DEVELOPMENT
CREDIT AUTHORITYDCA
PRESENTATION TO FTF PARTNERS 2nd
QUARTRLY COORDINATION MEETING
EXECUTIVE SUMMARY
• DCA programs have been in Ethiopia for 13 years and facilitate
increased lending via partnerships with local lenders
• Current Ethiopian DCA have been expanded to provide
enhanced coverage to agriculture and health care industries
• More than US$20 million combined is available for agriculture
and health care loan guarantees, with the objective to
increase lending and grow the equipment leasing market
• Serengeti Capital gives Technical Assistance to this program
focusing on both Borrowers and Banks
MAJOR OBJECTIVES OF DCA PROJECT
• Loan guarantee scheme (50%) with local banks supporting
small and medium enterprises in various sectors
• Support the development of key sectors and financial markets
• Mobilize local cash, encourage local markets, and explore new
sectors and activities
• Demonstrate the sustainability and profitability in tradition
under represented economic sectors
OVERVIEW OF DCAs
Background
Approach
• Broad financing authority
allowing private sector bank
resources to have a greater and
sustainable impact in supporting
economic growth
• Partnership agreements with
local private banks
• Have been used by USAID/
Ethiopia since 1999 to stimulate
lending to underserved markets
• Partner banks reimbursed the
net principal on default loans
covered under the agreement
• Past target groups include SMEs
in priority members of the
Diaspora community and
women entrepreneurs focusing
on Agriculture related activities.
• All loans made with partner
banks’ funds
• USAID guarantees 50% of
borrower’s collateral need
• Due diligence and credit
decisions made by lender
CURRENT ETHIOPIAN DCA
Structure
• Agricultural Equipment Financing DCA
• Health Care DCA
• Diaspora DCA
• Women DCA
PROPOSED DCA STRUCTURE
Health care
• A US$13.5 million, multi-bank loan portfolio guarantee
for private health providers offering HIV/AIDS and TB
services
• Equipment financing facility shared by two private
commercial banks - NIB Bank and Bank of Abyssinia
Agriculture
• A US$7.3 million, multi-bank loan portfolio guarantee
for six years
• Equipment financing facility shared equally by two
private commercial banks - Bank of Abyssinia and
Zemen Bank
EXPECTED IMPACT
Results
• Partner banks increase lending in agricultural sector
– especially financing for agricultural equipment
• Targeted small holder farmers and agro-processing
industries will have opportunity to accumulate
capital assets that enable them to maximize their
farming activities
Long-term
goals
• Partner banks develop own strategy for expanding
lending to targeted businesses without a guarantee,
perhaps via leasing subsidiaries or expanded lending
via intermediaries to agricultural sector
• Additional local financial institutions will introduce
equipment leasing businesses/ subsidiaries or, at a
minimum, increased lending to this sector
SERENGETI CAPITAL’S ROLE
Health care
Agricultural
equipment
leasing
Technical
assistance
Women
entrepreneurs
Diaspora
• Provide technical assistance
under the various programs as
follows:
– Serve as a point of contact
for DCA implementation &
monitoring
– Provide borrower focused
TA
– Provide bank focused TA
BORROWER FOCUSED TA
TA SUPPORT PROCESS
Step 1
Contact Serengeti Capital,
Ethiopia
• Before approaching the bank, email or call the Serengeti’s Ethiopia office
to make an appointment. Serengeti’s role is to guide beneficiaries
through the process and facilitate a relationship with the bank. Interested
parties should come prepared with a business plan. Serengeti will review
business and may recommend amendments
Step 2
Assemble required
documents
• Loan applicants must obtain documents listed below. If an applicant does
not have these documents and do not know how to acquire them,
Serengeti Ethiopia will give information on how to do so.
Step 3
Submit application to
appropriate bank
• After completing step two, Serengeti Ethiopia will write a TA support letter
recommending beneficiary to the banks. Banks will not process the loan
application under the DCA without this certification.
• Banks will also conduct their own appraisal before granting credit
BORROWER FOCUSED TA
Business
development
• Assist with business plan development
• Review Business plan and cash flow projections
• Appraise Feasibility studies
• Advise on bank regulations and guidelines
• Business registration assistance
• Training on business functions
Potential
lenders
• Help potential borrowers understand how lending
process functions
• Link potential borrowers with appropriate banks
BORROWER FOCUSED TA
CHECK LIST OF REQUIREMENTS FOR LOAN APPLICATION
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Application letter
Yellow card
Tax identification No.
Feasibility study/Business plan
Valid license/registration No.
Investment permit
Article and memorandum
Association/PLC/SC
 Delegation of Authority for
signing loan contracts
 Company board resolution to
borrow
 Original collateral documents
(e.g. Title deed, car ownership
booklet, etc…)
 Consent of mortgagor (if
property owned by third party)
 Evidence of marital status
 Financial statements/S;I/S;C/F)
 Invoices
 Bills of quantity
 Credit information from other
banks
BANK FOCUSED TA
Capacity
building
• Training on how to administer the DCA guarantee
• Training on credit-risk analysis and cash-flow lending
• Pre-screening and referrals of potential beneficiaries
• Conducting field visits with bank staff to observe
potential projects and borrowers
Marketing
assistance
• Designing and promoting a lending product using
the guarantee
• Advising on setting up specific lending units in the
Bank to promote new products around guarantee
• Outreach to potential borrowers targeted by the
guarantee
QUESTIONS?