Development Credit Authority (DCA)

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See also: USAID DCA Overview

Date of Operation: 2004 – 2020

Primary Implementing Partner: Bank of Abyssinia, NIB International Bank, Zemen Bank

Regions of Operation: National

Goal:

Encourage growth of the private sector and microenterprises by improving access to finance and credit for underserved populations.

Project Objectives:

  • Increase access to short-term marketing credit and medium-term investment capital for women, diaspora and local entrepreneurs engaged in small and medium business activities in the agriculture and health sectors.

Description:

One problem Ethiopia’s farmers face is a lack of access to finance, which they need to modernize their practices and purchase or lease machinery. Ethiopian banks generally require collateral valued at a minimum of 100 percent of the value of the loan plus interest, which is unreachable for most farmers. Since all Ethiopian land belongs to the government, farmers cannot use the farmland they lease as collateral and banks do not accept crops or other farm stock as collateral.

In Ethiopia, 44% of health expenditure takes place in the private sector. Evidence suggests that the private sector accounts for as much as 10% of national TB case detection and for more than one-third of HIV counseling and testing; furthermore, a considerable proportion of the country’s health workforce is in the private sector. With funding provided by the U.S. President's Emergency Plan for AIDS Relief (PEPFAR), this agreement will increase lending to private health sector enterprises, particularly those providing HIV/AIDS and TB services.

To expand access to credit in the agricultural and health sectors, USAID in Ethiopia established a loan portfolio facility. The facility is shared by four commercial banks, Awash International Bank and Bank of Abyssinia, Dashen Bank and NIB International with a 50 percent credit guarantee from USAID on the net loss of principal.

For agriculture, the guarantee supports the banks in extending credit to agricultural cooperatives, livestock marketing groups, private sector agro-processors, and private sector commercial horticulture producers. The facility builds upon the Mission’s agricultural capacity building and economic growth activities focused on coffee, food grains (cereals, oilseeds, and pulses), horticulture, and livestock/livestock products (meat, dairy, hides/skins, and leather/leather products).

For health care, loans will enable providers and distributors to make quality improvements and expand services to more people living with HIV and TB. It will improve the reach and quality of private clinics, pharmacies, and hospitals throughout Ethiopia.

Expected Results:

  • Establish easy access to agricultural equipment and machinery for smallholder farmers and Agro processing industries; enable HIV/AIDS and TB providers to upgrade facilities, equipment, and expand services.
  • Create behavioral change in partner commercial banks
  • Providing clean loans or loans requiring less collateral
  • Increase employment opportunities