How USAID is Putting Local Wealth to Work

Posted by Ben Hubbard
March 22, 2012
USAID Development Credit Authority Image

You can view the full-size image here.

In the 1960s, during USAID's founding decade, official development assistance represented 70 percent of all capital flows to developing countries. Today, foreign aid makes up just 13 percent, having been replaced over time by trade, investment, and other sources of private capital.

This changing landscape means our impact can be even greater. Rather than using our development dollars to substitute for missing private capital, we can use them to attract it. Even better, we can unlock existing local wealth and put it to work for development.

That's what we do at the Development Credit Authority (DCA). In our 12 year history issuing credit guarantees, DCA has worked directly with more than 200 local private financial institutions, reaching more than 100,000 credit-worthy, but underserved borrowers. In 2011 we established 37 guarantees that will mobilize an additional $200 million in commercial capital in 21 countries.

Among the highlights, we supported the first-ever municipal bond offering in Serbia, a historic step in the development of their local capital markets. We finalized a $25 million deal with J.P Morgan Chase and a group of impact investors that will fuel economic growth in East Africa by providing equity financing for small businesses. And we signed a $34 million guarantee in Egypt that will mobilize capital for small businesses that lack access to credit following the turmoil of the Arab Spring.

Aside from these unique deals, DCA created a Strategic Transactions Group in order to develop capital markets alternatives to typical development solutions. At the Agency level, Field Investment Officers are being deployed to our regional missions to originate innovative deals and ensure financing solutions become a critical component of USAID programming.

This is a good start. In the coming year we will further deepen our work across the Agency, helping to incentivize private investment so that development continues long after we exit.

You can learn more about the Development Credit Authority by viewing the Impact Brief 2011 here.

Editor's Note: This entry was first posted on USAID's Impact Blog. You can learn more about the work of the Development Credit Authority (DCA) on its USAID web page.

About the Author: Ben Hubbard serves as the Director of Development Credit Authority at the U.S. Agency for International Development (USAID).

Comments

Comments

Seymour P.
|
United States
March 23, 2012

Portia S. in the U.S.A. writes:

No nation, including the United States, has ever undergone significant development based on the short-term profit objectives of private entrepreneurs. The only system that has ever succeeded is Alexander Hamilton-style National Banking, where governments issue sovereign credit for infrastructure projects that may take 25-50 years to pay for themselves. If the United States actually wants to help other nations develop, our government should promote that approach, instead of the British-style "Free Trade" market-driven tactic, which is intended to keep small nations dependent and vulnerable.

CassidyC
|
United States
April 6, 2012

Cassidy C. in the U.S.A. writes:

In a world in which countless dollars of foreign aid ends up in the hands of the dictators oppressing the very people the aid is meant for, the idea of social entrepreneurship offered by USAID's Development Credit Authority is an innovative method for development of impoverished nations. While direct foreign assistance plays a beneficial and necessary role, Development Credit Authority could allow USAID to implement thriving economic infrastructures in developing nations ensuring a foundation for their futures. This new method should serve as proof to all skeptics that the money U.S. citizens provide for foreign assistance can be used to provided sustainable economic development that not only goes directly to the intended groups, but, with 98.25% of USAID-supported borrowers paying back their loans, it is a feasible system for the United States to support. I can only hope that the USAID's Development Credit Authority continues to improve and help impoverished people in a new way.

JOHN T.
|
Ethiopia
April 9, 2012

John T. in Ethiopia writes:

Would like to increase my productivity of various crops,where can I get the fund as to make the mordern agriculture?

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