Editor's note: This post originally appeared on USAID's blog and is republished here with permission.
As I wrote last year on NextBillion, rather than using USAID's 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've been doing at the Development Credit Authority (DCA).
Credit guarantees are a cost-effective way to get local, private financing into the hands of credit-worthy borrowers. From low-income Haitians seeking to rebuild in Port-au-Prince, to women-owned small businesses in Kabul, to solar companies in Uganda, USAID is enabling private markets in the developing world to provide financing to the people who need it most.
This past year, DCA worked with 45 financial institutions in 23 countries in 2012 to unlock up to $525 million in private capital for under-served entrepreneurs in developing countries. The financing, made available through 34 partial credit guarantees, is the most USAID has mobilized in a single year.
An additional 39,000 small businesses will soon be able to access local financing because of the new USAID credit guarantees, reflecting the agency’s drive to leverage private sector resources for international development. Thanks to increased employment and other benefits for the families of these small business owners and their workers, these loans will translate into more than a million people whose lives have been improved by increased access to finance.
Learn more about DCA on our website.