Development Credit Authority Putting local wealth to work

AN OVERVIEW OF USAID'S CREDIT GUARANTEES

DCA PORTFOLIO 1999 - 2011 PUTTING LOCAL WEALTH TO WORK

The Development Credit Authority (DCA) uses $2.3 BILLION in credit made available partial credit guarantees to mobilize local financing Agriculture • Health • Environment • Small Business • Microfinance Housing • Water • Energy • Infrastructure • Education in developing countries. Guarantee agreements encourage private lenders to extend financing to underserved borrowers in new sectors and regions. $10 MILLION bank fees received By opening up local channels of financing, USAID is empowering entrepreneurs in developing countries at $8.3 MILLION claims paid a minimal cost to the U.S. taxpayer.

»» Risk-Sharing Partnerships: Financial institutions 1.75% default rate across 67 countries with USAID guarantees make loans using their own capital. The cumulative default rate of all loans supported by USAID guarantees is only 1.75%. These same loans have cost-effectively mobilized more than $2 billion in private, local funds to finance development. »» Additionality: Guarantees allow lenders to take on additional risk, whether by creating a new loan product, offering improved loan terms, or lending to a new sector. USAID charges banks fees to avoid guaranteeing loans banks would have made without the guarantee. »» Sustainability: Experience shows that when Credit: Morgana Wingard USAID guarantees expire, banks continue lending to the same borrowers that they previously EMPOWERING PEOPLE, CHANGING LIVES perceived as unqualified. The design of a partial credit guarantee ensures that banks perform their In Uganda, a USAID guarantee enabled an own due diligence to understand new sectors and entrepreneur to receive a loan large enough to are therefore more likely to continue lending on expand his business. As a result, his profits increased their own. In some cases, competitor banks have from $6,500 to $22,000 annually and he was able entered the same market after observing the to hire an additional 40 workers, including the chef success of USAID partner banks. in this photo. The borrower repaid his loan in full Since 1999, USAID’s Development Credit Authority and has since received another loan, double in size, has been designing and delivering investment without a guarantee. alternatives that unlock private financing in support of U.S. development priorities. facebook.com /usaid.dca @USAID_Credit LEN BO USA D R ID E RO 50 R W % L E O R A

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COUNTRIES WITH USAID CREDIT GUARANTEES