Development Credit Authority (DCA)

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Using the Development Credit Authority (DCA), USAID can issue guarantees that mobilize private financing for development activities. DCA guarantees are provided to private financial institutions that are willing to engage differently in business either by extending credit to disenfranchised sectors that have little or no access to financing and/or improving loan terms. DCA guarantees are designed to provide additional value and demonstrate to the market that targeted sectors are creditworthy. Each guarantee covers up to 50 percent of the loss a financial institution incurs when lending to targeted projects/businesses. USAID guarantees a fraction of the loss to encourage financial institutions to take more risk but also lend prudently since at least half of the loss is unsecured. By mobilizing private capital for development purposes, USAID leverages resources to have a greater and more sustainable impact. Across the world, for every USAID dollar spent on a DCA guarantee, an average of $30 of private credit is mobilized.

In South Africa, USAID has used the DCA model to provide municipalities with funding, for underserved entrepreneurs, and to families to rent, purchase, or rehabilitate their homes.

For more information, visit USAID/South Africa’s economic growth page.

Current Development Credit Authority Programs

Old Mutual Investment Group
Housing - US $123 million – (2) Loan Guarantees:  Real People $69.4 million and Doornkuil $53.6 million
Although South Africa is the strongest economy is sub-Saharan Africa, many remain unable to afford housing. In order to address this, USAID structured two local currency guarantees to enable South Africans to access the necessary finance to rent, own, or rehabilitate their housing. The first is a guaranteed loan to Real People, a financial services company providing innovative financial products to middle and lower income households in South Africa. The second, to Doornkuil, will finance the development of a large mixed use residential development catering to the affordable housing market.

FirstRand Bank
Agriculture - US $43 million - Loan Portfolio Guarantee
Over a decade after the end of apartheid in South Africa, blacks still struggle to achieve the economic opportunities afforded to whites. In 2008, USAID structured a guarantee on loans made by FirstRand Bank to emerging black farmers and black-owned agribusinesses in all of South Africa’s provinces, helping South Africa’s economy grow and fostering the development of an underserved sector.

Blue Financial Services (Blue)
Small and Medium Enterprises - US $20 million
Blue Financial Services is a growing lender to populations underserved by financial institutions. In 2009, USAID developed a guarantee to enable Blue’s Small Business Division to extend its risk profile in making loans to small and medium enterprises, thereby facilitating large-scale sustainable private funding to a greater number of small and medium enterprises which would not traditionally have access to credit.