The Development Credit Authority (DCA) was a programme within the

United States Agency for International Development The United States Agency for International Development (USAID) is an agency of the United States government that has been responsible for administering civilian foreign aid and development assistance. Established in 1961 and reorganized in 1998 ...

(USAID) that used to issue

loan guarantee A loan guarantee, in finance, is a promise by one party (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the ...

s which would act as collateral for private

loan In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money. The document evidencing the deb ...

s. The DCA could issue guarantees up to 50% of the loan. As the credits were backed by the full faith and credit of the U.S. government, private lenders could be assured particularly for loans made in local currency. It merged with the

Overseas Private Investment Corporation The Overseas Private Investment Corporation (OPIC) was the United States Government's Development finance institution until it merged with the Development Credit Authority (DCA) of the United States Agency for International Development (U ...

(OPIC) to form the U.S. International Development Finance Corporation (DFC) on December 20, 2019.

History

USAID's Development Credit Authority was created in 1999 to mobilize local private capital through the establishment of risk sharing relationships with private financial institutions in countries covered by USAID. The partial loan guarantees extended by USAID, through the DFC, allowed the U.S. Government to use credit to pursue the development purposes specified under the

Foreign Assistance Act The Foreign Assistance Act (, et seq.) is a United States law governing foreign aid policy. It outlined the political and ideological principles of U.S. foreign aid, significantly overhauled and reorganized the structure of U.S. foreign assista ...

(FAA) of 1961, as amended. These guarantees typically cover up to 50% of the principal of loans to entrepreneurs,

Small and medium-sized enterprises Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel and revenue numbers fall below certain limits. The abbreviation "SME" is used by many national agencies and international organiza ...

, and other projects that advance the U.S. Government's

international development International development or global development is a broad concept denoting the idea that societies and countries have differing levels of economic development, economic or human development (economics), human development on an international sca ...

objectives. Credit assistance's been used in areas such as

microenterprise A micro-enterprise (or microenterprise) is generally defined as a small business employing nine people or fewer, and having a balance sheet or turnover less than a certain amount (e.g. €2 million or PhP 3 million). The terms microenterprise and ...

and small enterprise,

privatization Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation w ...

of public services, infrastructure, efficient and

renewable energy Renewable energy (also called green energy) is energy made from renewable resource, renewable natural resources that are replenished on a human lifetime, human timescale. The most widely used renewable energy types are solar energy, wind pow ...

, and

climate change Present-day climate change includes both global warming—the ongoing increase in Global surface temperature, global average temperature—and its wider effects on Earth's climate system. Climate variability and change, Climate change in ...

. DCAs do not cover interest income lost: In a country that has, for example, a 30% interest rate, the interest income would represent almost 50% of the total loan value and is not insured via the DCA. In this case, the DCA covers 50% of the principal, but only 25% of the total loan exposure.

References

{{reflist

External links

USAID
United States Agency for International Development Development finance institutions