One of the biggest barriers for African entrepreneurs looking to start a business is lack of access to capital. The USAID Development Credit Authority (DCA), created in 1999, was established to address the needs of local businesses by using partial credit guarantees to mobilize local financing in developing countries. Simply speaking those entrepreneurs who previously were deterred from borrowing money at a bank because they had no collateral are now able to borrow using USAID partial credit guarantees as their collateral. For private lenders, such as banks, it offers an opportunity to lower their credit risks while discovering new financing opportunities. In this way, USAID is able to empower entrepreneurs in developing countries to help themselves, at a minimal cost to the US taxpayer.
Other approaches to helping alleviate some of the obstacles that prevent businesses from flourishing in Africa include the Agriculture Fast Track, a fund that helps borrowers develop the necessary materials to secure a large-scale bank loan to support Africa’s agricultural agenda. The project is initially working in Burkina Faso, Cote d’Ivoire, Ghana, Ethiopia, Mozambique and Tanzania but hopes to expand to more countries.
Examples of USAID’s work under the Development Credit Authority in Africa include:
- In Uganda, a USAID guarantee enabled an entrepreneur to receive a loan large enough to expand his business. As a result, his profits increased from $6,500 to $22,000 annually and he was able to hire an additional 40 workers. The borrower repaid his loan in full and has since received another loan, double in size, without a guarantee.
- In Nigeria, more than 80% of health practitioners reported an increase in patients served after improvements they made with a DCA backed loan.
- Through DCA, Pride Tanzania was able to issue the first microfinance bond in sub-Saharan Africa. The bond helped the MFI to increase its portfolio from 10,000 members to approximately 150,000 members.
LEARN MORE: USAID Development Credit Authority
LEARN MORE: Agriculture Fast Track
Comment
Make a general inquiry or suggest an improvement.