Development Credit Authority
The Development Credit Authority (DCA) enables USAID to offer partial loan guarantees that advance development objectives throughout the world. Under funding authority enacted by Congress, USAID enters into risk sharing arrangements with local financial institutions, generally guaranteeing no more than 50% of a loan or portfolio of loans. This approach ensures that local financial institutions maintain substantial risk and have ample incentive to undertake thorough due diligence and project oversight. DCA partial loan guarantees are combined with grant-financed training and technical assistance to support development activities in underserved private markets. The use of DCA guarantees by USAID missions has grown substantially in recent years, with a current total of over 144 projects across 39 countries. DCA guarantees often establish the foundation for relationships that continue the flow of credit to underserved sectors long after DCA's involvement has ended.
|
(in thousands of dollars)
| Development Credit Assistance |
FY 2004 Actual | FY 2005 Actual | FY 2006 Appropriation | FY 2007 Estimate |
|
Credit Subsidy |
|
DCA Transfer authority | [21,000] | [21,000] | [21,000] | [21,000] |
|
Direct Appropriation * | - | - | - | 5,000 |
|
Administrative Expenses |
|
Appropriation for DCA | 7,953 | 7,936 | 7,920 | 8,400
|
* Up to $2 million may be used for project development costs
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In FY 2005, DCA guarantees were targeted to critical areas in the developing world. They mobilized lending to micro and small enterprises damaged by the tsunami in Indonesia and supported small and medium-size enterprise lending in the West Bank and Gaza. In Serbia, DCA was used to channel $10 million in loan capital to municipal lending. DCA also promoted agribusiness lending in Ethiopia, Kenya, Moldova, Rwanda, Tanzania and Uganda.
In FY 2006, USAID will fund administrative costs for the development, implementation and financial management of all USAID credit activities ($7,920,000) and will use transfer authority ($21,000,000) for the subsidy cost associated with using DCA to guarantee loans and loan portfolios. This will support innovative financing of water and sanitation facilities in developing countries under the Presidential Water Initiative. DCA will also promote the flow of credit to microfinance institutions, small and medium enterprises, agribusinesses, energy-efficiency projects and municipalities in USAID-assisted countries.
In FY 2007, USAID plans to fund administrative costs for the development, implementation and financial management ($8,400,000) of all USAID credit activities and will use transfer authority ($21,000,000) for the subsidy cost of using DCA to guarantee loans and loan portfolios. This transfer authority will allow for guarantees of loans and loan portfolios in every region of the globe and every economic sector targeted by USAID. In addition, the Agency plans to use $5 million for the Africa Housing and Infrastructure Facility (AHIF). This innovative credit facility will build on USAID's experience with DCA and will support subsidy costs of partial guarantees for private sector financing of water, infrastructure, and housing projects in Africa, focused primarily on small and middle market housing and infrastructure projects. The AHIF will enhance the effectiveness of USAID's response to Presidential Initiatives such as Water for the Poor. The $3 million in subsidy would leverage up to $55 million in infrastructure financing in 2007. Up to $2 million may be used for project development costs, including one-time start up expenses associated with developing early stage AHIF projects, such as conducting feasibility studies.
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