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Development Credit Authority

Development Credit Assistance FY 2003 Actual FY 2004 Actual FY 2005 Appropriation FY 2006 Estimate Credit Subsidy Transfer authority for DCA [5,859] [20,876] [21,000] [21,000] Administrative Expenses Appropriation for DCA 7,542 7,953 7,936 8,000

The Development Credit Authority (DCA) is a broad, general funding authority enacted by Congress that allows USAID to issue partial guarantees of up to 50% for development purposes. DCA augments grant assistance by mobilizing private capital in developing countries for sustainable development projects, thereby supporting the capacity of host countries to finance their own development. DCA guarantees work with a combination of grant-financed training and technical assistance for creditworthy but historically underserved markets. While DCA can support any sector with adequate cost-recovery potential, experience has shown that it is especially effective in stimulating economic growth and agricultural development.

In FY 2004, DCA was used to channel $18 million in loan capital to agribusiness lending in Ethiopia, and $5 million to stimulate student loan access for lower-to middle income students in Panama. In Kazakhstan, DCA was used to finance energy efficiency improvement projects in schools and hospitals and infrastructure improvement for regional electric distribution companies. DCA also proved useful in promoting commercial bank lending to farmers posting warehouse receipts for crops as collateral in Zambia.

In FY 2005, DCA will fund the development, implementation and financial management ($7,936,000) of all USAID credit programs and will use transfer authority ($21,000,000) for the subsidy cost associated with using DCA to guarantee loans and loan portfolios. This will support an innovative program to finance water and sanitation facilities in developing countries under the Presidential Water Initiatives. It will also support ongoing activities such as small and medium-size enterprises lending in the West Bank and Gaza, agribusiness lending in Ghana and Kenya, and renewable energy, energy efficiency, and clean production project finance in El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

For FY 2006, USAID plans to fund the development, implementation and financial management ($8,000,000) of all USAID credit portfolios and will use transfer authority ($21,000,000) for the subsidy cost associated with using DCA to guarantee loans and loan portfolios. The transfer authority will be used to guarantee loans and loan portfolios in every region of the globe and in every economic sector targeted by USAID including micro, small and medium-size enterprise development; competitive financial services; creative municipal financing; mortgage lending; and clean energy and clean water initiatives.

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