AMAD Matching Grants ProgramRequest for Applications (PI Process)

Issuing Date: [30.06.2021]

Anticipated Closing Date: [30.09.2021]

Round No.#: [1]

Location: [Kabul, Afghanistan]

Subject: Request for Applications (RFA)

Dear Applicant,

AMAD strives to provide critical assistance to small and medium enterprises (SMEs) in Afghanistan to improve their productivity and competitiveness especially in the context of problems caused by the COVID Pandemic, and to enhance their ability to access formal finance.

AMAD is financed by Kreditanstalt für Wiederaufbau (KFW), the German State Development Bank, under the Corona Emergency Relief Program (CERG). Under this program, AMAD will support SMEs with fixed and working capital needed for COVID-19-related adaptation.

The matching grants are focused on projects supporting private businesses. As a grant precondition, grantees must provide a matching contribution of 40% of the project value. The matching contribution can be provided from own sources or through a bank loan.

Matching Grants will be distributed via AMAD’s offices in Kabul. All grants will be awarded and executed in accordance with applicable regulations, Afghan laws and AMAD program’s policies and procedures.

This RFA consists of this cover letter and the following attachments:

1. Objectives of the Program2. Eligibility Criteria3. Application Process 4. Award & Grant Implementation5. Submission Guidelines6. Modifications to Application Guidelines7. Contact

Thank you for your interest!

AMAD team

1. Rationale and Objectives of the Grant Scheme

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The rationale for providing Government grants to private firms through the CERG program and others is to incentivize investment, production and employment in small and medium enterprises (SMEs) that would otherwise have difficulty in accessing finance. That difficulty arises because SMEs may be seen as risky by financial institutions or investors. The developmental benefits include: alleviation of Covid-related market disruptions (e.g. shortage of supplies); improvement in international competitiveness; innovative activities (e.g. new markets, products, processes); creation of jobs in critical sectors; or support to women owners.

2. Eligibility CriteriaApplicant Eligibility

# ELIGIBILITY CRITERIA1 SMEs that are active in one of the following priority sectors:

a. Food production;b. Manufacturing and exports;c. Health services – private clinics, hospitals, labs, pharmacies;d. Educational services – private schools, universities;e. Services sectors

ORSMEs that:

a. Have been severely affected by the crisis (their sales decreased by min. 50% due to Covid-19); andb. Show a strong ability to preserve employment, i.e.

A. Have min. 50 employees andB. Show the ability to maintain min. 75% of this staff

2 Locally owned1 private SME with transparent ownership.2

3 Valid registration and tax transparency,3 formally registered latest by end December 2019.4 valid sector specific permits (where applicable)

4 Located in Kabul, Afghanistan5 Has at least 5 employees including the business owner who are working in the business full time (40 hours/week,

above 227 days/year) at the time of application or as of February 29, 20206 Does not operate in sectors or activities under Project’s exclusion list.7 Does not have a negative credit record in the public credit registry.8 Commits to maintain a minimum level of business, financial, and technical records, either manually or electronically.9 Commits in writing to adhere to high ethical business standards, including transparency in business dealings.5

10 Accepts all obligations in regards to the provision of information and evidence to successfully complete the Know-Your-Customer (KYC) process (before grant disbursement and on an ongoing basis thereafter during implementation.

11 Should not have received any grants from Government or donor sources in 2020 or 202112 If a borrower from one of partnering institutions (PIs), has a good track record (max 30 days past due in any

instalment in the 12 months preceding March 2020).

Project Eligibility

NO ELIGIBILITY CRITERIA

1 Locally owned means above 50% direct ownership.2 Applicant to provide breakdown of ownership with names and addresses of major shareholders.3 E.g. at least have a valid municipality license or MOIC registration, MOIC/municipality tax ID number.4 Was in existence by December 2019 and registered at that time5 Letter of commitment to be provided to applicant by AMAD for signature.

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1 Project concept must support ‘additional’ production or services: innovative6; creating new business linkages; not easily implementable without the grant, or with the overall objective of mitigating the impact of COVID-19.

2 Must be consistent with AMAD’s environmental and social commitment plan (ESCP)3 Must be in line with the grant features stipulated in this RFA.4 Should be judged as able to be completed (all funded equipment, supplies and services fully delivered on site and

installed where appropriate) within 9 months from receipt of award.5 Firm must commit to meet the required matching contribution in cash through own funds (e.g. equity, family

funds) or outside market funds (e.g., bank loan).

Eligible Expenditures

Eligible expenditures for grant utilization are project-related purchases of goods and services (incl. second-hand equipment). Expenditures done before the signing of the Grant Agreement won’t be reimbursed. All goods and services covered by the grant or by matching contribution must be project-related and adhere to the agreed budget. Verification of invoices and payments will be done to ensure that the actual cost of the items corresponds to the budget. The below table provides few examples:

ELIGIBLE EXPENDITURE

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2.

Longer Term Investments- Site improvement, Civil works, Buildings 7

- Production plant, equipment and tools- Equipment installation, testing, commissioning;- Upgrading, retooling of production lines

Purchase of and/or training in:- New business systems: accounting, ICT, quality control, digitization.- Design, quality, testing services- Marketing/research, distribution, promotion- Certifications/licensing (incl. ISO or OHSAS)- Environmental/Social Management (and Monitoring) Plans, and Impact Assessments.

Short-term investments - material inventories required to avoid critical supply shortages due to COVID - critical expenses necessary to support business continuity during pandemic (maximum of six months). - periodic maintenance services for machinery, equipment, ICT, inaccessible during pandemic.

Ineligible Expenditures

Existing assets not subject to upgrading or improvement as part of the project are not acceptable for the grant funding because the grant requires a new investment (i.e. undertaken after Grant Agreement).

INELIGIBLE EXPENDITURES

Facilities, Goods and Services

6 Innovative in this context means implementation of new processes, products and services, as well as developing new markets. This innovation can happen either on firm, regional or national level.7 Expenditures for site, buildings and civil works are only acceptable as grant related expenditures if they are clearly dedicated to the project and are critical inputs to the project.

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1. Contents of Project Exclusions List (see Annex 1).2. Other ineligible expenditures could, inter alia, include (examples below):

o Purchase of land (ineligible for the grant portion only) 8

o Purchase of multipurpose buildings (ineligible for the grant portion only)o Assets that are open to regular resale such as passenger vehicles (ineligible for the grant portion only) -

subject to potential misappropriation, non-project use, or not considered to justify public fundingo Equipment and services for military, surveillance equipment, police, law enforcemento Luxury goods, gambling equipment, gifts, gratuities, donationso Weather modification equipment (ineligible for the grant portion only)o Politically related expenditures such as contribution to campaigns for public office or lobbying public

entities.

Business operations support1. Regular /non-project related costs (i.e. labour, operating input)2. Expenditures and provisions for possible future losses or existing debts9

3. Entertainment representation4. Fines or penalties

Grant Project Budgets

Project budgets must define all necessary expenditures under the grant project and will comprise the grant amount and the matching contribution (loan or grantee’s own funds). Matching loans are issued by the Partner Institutions (PIs) to new or repeat borrowers.

Project Value Grant Amount Matching contribution Total funds availableGeneral grant CERG Min USD 10,000

No maxMin USD 6,000Max USD 30,000 for business with 6-100 employeesMax USD 100,000 for business with +100 employees

Min 40% of project valueNo maximum

USD 3,3 million

3. Application Process There are two types of grant origination process:

1. SME applies to AMAD for a grant and disposes of required matching contribution through own capital or equity.

2. SME applies to AMAD for a grant and in parallel for a loan with a bank (a Partner Institution, PI).

In the first scenario AMAD is responsible to perform the full assessment of the applicant. For overview on the process steps, please see Annex 2.

In the second option, AMAD relies on PIs’ initial eligibility screening, and information regarding assessment of the concept note, grant application, environmental and social risk assessment and customer due diligence. All data provided by the PI is verified by AMAD. For process overview see Annex 3.

8 The reason for non-eligibility of land (whether already owned or purchased) or multipurpose buildings is because they are a readily marketable, non-risk asset, which do not necessarily have any specific link to the project. However, expenditures on specific land improvements involving e.g. effluent treatment, irrigation systems, flood control, terracing, and others, may be acceptable on a case by case basis.9 Limited operating losses incurred at the initial stage of business recovery can be accepted for a maximum period of 3 months on an exceptional basis,

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In both scenarios, grant decisions are solely made by AMAD, which assumes full responsibility for the grant implementation, including disbursements, monitoring, and reporting.

Time Required

The application process has two stages: Stage One (Concept Note) outlines the cornerstones of the intended investment project and serves to assess eligibility. Stage Two (Application) compiles all relevant details of the project including financial analysis and impact.

The time needed for reaching a grant decision depends on project complexity, level of preparation, and data available. The processing time from concept note submission to final grant decision is likely to be one month or more.

Submission of Concept Notes

SMEs register their interest on AMAD’s website (www.amad.af) or via e-mail: grants@amad.af or by calling: +93791 611 526/+93791 611 527, providing basic business information, necessary for eligibility check. Eligible applicants will be supported in preparing the required documentation on the intended project (Concept Note, estimating matching (non-grant) financing needs and – if needed – are guided on how to apply for a loan with a bank. If an SME applies directly for a loan, the PI staff support its Concept note preparation.

Preparation and Submission of Grant Application

Concept Notes submitted by applicants will be screened for eligibility on an on-going basis. In case of matching contribution in a form of a bank loan, Concept notes are generated in parallel to the loan request-related activities.

Based on positive eligibility of Concept Notes, SMEs are invited to develop a full Grant Application. This process will be supported by AMAD (either through AMAD staff of by cooperating PI staff) during mandatory field visits. Applicants may submit their Grant Applications directly during the field visit or subsequently via the AMAD channels.

Scoring & Selection

Each Applications undergoes a multi-stage scoring and selection evaluation. The scoring criteria are:

1. Quality of Project Plan: Project business rationale, project impact, project description completeness, workplan consistency, sales impact, ability to find matching contribution

2. Business Financials: Overall financial position (past and current) re. sales, profit, indebtedness3. Business Management Capacity: Overall management capacity & effectiveness, management

understanding of target market, financial management capacity, ability and commitment to execute the project, risk Management capability, value chain integration & partnerships

4. Developmental Goals: Innovativeness of project, responsiveness to COVID-19 challenges, impact on competitiveness, employment impact, impact on women economic empowerment

All pre-selected applicants undergo a second field visit for risk analysis and financial assessment, incl. environmental and social risk, upon which a second scoring determines if an applicant is pre-approved.

4. Grant Award and Implementation

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All pre-approved applicants sign a Grant Agreement setting forth the conditions and obligations for the grantee, the timeframe for grant implementation, the budget, disbursement schedule, the project milestones, verification and completion process and dispute procedures. The grant project will primarily be implemented by the Grantee while the progress and quality of the work will be monitored jointly by the Grantee and AMAD staff. In case of a matching loan granted by a PI, AMAD shares the copy of a Grant Agreement with the PI.

Number of grants

AMAD awards a maximum of one grant per SME.

Co-payments and Disbursements

The min. 40% matching contribution (co-payment) by the grantee is a condition for each grant payment. The funding of the co-payment must be either own funds (e.g. family funds) and other sources of equity funds, or by a loan from a commercial source (e.g. a banking institution/PIs) which carries market-based lending terms. The equity sources will be verified. Grants are disbursed either in full or in instalments (tranches). Each tranche will be paid as per the Grant Agreement and as defined in the Grant Project Workplan.

Grants are disbursed in USD by direct wire transfer to the grantee’s bank account. There will be no cash transactions. Grantees have to keep proper documentation of payments under project. AMAD reserves the right verify the milestone and to inspect the grantee's financial records.

In case of a loan granted by a PI, initial grant disbursements are made upon disbursement of the loan by the PI. For all subsequent disbursements, AMAD would seek evidence of good debt service (not been overdue of more than 30 days for any installment during the repayment period as per account statements of the PIs).

Reporting by and Monitoring of Grantees

All grantees provide on-going information on the progress of the grant project and on other business indicators, as specified in the Grant Project Workplan and a final report at project end. Where necessary, AMAD conducts site visits and regular check-ins with the grantee. All grantees provide comprehensive information on grant performance, business operations and actual project outcomes in the Completion Report. In case of a loan granted by a PI, PIs conduct regular loan monitoring, also E&S and CDD review as per their loan management procedures, regularly submitting all relevant documentation to AMAD.

General Implementation Responsibilities

The grantee agrees to comply with all policies, procedures, and stipulations contained therein. The grantee commits to give full cooperation to AMAD staff in the oversight of the grant.

The grantee agrees to: keep documentation of all project expenditures and if possible other key financials for three years. submit bi-annual information on project progress and grant expenditures and relevant to

environmental and social risk assessment and Customer due diligence processes.

Modification, Suspension or Termination of Matching Grants

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AMAD reserves the right to suspend or terminate a grant agreement as per the Grant Agreement.

5. Submission of Applications Grants are awarded on a rolling basis until the total funding is depleted (USD 3.3 m for general grants). AMAD will not accept Concept Notes afterwards.

The deadline for submitting a Concept Note is of 30.09.2021. Concept Notes submitted after deadline will not be reviewed.

All complete Concept Notes must be submitted electronically. Please do not zip or compress files. All Concept Notes must be in MS Word format.

In the subject line of your email, please include: CN_[Business Name]_[Province]. Please submit your Concept Notes via this email address: grants@amad.af. Grants are awarded on a rolling basis until the total funding is depleted (USD 3.3 m for general grants). AMAD will not accept Concept Notes or Grant Applications submitted afterwards.

The deadline for submitting a Concept Note is of 30.09.2021. Concept Notes submitted after deadline will not be reviewed.

All complete Concept Notes must be submitted electronically. Please do not zip or compress files. All Concept Notes and Grant Applications must be in MS Word format with accompanying budget and other calculations in the MS Excel format according to the templates provided with this document.

In the subject line, if Concept Note, please include: “CN_[Business Name]_[Province]”. If Grant Application, please include: “Application_[Business Name]_[Province]”.

Grant Applications must be accompanied by the following documentation:

a) Copy of business license b) ID Copy (Tazkira or valid passport) of Owner/Directors/Shareholders/ Partnersc) Tax identification number (TIN)/other form of tax identification documents

Where applicable, additionally the following documentation will be required:

d) Certificate of Incorporation should be updated annually, Memorandum of Association, Article of Association (where applicable)

e) Partnership Agreement (where applicable) f) Authorization by Board of directors to Chief Executive Officer or other officers for

conducting financial transactions (where applicable).g) Identification of the representative the company/business in its dealings with the

bank/financial institution.

6. Modifications to Application GuidelinesAMAD may modify these Application Guidelines as deemed necessary and publish the revised version.

7. Grievances and Complaints

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AMAD will endeavor to ensure that all grantees are satisfied with the level of service received. If not, a grantee can file their complaint with the program’s grievance redress mechanism.

This is a free and confidential service which is open to all women and men who have formally applied for and/or received matching grants. It aims to resolve complaints about the matching grants program within 2 business days. When a complaint is lodged it will be recorded and filed by the complaints officer who will inform the complainant of the next steps in the resolution of her/his complaint.

8. Contact InformationIf you need assistance, please contact AMAD’s team in Kabul. Verbal explanations will not be binding.

For application-related questions or for submission of Concept Notes, please reach us at:

Kabul:

Telephone 1: +93791 611 526

Telephone 2: +93791 611 527

E-Mail: grants@amad.af

For complaints, please contact us at:

Email: hotline@amad.af

Telephone: +93 792 423 333

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Annex 1 – AMAD E&S Exclusion List

1. Production/activities involving forms of forced labor10/ harmful child labor11.2. Activities or materials deemed illegal under host country laws or regulations or international

conventions and agreements, or subject to international phase-outs or bans, such as:- Ozone depleting substances12, PCBs (Polychlorinated Biphenyls) and other specific, hazardous

pharmaceuticals13, pesticides/herbicides or chemicals14;- Wildlife or products regulated under the Convention on International Trade in Endangered

Species or Wild Fauna and Flora (CITES); or- Unsustainable fishing methods (e.g. blast fishing, fishing using electric shocks and drift net

fishing in the marine environment using nets in excess of 2.5 km in length).3. Cross-border trade in waste and waste products, unless compliant with the Basel Convention and

the underlying regulations.4. Destruction15 of High Conservation Value areas16.5. Commercial logging operations for use in primary tropical moist forest.6. Purchase of logging equipment for use in cutting forest.7. Production/trade in wood or forestry products other than from sustainably managed forests.8. Production, trade, storage, or transport of significant volumes of hazardous chemicals, or

commercial scale usage of hazardous chemicals.9. Radioactive materials17 and unbounded asbestos fibres.10. Mining of uranium as an essential source of extraction.11. Non-conventional prospection, exploration, extraction of oil from bituminous shale, tar/oil sands.12. Prospection, exploration and mining of coal; land-based means of transport and related

infrastructure essentially used for coal; power plants, heating stations and cogeneration facilities essentially fired with coal, as well as associated stub lines

13. Pornography and/or prostitution.14. Alcohol beverages.15. Racist and/or anti-democratic media.16. Production or activities that impinge on the lands owned, or claimed under adjudication, by

indigenous peoples, without full documented consent of such peoples.17. If any of these products form a substantial part of a project’s primary financed activities18:

- Tobacco- Weapons and munitions; or

10Forced labour means all work or service, not voluntarily performed, that is extracted from an individual under threat of force or penalty as defined by ILO conventions.

11Harmful child labour means the employment of children that is economically exploitive, or is likely to be hazardous to, or to interfere with, the child's education, or to be harmful to the child's health, or physical, mental, spiritual, moral, or social development. Persons may only be employed if they are at least 14 years old, as defined in the ILO Fundamental Human Rights Conventions (Minimum Age Convention C138, Art.2), unless local legislation specifies compulsory school attendances or the minimum age for working. In such cases the higher age shall apply.

12 Ozone depleting substances such as the ones listed under the Montreal Protocol.

13 Hazardous Pharmaceutical such as the ones defined by the WHO in their list "Pharmaceuticals: Restrictions in Use and Availability"

14 Harmful pesticides and herbicides are defined under the Rotterdam Convention, Persistent Organic Pollutants are defined under the Stockholm Convention.

15Destruction means the (1) elimination or severe diminution of the integrity of an area caused by a major, long-term change in land or water use or (2) modification of a habitat in such a way that the area’s ability to maintain its role is lost.

16High Conservation Value (HCV) areas are defined as natural habitats where these values are considered to be of outstanding significance or critical importance (see http://www.hcvnetwork.org).

17This does not apply to the purchase of medical equipment, quality control (measurement) equipment or any other equipment where the radioactive source is understood to be trivial and/or adequately shielded.

18For companies, “substantial” means more than 10% of their consolidated balance sheets or earnings. For financial institutions and investment funds, “substantial” means more than 10% of their underlying portfolio.

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- Gambling, casinos, and equivalent enterprises

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Annex 2 – Summary of Process Steps with no partnering institutions /PIs/ role

Step Procedure Deliverable Documentation

1 Request for Applications Publish Application Guidelines (AG) AG

2Workshop and submission of Concept Note

SME to register for workshop (providing some basic eligibility information) SME registration on website

Outreach team to invite eligible SMEsUndertake workshop with a group of 5-7 eligible

SMEsReceive Concept Notes and Annexes on rolling

basis by specified deadline

Concept Notes

3Screening for Eligibility and Shortlisting

Finalize eligibility screening Shortlisted Concept Notes

4Collect Grant

Applications via Field Visits and BDS

Undertake field visit and selected BDSReceive detailed Application and Annexes by

specified overall deadline

Grant ApplicationField visit checklist

(including E&S Assessment Form and CDD Checklist)

5 Scoring and Selection CDD, E&S Assessment, and Credit Check (rolling basis)

E&S Assessment FormCDD Checklist

Credit Check FormScoring for pre-selection Scoring Matrix

Field visit to pre-selected applicants for risk analysis and financial assessment

Pre Award Assessment Checklist

Final selection for pre-approval

Preparation of pre-approval commitment lettersSubmission of documentation of pre-selected

candidates to AMAD

AMAD Recommendation for Pre-Approval

Application PackagesConditional Pre-Approval

Commitment letters

6 Pre-Approval Technical review and compliance check by AMADPre-approval AMAD Review Checklist

7Grant Agreement Development of Grant Agreement Draft Grant Agreement

Signature by the Grantee Signed Grant Agreement

Preparation and Verification of Grant Agreement Package Grant Agreement Package

Final Approval Signed Grant Agreement Package

Share Grant Agreement with Grantee Final Grant Agreement

8 Implementation Grantee notifies about achievement of milestone (matching contribution) Notification

Prepare disbursement request and verify achievement of milestone

Disbursement RequestDisbursement Checklist

Approval of disbursement request Approved disbursement request

AMAD disburses Grant tranches as per conditions of the Grant Agreement Payment

9 Monitoring AMAD undertakes regular grant monitoring and submits observations to AMAD Reports

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Annex 3 – Summary of Process Steps via partnering institutions /PIs/

Step

Procedure Deliverable Documentation

1 Request for

Applications

Publish Request for Applications (RFA)

Reach out to existing PI clients

2 Collect Concept Notes Receive complete Concept Notes

3 Screening for Eligibility

and Shortlisting

Conduct eligibility screening, document

observations

PI to collect CDD

documentation

Submit documentation to AMAD

Verify accuracy of eligibility screening Verify that documentation is

on hand

4 Collect Grant

Applications via Field

Visits and BDS

Undertake field visit

And receive detailed Application and Annexes

PI to undertake CDD

assessment

Finalize documentation and assessment (E&S,

CDD and Credit Check)

And submit documentation to AMAD

5 Scoring and Selection Verify completeness of information obtained by PI Verify CDD Assessment

done by PI (CDD Checklist)

Scoring for pre-selection 19 Reject non-acceptable

customers

Field visit to pre-selected applicants for risk

analysis and financial assessment

Review and confirm CDD

Assessment and finalize

checklist

Final selection for pre-approval

Submission of documentation of pre-selected

candidates to AMAD

6 Pre-Approval Technical review and compliance check by and

pre-approval

Communication of decision to PI (Commitment

Letter (CL))

PI makes loan decision and informs AMAD

7 Grant Agreement Development of Gran Agreement and submission

to PI

Signature by the Grantee and submission of

complete documentation to AMAD

Finalization of Agreement Package

Approval by AMAD and reversion of final

Agreement to PI

8 Implementation PI disburses loan and informs AMAD

SCSA prepares disbursement request Sanction Screening

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Enhanced CDD measure:

wire transfer

PI undertakes regular grant monitoring and submits

observations to AMAD

ACGF disburses Grant tranches as per conditions

of the Grant Agreement

9 Monitoring PI undertakes regular loan monitoring as per credit

policy and submits observations to AMAD

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