powering exchange even in remote markets, and offering new off-farm job opportunities. Illustrative business models include:
  • Expanding basic financial services through MFIs, Banks and financial digital platforms.
  • Creating access to financial products through the establishment of informal savings and credit groups.
  • Increasing access and use of financial services for savings, credit, and insurance by small ruminant producers, traders, and SMEs providing support services. Activities within this priority area will center around working with collectives and their members to increase their household savings and access credit and insurance as a buffer when shocks and stresses occur.
  • Increasing access to financial services for farmers, traders, aggregators, microenterprises and other ecosystem actors with a focus on access to credit and savings for producers, processors, and buyers to invest in new technologies and business models.
  • Expand access to agri-insurance services to rural farming communities in North eastern Nigeria.

Uncompetitive livestock sector in NEN:

• Livestock production in North eastern Nigeria constraints vary from area to area, and species to species. The most widely reported constraints relate to: animal health care and disease control and the limited capacity of extension services. Increasing access to animal extension, business/technical advisory services, animal health products, and veterinary products services to small ruminant producers, marketers, and other support services microenterprises through innovative models such as community animal health worker (CAHWs).
• The Activity envisions an inclusive, resilient and competitive livestock sector in north eastern Nigeria. The market would be characterized by - improvements in productivity and expansion and development of a number of businesses engaged in and profiting from market systems (upstream and downstream of selected value chains). Illustrative business models include:
  • Strengthening access to animal extension, business/technical advisory services, animal health products, and veterinary products services to small ruminant producers, through innovative models such as community animal health worker (CAHWs) with emphasis on digital and agricultural technologies, new and existing agricultural extension materials.
  • Supporting livestock marketing, aggregation etc., and other support services through innovative models.
  • Increasing access to appropriate animal inputs particularly water, grazing land, feed, and fodder. Models should also identify intensive/semi-intensive production models eg cultivating fattening hay, silage, feed, fodder, fattening, feedlot, feed finishing, ranching models, etc.

Section B: Special Grant Requirements

• The Activity grant aims to support agri-businesses and smallholder farmers to build a sustainable opportunity to engage in exchange in goods and services. Specifically, this funding opportunity seeks to leverage networks of rural households served by private sector firms such as input distributors or buyers under out-grower schemes to:
  • Enable companies to innovate a business model that offers mutual benefit between them and the rural households in NEN.
  • Support companies to expand to strengthen aggregation, private extension, and digitized networks of farmer suppliers and customers.
  • Support companies to grow sales, leverage investments, increase their customer base, etc.
• The Activity seeks to identify 25 - 30 private sector firms that are already in the business of offering services to farmers as either input distributors, agri-services providers, financial and business services providers, traders, processors, offtakers, agri-tech providers and/or under outgrower models. Larger companies will identify the aggregators, retailers, and agents.
• The Activity seeks to reduce market distortions arising from the infusion of grant funds. Care should be taken to ensure that the structure of the promotion or discount does not negatively affect long-term market sustainability.
• The award will be directly managed by the Rural Resilience Activity with USAID support. This solicitation intends to enter into a business metric-based milestone agreement that includes interventions that fit the evaluation criteria outlined in Section D below.
• The number of partnerships available will be determined based on interest, funding available, and quality of proposals. The proposed projects are anticipated to begin by September 2021 and end on or before September 2022. However, proposals could be submitted for multi-year activities over multi-year phases, with phase 1 to cover a maximum of one year.
• The total value of each award from the Rural Resilience Activity for this solicitation is estimated to range from US$25,000 - US$150,000 with 10 to 20 partnerships anticipated. Proposals must make business sense for the partner and must demonstrate a significant impact for smallholder farmers and MSMEs.
• As the amount of an award is subject to negotiation, a negotiated award amount may or may not fall within this range. Furthermore, the Rural Resilience Activity is not obligated to issue awards/an award up to the number of funds available. Grantees may be required to cover and create leverage of minimum over the next one year of 30% of the total cost.
• Application reviews will take place in August and September 2021. All applicants will be notified of their application status at this time. Note that immediate negotiations and site visits will occur with successful applicants around September 2021. Site visits and other engagements requiring physical interactions will take into consideration relevant COVID-19 guidelines from the Federal and targeted State Governments in Nigeria. Please make sure the proposed project manager and a decision-maker will be available at that time since negotiations and site visits are required steps in the award process for selected applications.

Award Performance Management:

• The Rural Resilience Activity will work with the awardees to establish reporting and traceability requirements to track the details of all rural households/individuals doing business with the Applicant in North eastern Nigeria. It is anticipated that the Activity can reach at least 5,000 farmers, youths and women per award. The awardees will specifically be required to provide assorted monitoring and evaluation data to RRA such as:
  • # Of smallholder farmers reached through the various activity
  • # Names of beneficiaries, their locations, gender, age
  • # Type of products purchased/sold including volume and cost
• This funding opportunity is expected to generate business for the participating private sector companies enabling their recovery from Covid induced low commercial activity. This in turn is expected to position the private sector companies and the targeted households and communities to strengthen the development and implementation of their adaptive, responsive and transformative capacities to enhance resiliency. The Rural Resilience Activity will monitor various parameters to determine companies’ resiliency and adaptation to covid business environment through tracking the following against baseline data:
  • # Volume and value of inputs sold on the market
  • # Of staff employed by the companies
  • # Of embedded services provided by the companies
• Awards under this NOFO will be time-bound and monitored to keep track of the promotional and discount offers provided to farmers. Awardees will have a deadline, after which time they will be required to engage with the farmers without further discounts.

Section C: Selection Process

• Within ten (10) working days of the deadline for submitting expressions of interest, a technical review panel will convene. The Activity shall take steps to ensure that members of the review panel do not have any conflicts of interest or the appearance of such with regard to the organizations whose applicants are under review. An individual shall be considered to have the appearance of a conflict of interest if that person, or that person’s spouse, partner, child, a close friend or relative works for or is negotiating to work for, or has a financial interest (including being an unpaid member of a Board of Directors) in any organization that applied currently under the panel’s review. Members of the panel shall neither solicit nor accept gratuities, favours, or anything of monetary value from parties to the awards.
• The status of the EOIs received, whether accepted or rejected, shall be communicated to all applicants within thirty (30) days. All Applications that meet the NOFO requirements will be reviewed by the review panel.

Eligibility

• For this Call for Applications, the Rural Resilience Activity (RRA) is interested in partnering with: for-profit private sector companies foreign organizations (referred to as non-U.S. NGOs): either non-profit or for-profit organizations that meet the definition in 2 CFR 200.47 can apply as part of a consortium. However, the lead applicant must be legally registered in Nigeria.
• Applicants must have a DUNS number (a nine-digit identification number required for all procurement- related activities). A DUNS number is not required for application, but will be required for receipt of award.
• Social enterprises such as community-based organizations with commercial business models. Applicants must be Nigerian licensed and legal private input companies, business organizations/associations/cooperatives working in Nigeria.
• Individual consultants will not be considered for this NOFO. Previous or ongoing work with the Rural Resilience Activity does NOT preclude applicants from participating. Current partners encouraged to apply.

Section D: Evaluation Criteria
Upon submission, the RRA Team will evaluate all Concept Note applications using the following criteria:

• Business Case: Applicants will be evaluated on how the proposed partnership will meet business goals and objectives while engaging and supporting smallholder farmers. Applicants should introduce the proposed product or service and present a clear business case for it. Applicants should explain how the proposed activity complements and aligns with Rural Resilience Activity Objectives.
• Commercial viability where applicable: Applicants will be evaluated on the potential for growth of the product or service in the smallholder market. The market opportunity should be explained, including any market constraints faced by the business. Confirmation of long-term commitment to engaging smallholder farmers in business operations should be provided. Applicants will be evaluated on how the product or services will continue to scale post-funding. Applicants should provide a five-year projection of revenue, costs, and net income.
• Smallholder beneficiaries Impact: Applicants will be evaluated on the perceived level of impact on smallholder farmers and microenterprises especially women and youth. Applicants must indicate the number of smallholder farmers and microenterprises they intend to reach and how the partnership will expand market opportunities, improve nutrition, strengthen resilience and increase incomes for these groups. For this funding opportunity, smallholders are defined as farmers who cultivate less than five hectares and micro enterprises are defined as businesses that employ 1-9 employees including the business owner.
• Organizational Capacity: Applicants will be evaluated on business and management qualifications in regards to scaling products or services that target smallholder farmers and microenterprises. Applicants should articulate the organization’s experience (track record) operating in smallholder markets, identify any potential capacity gaps in systems or management, and provide solutions for filling those gaps.
• Instructions: Number of points in the following table should be tailored to each project. Cost is a determining factor though this criterion should be weighted less than the other five.

Evaluation Criteria & Points

Business Case (40):

• Applicants will be evaluated on how the proposed partnership will meet business goals and objectives while engaging and supporting smallholder farmers. Applicants should introduce the proposed product or service and present a clear business case for it. Applicants should explain how the proposed activity complements and aligns with Rural Resilience Activity Objectives.

Commercial Viability where applicable (20):

• Applicants will be evaluated on the potential for growth of the product or service in the smallholder market. The market opportunity should be explained, including any market constraints faced by the business. Confirmation of long-term commitment to engaging smallholder farmers in business operations should be provided. Applicants will be evaluated on how the product or services will continue to scale post-funding. Applicants should provide a five-year projection of revenue, costs, and net income.

Smallholder beneficiaries Impact (25):

• Applicants will be evaluated on the perceived level of impact on smallholder farmers and microenterprises especially women and youth. Applicants must indicate the number of smallholder farmers and microenterprises they intend to reach and how the partnership will expand market opportunities, improve nutrition, strengthen resilience and increase incomes for these groups. For this funding opportunity, smallholders are defined as farmers who cultivate less than five hectares and micro enterprises are defined as businesses that employ 1-9 employees including the business owner.

Organizational Capacity (15):

• Organizational Capacity: Applicants will be evaluated on business and management qualifications in regards to scaling products or services that target smallholder farmers and microenterprises. Applicants should articulate the organization’s experience (track record) operating in smallholder markets, identify any potential capacity gaps in systems or management, and provide solutions for filling those gaps.

Total Points: 100.

Application Closing Date
27th August, 2021.

Method of Application
Interested and qualified Partners should send an email requesting interest to participate in an information meeting to: [email protected] and a meeting will be organized for applicants individually or as a group and as appropriate.

Information Meeting

• The information meeting will provide an opportunity for interested applicants to learn more about the opportunity and the process.
• Attendance at the information meeting is an optional requirement by applicants.

Important Information and Notice

• Award will be made to the responsible applicant(s) whose application(s) offers the best value for money.
• Issuance of this NOFO does not constitute an award commitment on the part of the Rural Resilience Activity, nor does it commit the Activity to pay for costs incurred in the preparation and submission of an application. Applications are submitted at the risk of the applicant. All preparation and submission costs are at the applicant's expense.
• Any questions concerning this NOFO should be submitted in writing not later than ten (10) days prior to the closing date shown above to: [email protected]  Applicants should retain for their records one copy of all enclosures which accompany their application.
• Thank you for your interest in Feed the Future/Nigeria Rural Resilience Activity activities.