Development Credit Authority
"The role of government is not to try to create wealth....The role of government is to create an environment in which people are willing to risk capital, to take risks; an environment in which people are willing to realize their dreams"
- President George W. Bush
In many developing countries, people cannot realize their dreams, not because they lack aspiration or tenacity, but because they lack an access to vital resources. USAID's Development Credit Authority enables people, businesses, and local governments to access one of the most important resources, capital. Banks and other financial institutions in developing countries have excess capital but choose not to lend to the majority of small and medium businesses that are the engines of economic prosperity and job creation. Through the use of USAID's partial credit guarantees, financial institutions all over the world are beginning to invest in their own country and support the determination of their people to succeed. USAID's partial credit guarantees have made over $1 billion in financing available for farmers, microenterprises, health clinics, and local governments. Partial credit guarantees don't create wealth; they enable people to create it for themselves.
Small and Medium Enterprises in Jordan Grow through New Access to Finance
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| One beneficiary of a USAID partial credit guarantee |
USAID/Jordan and the Bank of Jordan formed a partnership in 2005 through the use of a USAID partial credit guarantee to make $5 million in financing available to small and medium enterprises. This partnership enabled the Bank to more aggressively target small and medium enterprises by extending loans to new customers who lack a credit history and to current clients who lack sufficient collateral.
Ali Alkaabneh & Brothers Co., which manufactures and distributes snack food, started business in September 2005. In 2006 Ali Alkaabneh & Brothers Co. benefited from a USAID guaranteed loan to expand their service area. As Ali Alkaabneh & Brothers Co. expanded their business due to the loan, the business also hired new employees. The smiling face of this woman is only one benefit of the USAID partial credit guarantee.
Two Ways to Housing in Nigeria and Zambia
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| The US Ambassador to Nigeria and Zenith Bank partners at the launch of Zenith Bank's new mortgage finance product. |
USAID/Zambia promoted housing construction by providing a $12.0 million guarantee for the Lilayi Housing and Community Economic Development Project. This $65 million project will build over 5,000 units of housing and community infrastructure in Lusaka.
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| A model home for the Lilayi Housing Project in Zambia |
USAID coupled the DCA guarantee with technical assistance to help local authorities provide deeds and title registration to eligible households. The guaranteed mortgages partially finance the first phase of construction. Other donors and development finance agencies are also supporting the low-cost housing construction project. In Nigeria, housing construction is already well underway. Therefore, USAID/Nigeria signed a $10 million loan portfolio guarantee with Zenith Bank to provide long-term mortgages (~10 years). With access to longer-term financing more Nigerians can afford to become first time homeowners. The guarantee targets primary residences in the cities of Abuja, Lagos, Port Harcourt, and Kano.
Cascading Credit in Armenia
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| Cheers! Garegin Gevorkian, Jonathan Stark, Anthony Godfrey, Tigran Sarkisyan, and Donald Hart at the Issuance of Cascade Credit's USAID guaranteed bonds. |
Cascade Credit CJSC, a newly formed Armenian non-bank financial institution, issued the initial tranche of discounted bonds. The USAID partial credit guarantee covers the issuance by Cascade Credit of $12 million in commercial bonds over three years. The bond proceeds will be lent to Armenian businesses engaged in the production of exports. These businesses have difficulty accessing financing due to local bank's restrictive lending practices. This is also the first issuance of a commercial bond in Armenia.
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