Enhancing the Business Capacity of MSMEs in Dhouk Governorate- KRI through Non-Financial Services

Enhancing the Business Capacity of MSMEs in Dhouk Governorate- KRI through Non-Financial Services under the ILO PROSPECTS Project – Phase II"Call for Proposal1. BACKGROUNDIn Iraq, PROSPECTS partnership aims to support national efforts to strengthen systems and develop/implement policies that promote inclusion and socio-economic development of forcibly displaced and host communities, whilst working closely with local authorities, business/private sector, and communities to identify, maximize, and realize opportunities on the ground. With a geographic focus on the Northern governorates of Duhok and Ninawa, the partnership focuses on three pillars, namely: education and learning; economic inclusion and protection; and critical infrastructure pillars.Within the framework of the education and learning, economic inclusion, and critical Infrastructure pillars of the PROSPECTS partnership in Iraq, ILO’s focus is on supporting thousands of forcibly displaced persons and host community members to access more and better livelihoods and decent job opportunities. It is doing so through an integrated approach that support market-driven skills training; improve public employment services; implement labour intensive infrastructure projects; promote financial inclusion; and support business start-ups and micro, small, and medium-sized enterprises (MSMEs).Enterprise development and Financial Inclusion component of PROSPECTS programme – IraqThe Financial Inclusion pillar of the PROSPECTS project is structured around two core components, outlining an integrated approach to the International Labour Organization's (ILO) enterprise development and access to finance interventions:1. Entrepreneurship and Financial Education2. Access to FinanceBelow is an outline of integrated approach for ILO/PROSPECTS enterprise development and access to finance interventions:Entrepreneurship and Financial Education: ILO ToolkitsTo facilitate the work on entrepreneurship and Financial Education, the ILO has developed training toolkits that are used worldwide in several countries. These include “Start and Improve Your Business (SIYB)” training and “Financial Education/FE” curricula. These tools were adapted to Iraqi context and translated to Arabic and both Kurdish dialectics (Sorani & Badini) and served the areas of PROSPECTs interventions in Dohuk and Ninawa and targeted to refugees, returnees and host communities.In the first phase, the International Labour Organization (ILO) PROSPECTS with the support of its partners, played a crucial role in bridging the gap between supply-side actors, non-financial and financial BDS providers but also with demand-side clients (MSMEs) including startups and scale-ups. This was achieved through a multi-pronged approach involving outreach, capacity building, referrals, and risk mitigation measures facilitated through collaboration with the Central Bank of Iraq (CBI), partner banks and the Iraqi Company for Banking Guarantees (ICBG).As a result of these efforts, ILO built the capacity of a range of public and private BDS providers on its business and financial management tools targeting MSMEs. A total of 67 national trainers were certified and in turn trained over 2,981 individuals who graduated from SIYB and Financial Education (FE) training programs.Of these, 1170 individuals applied to access finance from partner banks and underwent in-house screening while preparing mini-feasibility studies in preparation for referral to partner banks based on the eligibility criteria agreed with banks and captured in an operations manual that included products description. A total of 480 trained clients were referred to three partner banks to explore potential loan options for starting or expanding their businesses within the areas of PROSPECTS intervention in North Iraq.Access to finance:Recognizing the challenges in access to finance in Iraq , ILO partnered with the Central Bank of Iraq (CBI) and the Iraqi Company for Banking Guarantees (ICBG), launched in 2019 under the "Four Trillion Initiative," to facilitate access to finance for the PROSPETS target groups. Through this in this initiative, disbursement of loans to Iraqi entrepreneurs via partner banks, utilizing an innovative guarantee scheme and a comprehensive model designed to address key entrepreneurial challenges in Iraq was facilitated. This initiative resulted in a total of 284 disbursed loans in the value of 2.92 M through the three banks, covering different sectors by the end of March 2025. This pilot showed the large size of demand for financial services, the huge impact of financial injection on productivity/income enhancement and job creation (at 1240 jobs were maintained and created through these loans). It also indicated that MSMEs are reluctant to address banks directly, hence the importance of bridging the trust gap, while working on enhancing their business and financial literacy skills.Strengthening business development services for MSMEs in Northern IraqThe ILO PROSPECTS Phase II initiative in Iraq seeks to enhance the resilience and economic inclusion of Micro, Small, and Medium Enterprises (MSMEs), particularly those led by or employing forcibly displaced persons (FDPs)— including internally displaced persons (IDPs), refugees—and host communities. A key pillar of this effort is the identification and partnership with sustainable, high-capacity Business Development Service (BDS) provider having operation in Dhouk Governorate.Northern Iraq is home to over 6.3 million people and more than 150,000 MSMEs, which constitute over 50% of private-sector employment, particularly in retail, agriculture, services, and manufacturing. However, the BDS landscape is fragmented, urban-centric (mostly in Erbil and Sulaymaniyah), heavily donor-dependent, and lacks sustainability mechanisms—leaving rural and conflict-affected areas such as Duhok, Halabja, and Ninewa significantly underserved.To address this, a comprehensive mapping and assessment of 32 BDS providers was conducted in April 2025 using desk reviews, stakeholder consultations, and a snowballing approach. The evaluation focused on institutional capacity, service range, alignment with PROSPECTS priorities, and sustainability prospects. While all providers demonstrated relevant experience in entrepreneurship training and project implementation, systemic weaknesses were observed in financial sustainability, market orientation, and monitoring and evaluation (M&E) systems.Importantly, the current BDS environment remains driven by donor programming rather than MSME market needs, with limited engagement from financial institutions and minimal cost-recovery models. Nonetheless, some institutions have begun introducing fee-based services, while others showed strong alignment with PROSPECTS’ target groups and programmatic goals.The findings highlight both the potential and the gaps in Iraq’s enterprise support ecosystem. This TOR seeks to formalize partnerships with active BDS providers who can design and deliver contextually relevant, inclusive, and sustainable BDS services, particularly in underserved areas and contribute meaningfully to private sector development and socio-economic recovery in Northern Iraq.PROSPECTs Phase II: Future Direction of enterprise development and financial Inclusion componentRecognizing the need for long-term sustainability and impact beyond the initial ILO intervention, Phase II of ILO- PROSPECTS will facilitate the transition of BDS providers into sustainable, market-driven actors while strengthening the crucial links amongst entrepreneurs, BDS providers and financial service providers. To achieve this, ILO is actively seeking BDS entity/ies that are operating in Dohuk Governorate to lead entrepreneurship development and prepare suitable clients for referral to partner banks/s, ensuring they can access loans to start and grow their businesses. A phased approach will be followed to reach a sustainable business model linking the BDS provider with partner banks/s.The ILO believes that strengthening financial management, fostering sector-specific services, building effective monitoring and evaluation systems, and formalizing partnerships with financial service providers are essential steps toward a more coordinated, impactful, and sustainable BDS ecosystem in the North region. Sustainable BDS provision refers to a market-oriented approach to supporting micro, small, and medium-sized enterprises (MSMEs) through services that are financially viable, responsive to client demand, and extend beyond basic management training to,encompass a diverse range of business needs2. OBJECTIVEThe overall objective of this TOR is to influence sustainable BDS provision that will go beyond subsidised business development services. During the pilot phase, participating BDS providers will seek to enhance the entrepreneurial and financial capabilities of 400 aspiring and existing entrepreneurs in Dohuk governorate — including youth, women, refugees, IDPs/returnees, and host community members—to become investment ready and referral of 150 loan applicants (IDPs/returnees and HC) amongst them to access finance through formalized structured referral mechanism established with partner bank/s of the ILO PROSPECTS programme.This will take place through the delivery of quality-assured training on Start and Improve Your Business (SIYB) and Financial Education (FE), including post-training coaching, tailored mentorship to prepare entrepreneurs to access finance from partner bank/s. In parallel, BDS provider/s will submit a sustainability plan to phase out the subsidized training delivery into financially viable business model building on the partnership with bank/s and on clear financial projections established during the training implementation period.2.1 Specific Objectives:• Formalize a structured referral mechanism between BDS provider/s and PROPSECTS partner bank/s with agreed on referral mechanism steps and based on designed product/s and clear eligibility criteria to access finance for MSMEs. A report detailing the agreed working modalities will be prepared and submitted to ILO.• Identify, mobilize, and enrol eligible clients seeking to access finance into SIYB and Financial Education training based on inclusive and transparent criteria. The BDS provider is expected to design specific activities for attracting the right candidates and inform them of the opportunity. This effort is expected to reach at least 700 potential clients to allow for attrition.• Conduct Training Needs assessment and market segmentation to inform the design of the interventions. The BDS provider is expected to analyse the needs of the identified potential clients to include nature of business, business practices, knowledge gaps. The findings should be documented in a training needs analysis with excel file of clients submitted to the ILO prior to implementation of the training interventions.• Deliver high-quality, gender-responsive, and contextually adapted training to 400 clients using ILO’s SIYB and Financial Education curricula thus facilitating the development of viable business plans, business improvement action plans and financial literacy among trainees. The training sessions should be conducted by ILO’s certified trainers in the relevant packages. The BDS provider is expected to identify appropriate venues, procure the stationery and training manuals to facilitate delivery of training interventions.• Provide post-training coaching and mentoring support to 75 selected entrepreneurs (35 start-ups and 40 scale-ups) to reinforce practical application of skills. The BDS provider should design appropriate mentorship interventions appropriate for each package. There should be a clear link between the training needs identified for the clients and the mentorship outcomes. Mentorship reports need to present individual progress and how they can be further assisted.• Assess the readiness of coached entrepreneurs for access to finance and refer at least 150( 40 start ups and 110 existing) eligible candidates to partner bank/s based on the formalized referral mechanism. (target is 100approved loan applications). Progress reports on access to finance needs to be presented to the ILO detailing number of applications received and referred, number of clients accessing finance, number of rejected applications and reasons.• Submit an amended sustainability plan encompassing partnership assumptions, financial projections and pricing models to ensure viable non-financial service provision.• Establish and implement a robust monitoring, evaluation, and reporting system to track progress, document outcomes, and support project learning.3. SCOPE OF ASSIGNMENTPhase one: Preparation, introduction of the program in the target governorate ( Dhouk) and its districts through:• MOU or agreement signed between BDS provider/s and partner bank/s encompassing a structured referral to allow for more focused targeting.i. Active participation of the BDS provider with the partner bank in the product design process and in the planned trainings for relevant staff: As part of their engagement under the ILO PROSPECTS Phase II initiative, selected BDS providers will actively participate in trainings on credit appraisal with bank staff to ensure close alignment. This participatory model is expected to enhance trust between BDS providers and financial institutions, paving the way for longer-term institutional partnerships.ii. Comprehensive outreach campaigns effectively conducted across Duhok and its, reaching potential beneficiaries from diverse backgrounds. Clear eligibility and selection criteria established aligned with both ILO training materials SIYB and FE and bank product targets, ensuring inclusivity in terms of gender, displacement status, disability, age, type of training courses, project target groups, sector.iii. Standardized application forms created in (paper and digital (hard copies and digital copies) aligned with both ILO training material’s applications forms for SIYB (GYB, SYB & IYB) and loan application forms needed for bank/s. A transparent registration process should be successfully implemented with both digital and paper-based applications accessible to all target groups.iv. Applications are reviewed and scored against the eligibility criteria based on the speciality of each training course to ensure fair geographic and demographic representation.v. Validated final list of selected participants produced and shared with ILO.Phase two: implementation of the trainings and assessment to ensure proper referrals to banks:1. For the entrepreneurship, the entity/s will facilitate the implementation of training workshops and graduation of 400 clients on SIYB and FE curricula.2. Later, the partner will conduct mini feasibility study and needs assessment for those who confirmed continued interest to access finance through selection committee established in coordination wi…