May 11, 2015
Maryam Khosharay
Sean Keogh
Development Credit Authority
DCA credit guarantees
encourage banks to
convert these liquid
reserves into loans for
developmentally
important projects by
reducing the bank’s
risk of doing so.
Development Credit Authority (DCA)
Development Credit Authority
SOURCE: World Development Indicators, 2011
Turning Local Wealth into Investments for Growth
Developed
Bank liquid reserves Percent of bank liquid reserves to bank assets
Domestic Credit Provided to Private Sector Percent of GDP
0 20 40 60 80 100
Spain
United States
Uganda
Guatemala
Cambodia
Botswana
Afghanistan
Haiti
0 50 100 150 200 250
Afghanistan
Haiti
Uganda
Guatemala
Botswana
Cambodia
United States
Spain
Developing
There are tremendous stores of liquid reserves in developing markets not being put to
productive use, despite an enormous appetite by private investors to put these assets to work.
Development Credit Authority NPL Ratio (>90 days)
451
328 166,428
74
84% $3,715,748,013 $1,359,336,738
84,780: 53% 41,671: 27%
$151,397,096 $14,348,564 2.14%
$1 : $25 SME: $18,140
Micro: $3,507 $14,865,303 5.18%
Leverage Ratio Average Loan Size Total Fees Received
Since FY99, DCA has signed 451 guarantees, leveraging $3.7 billion in
private capital, achieving an 84% utilization rate for expired guarantees
Development Credit Authority
DCA Offers 4 Main Products
Development Credit Authority
Diversity of Qualified Lenders and Borrowers
Financial Institutions
Private Utility Providers
Energy enterprises
Students / Schools
MSMEs
Households
Municipalities
Farmers / Agribusiness
Health Clinics
Rural Banks
Institutional Investors
Leasing Companies
Non-Bank Financial Institutions
Commercial Banks
Investment Funds
MFIs / Coops
Credit Unions
A DCA Guarantee can support virtually
any type of lender and borrower except
sovereign governments, other donors
and development finance institutions.
Development Credit Authority
Standard Terms and Conditions
DCA Guarantee
▪ Guarantee Facilities: Average ~$7.5 million (although sub loans much smaller) but can be as
large as $100 million per borrower.
▪ Loan coverage: Usually 50% on a pari passu basis, but can go up to 80% and offer 1st loss
guarantees
▪ Sub sovereign guarantees can be considered, no sovereign
▪ Direct loan authority but never used
▪ Partners pay origination and utilizations fees
▪ USAID typically pays guarantee subsidy, but cost can be covered by 3rd parties (gift authority)
▪ Principal only coverage, no interest
▪ Guarantee cannot be used to cover equity in any form
▪ Maximum tenor: 20 years
Guarantees are structured to match the needs and requirements of
identified lenders and/or borrowers within USAID policy and legal limits.
Development Credit Authority
Loan Portfolio Guarantee
USAID supported borrower
class, though specific
borrowers unknown at time of guarantee
L B
B
B
Development Credit Authority
Household Technology Guarantee Facility: Partnering
with Impact Investors Terms
Facility Size $100 M
Partners SIGNINA CAPITAL FUNDS AGmvK SOCIALALPHA INVESTMENT FUND (SAIF) SICAV-SIF CALVERT SOCIAL INVESTMENT FOUNDATION, INC
Coverage c. 50%
Guarantee Ceiling
c. 36M
Length 5 years
Currency Local currency loans
Sub-loan Maturity 12-24 months
Maximum Loan Size $5 M
Qualifying Borrowers Manufacturers and Distributers of household technologies
Targeted Sector
Environment, Health, SME
Qualifying Projects Growth businesses operating throughout value chain
Targeted Geographies
Africa, Latin America, S/SE Asia
Project description: DCA and Sida developed a loan portfolio guarantee facility with three
international financial institutions, two of them being impact investors, to encourage lending to
businesses needing working capital in the household technology sector. The guarantee covers
loans in Africa, Latin America and South/Southeast Asia, all areas of high market demand. The
guarantee structure will include risk elements that lower DCA’s overall exposure based on the
financial partner’s comfort with the target borrower group and the desire to reach a $100M
facility size from limited funds. A reserve fund of $25M will be allocated based on utilization,
development and exposure performance of financial partners.
1
2
2
Partner 2 $25M
DCA Guarantee
Household
Technology
Business
1
Household
Technology
Business
Household
Technology
Business
Financial partners make working capital loans
to household technology businesses
DCA provides a guarantee on the principal of
each eligible loan
Partner 1 $25M
Partner 3 $25M
Reserve $25M
3 Reserve will be allocated based on financial
partners’ ability to create the greatest risk-
adjusted impact
3
Development Credit Authority
We analyze financial indicators (utilization) and development indicators.
Utilization Benchmarks
Years Since
Obligation
Cumulative
Utilization
Target
1 20%
2 40%
3 50%
4 60%
5 80%
6 100%
7 100%
Partner bank behavior change due to the DCA
•High utilization, increased lending to the sector
•Lower interest rates or collateral requirements
•Longer term financing
•Creation of an agriculture/SME lending unit or loan
product
•Increased lending to sector after guarantee expires
•Tracking women, first-time borrowers, rural areas
•Low default rates
Greater development impact
•Impact on beneficiaries and households
•Other partner banks to entering the sector
•Policy change - i.e. partnering with central banks to
support their mandate to financing to agriculture
How do we define success?
Development Credit Authority
Strategic, market moving investments and partnerships
1
2
3
4
Strategic Interventions Looking Forward
Partnerships with multinational companies
Access to long-term financing
Leasing, insurance, and warehouse receipts
Development Impact Bonds (DIBs)
Municipal bonds and finance 5
Development Credit Authority
Contact Information & Additional Resources
Africa
Megan Rapp
202-712-1482
LAC / E&E
Romi Bhatia
202-712-0834
Strategic Finance
Sean Keogh
202-712-5970
Asia
Amanda Femal
202-712-1707
Office
Michael Metzler
202-712-5344
Recommended
