May 11, 2015 Maryam Khosharay Sean Keogh

Transcription

1 May 11, 2015 Maryam Khosharay Sean Keogh

2 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. (DCA)

3 Turning Local Wealth into Investments for Growth Bank liquid reserves Percent of bank liquid reserves to bank assets Haiti Afghanistan Botswana Cambodia Guatemala Uganda United States Domestic Credit Provided to Private Sector Percent of GDP Afghanistan Haiti Uganda Guatemala Botswana Cambodia United States Spain Spain 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. SOURCE: World Development Indicators, 2011 Developing Developed

4 Since FY99, DCA has signed 451 guarantees, leveraging $3.7 billion in private capital, achieving an 84% utilization rate for expired guarantees 451 $3,715,748,013 $1,359,336,738 84% ,428 84,780: 53% 41,671: 27% 74 $151,397,096 $14,348, % $1 : $25 SME: $18,140 Micro: $3,507 $14,865, % Leverage Ratio Average Loan Size Total Fees Received NPL Ratio (>90 days)

5 DCA Offers 4 Main Products

6 Diversity of Qualified Lenders and Borrowers Rural Banks Institutional Investors Leasing Companies Non-Bank Financial Institutions Commercial Banks Investment Funds A DCA Guarantee can support virtually any type of lender and borrower except sovereign governments, other donors and development finance institutions. Financial Institutions Private Utility Providers Energy enterprises Students / Schools MSMEs Households Municipalities MFIs / Coops Farmers / Agribusiness Credit Unions Health Clinics

7 Standard Terms and Conditions DCA Guarantee Guarantees are structured to match the needs and requirements of identified lenders and/or borrowers within USAID policy and legal limits. 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 3 rd parties (gift authority) Principal only coverage, no interest Guarantee cannot be used to cover equity in any form Maximum tenor: 20 years

8 Loan Portfolio Guarantee L B B B USAID supported borrower class, though specific borrowers unknown at time of guarantee

9 Household Technology Guarantee Facility: Partnering with Impact Investors 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. Facility Size Partners Terms $100 M SIGNINA CAPITAL FUNDS AGmvK SOCIALALPHA INVESTMENT FUND (SAIF) SICAV-SIF CALVERT SOCIAL INVESTMENT FOUNDATION, INC Coverage c. 50% Partner 1 $25M Partner 2 $25M Partner 3 $25M 1 2 Reserve $25M 3 DCA Guarantee Financial partners make working capital loans to household technology businesses DCA provides a guarantee on the principal of each eligible loan 3 Reserve will be allocated based on financial partners ability to create the greatest riskadjusted impact 1 2 Household Technology Business Household Technology Business Household Technology Business Guarantee Ceiling Length Currency Sub-loan Maturity Maximum Loan Size Qualifying Borrowers Targeted Sector Qualifying Projects Targeted Geographies c. 36M 5 years Local currency loans months $5 M Manufacturers and Distributers of household technologies Environment, Health, SME Growth businesses operating throughout value chain Africa, Latin America, S/SE Asia

10 How do we define success? 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

11 Strategic Interventions Looking Forward Strategic, market moving investments and partnerships 1 Partnerships with multinational companies 2 Access to long-term financing 3 Leasing, insurance, and warehouse receipts 4 Development Impact Bonds (DIBs) 5 Municipal bonds and finance

12 Contact Information & Additional Resources Africa Megan Rapp Office Michael Metzler Strategic Finance Sean Keogh LAC / E&E Asia Romi Bhatia robhatia@usaid.gov Amanda Femal afemal@usaid.gov