Download - WFP-P4P Annual Conference January 30, 2013
WFP-P4P Annual ConferenceJanuary 30, 2013
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DCA Aims to Shift the Paradigm of Financing Development
Traditional development financing
Commercial finance
Grants
Financing after DCA engages
Commercial finance
Grants
Sustainability
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SOURCE: World Development Indicators, 2010
Turning Local Wealth into Investments for Growth
Developing Developed
Bank liquid reservesPercent of bank liquid reserves to bank assets
Domestic Credit Provided to Private SectorPercent of GDP
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DCA’s Standard Product
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USAID-DCA / WFP-P4P Partnership
Increase smallholder farmers’ ability to access finance to increase profitability and supply to WFP-P4P
Encourage financial institutions to-lend to agricultural value chains prioritized in USAID’s Feed the Future (FTF) strategies of four East African countries
- Ethiopia- Kenya- South Sudan- Tanzania
-accept direct contracts and forward contracts from WFP-P4P as a form of collateral substitution / market risk mitigant
Goals
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USAID-DCA / WFP-P4P Partnership
MethodologySet up three new bilateral DCA loan portfolio guarantees (LPGs- Kenya ($15m, Kenya Commercial Bank)- South Sudan ($7m co-guaranteed with AGRA, Equity Bank, Kenya
Commercial Bank, Finance SS Ltd)- Tanzania ($10.3m, National Bank of Commerce)
Amended one existing DCA LPG- Ethiopia ($7.3m, Bank of Abyssinia, Zemen Bank)
Use existing USAID Mission-level technical assistance (TA) programs that link borrowers to the guaranteed lender
All multi-year programs launched in September 2013
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USAID-DCA / WFP-P4P Partnership1 DCA provides a loan portfolio guarantee
for a financial institution to lend to FTF value chain actors, including producer organizations, aggregators, and traders
2 Direct contract/forward contract issued (in cases where WFP and other purchasers enter into these agreements) with producer groups and aggregators
3 USAID TA connects potential borrowers – including those with direct contracts or forward contracts – to the financial institution with a DCA guarantee
4
Banks provide loans to FTF value chain actors (both pre- and post-production loans) using direct contracts and forward contract as either a risk mitigant or partial or full collateral substitution where applicable
5
FTF value chain actors fulfill contracts (where applicable)
6 FTF value chain actors repay loans
TA provider
1
3 3
6
4
52
WFP, Other purchasers
Financial institution
DCA
FTF value chain actors
(i.e. producers,
aggregators)
Structure
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USAID-DCA / WFP-P4P Partnership
StrengthsStructure- Based on shared goals- Both institutions focus on their core activities- Aligning efforts to increase TA effectiveness in the field
Process- Early MOU signing to demonstrate high-level commitment- Designated and committed HQ and country-level POCs- Led to increased country-level coordination- Regular communications
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USAID-DCA / WFP-P4P Partnership
ChallengesStaying on timeline- 12 months from concept to launch- Projects are each at least five years long
Clarifying roles- Maintain each organization’s key functions, focus TA efforts
Managing stakeholder expectations
Maintaining inertia and communication after launch- Encourage country-level contacts to coordinate to focus on
implementation
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USAID-DCA / WFP-P4P Partnership
Beyond the PilotIncorporate structure into future agriculture focused DCA guarantees
Encourage country-level TA coordination even in the absence of DCA guarantee
Share successes and challenges broadly to inform other- local financial institutions considering lending against direct
contracts and forward contracts (from WFP-P4P and others)- guarantors seeking to replicate the project
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Questions