Washington — The U.S. Agency for International Development (USAID) has mobilized a record amount of private capital to support small businesses in developing countries.
USAID's Development Credit Authority (DCA) worked with 45 financial institutions in 23 countries in 2012 to unlock up to $525 million in private capital for underserved entrepreneurs in developing countries, the agency said in a December 18 news release. The financing, made available through 34 partial credit guarantees, is the most USAID has mobilized in a single year.
While USAID provides economic, development and humanitarian assistance around the world in support of U.S. foreign policy goals, its Development Credit Authority works with investors, local financial institutions and development organizations to design and deliver investment alternatives that unlock financing for entrepreneurs in the developing world.
Guarantees are a cost-effective way to get local, private financing into the hands of creditworthy borrowers. From low-income Haitians seeking to rebuild in Port-au-Prince, to women-owned small businesses in Kabul, to solar companies in Uganda, USAID is enabling private markets in the developing world to provide financing to the people who need it most.
Reflecting Obama administration priorities in food security and clean energy, these guarantees will open $219 million in bank financing for food security, $77 million for renewable energy and $215 million for small enterprises, USAID said. More than half of the $525 million of approved credit guarantees are in sub-Saharan Africa.
An additional 39,000 small businesses will soon be able to access local financing because of USAID credit guarantees, reflecting the agency's drive to leverage private sector resources for international development. Thanks to increased employment and other benefits for the families of these small business owners and their workers, these loans will translate into more than a million people whose lives have been improved by increased access to finance.
With the security of USAID's guarantees, up to $2.7 billion in credit has been made available to entrepreneurs in 70 developing countries since 1999. With historically low default rates, USAID has paid out only $9.1 million in claims across the entire portfolio while collecting $11 million from banks in fees.
The following are highlights from DCA's FY 2012 portfolio, with links to more information on USAID's website:
• USAID partnered with Acumen Fund, a nonprofit global venture fund, to facilitate the flow of up to $15 million in debt capital to social enterprises working to provide critical goods and services in Africa and South Asia.
• USAID will partially back private loans made to smallholder farmer organizations, including those with contracts from the World Food Programme-Purchase for Progress initiative.
• New guarantees will unlock $30 million in Haiti for private lending toward housing, construction and small businesses affected by the 2010 earthquake.
• A new credit guarantee will allow Root Capital to disburse more than $50 million in loans, reaching more than 1 million small-scale farmers over the next five years.
An infographic of USAID's Development Credit Authority 2012 Portfolio (PDF, 309KB) is available on the agency's website.