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1 1 (July 18, 2017)

handle is hein.crs/govcdxz0001 and id is 1 raw text is: FF. ' riESE .$r. h ,q . i p\w -- , gnom go mppm qq\ , q I aS 11LIANJILiN, Updated July 18, 2017 U.S. Foreign Assistance: USAID Loan Guarantees The U.S. Agency for International Development (USAID), the leading humanitarian and development agency in the U.S. government, provides assistance through multiple mechanisms. Until the early 1980s, a significant portion of its assistance was provided in the form of concessional loans for development purposes, often for purposes of building economic infrastructure, in much the same way as the World Bank provides loans to developing countries today. Since then, it has provided almost all assistance on a grant (i.e., gift) basis. But the agency maintains two programs that issue loan guarantees: the Development Credit Authority (DCA) and sovereign loan guarantees. Both have grown in prominence in recent years. D ek,,ome.nt Credfit Akwh,onkY Although the DCA program was formally launched in 1999, it has its roots in several predecessor loan guarantee programs with discrete development purposes, including the Housing Loan Guaranty Program, originating in the 1960s, and the 1990s Micro and Small Enterprise Development Program. Like those programs, the DCA stimulates private sector lending for development purposes by employing the promise of U.S. government repayment typically of up to half of each loan in case of default. By lessening the liability to the lending bank, these partial loan guarantees encourage banks to make loans for purposes and for clients that they may have previously avoided as commercially unviable or too risky. DCA loan guarantees may be used to support any development purpose in any part of the world. In FY2016, nearly half of DCA guarantees issued by value (47%) promoted activity in energy; 26% focused on agriculture; 9% were multi-sector; 3%, environment; 4%, women; 3%, trade; 3%, health; and 2% supported infrastructure. DCA programs have always been prevalent in sub-Saharan Africa. In FY2016, 51% of the value of DCA guarantee assistance went to sub-Saharan Africa; 25% to Asia; 15% to Latin America and the Caribbean; 3% in Europe and Eurasia; and 6% was globally oriented. Often USAID technical assistance is provided at the mission level to reinforce the development purpose of the loans. ~~c~xa ;of DC'~A orCstc USAID guarantees vary in form. They may support a loan or a bond; they may support a loan directly from a specific bank to a specific single borrower or a loan to a borrower from a yet unidentified bank. The vast majority of DCA guarantees are loan portfolio guarantees in which bank loans are provided to a range of borrowers in one or multiple countries to be used for certain purposes. The duration of guarantees is defined in each agreement-most range from 5 to 20 years. Current appropriations legislation limits the amount of DCA-guaranteed loans provided to any one country in any one fiscal year to $300 million. It further restricts total U.S. participation in any year to no more than $1.75 billion in lending no matter the portion being guaranteed. Examples of 2016 DCA guarantees include the following: Burkina Faso. A guarantee will make $16 million available for lending to micro, small, and medium enterprises (MSMEs) along the non-cotton agricultural value chain: producers, agro-processing businesses, and businesses selling agricultural products. Kenya. $17 million in loans are expected to be provided to individuals, MSMEs, service providers and others in the agriculture, renewable energy, and water and sanitation sectors, all currently lacking adequate sources of financing. East and South Africa Regions. A guarantee will make $50 million available to support lending in the power sector for renewable energy generation and natural gas-fired generation, transmission, and distribution. Haiti. A guarantee will make $6 million available to support building of low- to moderate-income housing. India. A guarantee will mobilize $9 million to support a healthcare provider's early stage development of a primary care model. Table I. DCA Appropriations (in $ millions) FYI5 FY16 FY17 FY18req. Program Transfer Ceiling 40 40 50 60 DCA Administration 8.1 8.1 10.0 9.1 Annual Portfolio Limit 1,500 1,500 1,750 2,000 Source: Foreign Operations Budget Justification Documents. Ul'sFuqn'mq, tr D)CA Lc a, Each year, in the annual State, Foreign Operations, and Related Programs (SFOPS) appropriations, Congress specifies an amount up to which USAID may transfer funds from other accounts to support DCA loan guarantee programs. It also directly appropriates funding to support the administrative costs of the office that both runs the DCA program and administers sovereign loan guarantees. The level of program funding required is not the same as the level of actual lending that takes place as a result of the guarantees. First, as noted, the United States is usually only .O 'T

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