WFP-P4P Annual Conference January 30, 2013

1. WFP-P4P Annual Conference January 30, 2013

2. DCA Aims to Shift the Paradigm of Financing Development Financing after DCA engages Traditional development financing Grants Commercial finance Grants Commercial finance Sustainability

3. Turning Local Wealth into Investments for Growth Domestic Credit Provided to Private Sector Percent of GDP Bank liquid reserves Percent of bank liquid reserves to bank assets Developing Developed SOURCE: World Development Indicators, 2010

4. DCA’s Standard Product

5. USAID-DCA / WFP-P4P Partnership Goals • Increase smallholder farmers’ ability to access finance to increase profitability and supply to WFP-P4P • Encourage financial institutions to • lend to agricultural value chains prioritized in USAID’s Feed the Future (FTF) strategies of four East African countries • Ethiopia • Kenya • South Sudan • Tanzania • accept direct contracts and forward contracts from WFP-P4P as a form of collateral substitution / market risk mitigant

6. USAID-DCA / WFP-P4P Partnership Methodology • Set up three new bilateral DCA loan portfolio guarantees (LPGs • Kenya ($15m, Kenya Commercial Bank) • South Sudan ($7m co-guaranteed with AGRA, Equity Bank, Kenya • Commercial Bank, Finance SS Ltd) • Tanzania ($10.3m, National Bank of Commerce) • Amended one existing DCA LPG • Ethiopia ($7.3m, Bank of Abyssinia, Zemen Bank) • Use existing USAID Mission-level technical assistance (TA) programs that link borrowers to the guaranteed lender • All multi-year programs launched in September 2013

7. 6 USAID-DCA / WFP-P4P Partnership DCA provides a loan portfolio guarantee for a financial institution to lend to FTF value chain actors, including producer organizations, aggregators, and traders Structure 1 DCA WFP, Other purchasers Direct contract/forward contract issued (in cases where WFP and other purchasers enter into these agreements) with producer groups and aggregators 2 2 5 1 USAID TA connects potential borrowers – including those with direct contracts or forward contracts – to the financial institution with a DCA guarantee 3 FTF value chain actors (i.e. producers, aggregators) TA provider Financial institution 3 3 FTF value chain actors fulfill contracts (where applicable) 4 4 Banks provide loans to FTF value chain actors (both pre- and post-production loans) using direct contracts and forward contract as either a risk mitigant or partial or full collateral substitution where applicable 5 6 FTF value chain actors repay loans

8. USAID-DCA / WFP-P4P Partnership Strengths • Structure • Based on shared goals • Both institutions focus on their core activities • Aligning efforts to increase TA effectiveness in the field • Process • Early MOU signing to demonstrate high-level commitment • Designated and committed HQ and country-level POCs • Led to increased country-level coordination • Regular communications

9. USAID-DCA / WFP-P4P Partnership Challenges • Staying on timeline • 12 months from concept to launch • Projects are each at least five years long • Clarifying roles • Maintain each organization’s key functions, focus TA efforts • Managing stakeholder expectations • Maintaining inertia and communication after launch • Encourage country-level contacts to coordinate to focus on implementation

10. USAID-DCA / WFP-P4P Partnership Beyond the Pilot • Incorporate structure into future agriculture focused DCA guarantees • Encourage country-level TA coordination even in the absence of DCA guarantee • Share successes and challenges broadly to inform other • local financial institutions considering lending against direct contracts and forward contracts (from WFP-P4P and others) • guarantors seeking to replicate the project

11. Questions