Strengthening DCA and Local Organizations—Even During an Ebola Outbreak
In Liberia, the VEGA LWA built the capacity of partner banks to fully utilize USAID’s Development Credit Authority (DCA) risk guarantee and provided technical assistance to SMEs through the Liberia Investing for Business Expansion Program (IBEX), which was managed by VEGA and implemented by VEGA Member IESC. USAID/Liberia created IBEX following underutilization of USAID’s DCA, a loan-guarantee program for partner banks in Liberia covering up to 50% of a lender’s loss on the guaranteed portion of a loan. DCA was designed for countries such as Liberia, where SMEs cannot gain access to credit due to a lack of information on their creditworthiness and high rates of default. In FY 2009, USAID provided an $11.1 million guarantee under the DCA for partner banks lending to SMEs in the agriculture and renewable energy sectors; by 2012, the guarantee remained unused.
IBEX was designed as a facilitation program to link creditworthy SMEs with banks and consisted of three components. Component one provided SMEs with technical assistance in business development services, such as preparing business plans, completing loan applications and providing the owner with the business and financial management skills needed to succeed. Component two worked with DCA partner banks to develop small-business lending portfolios and provide technical assistance in evaluating loan applications. Component three ensured the sustainability of the program after its completion by actively developing an exit strategy and working with the National Business Development Advisory Center to ensure that it could provide ongoing technical assistance to SMEs and banks.
What made IBEX special, however, was that these objectives were only the starting point, thanks to the creative and untiring work of Chief of Party (COP) Watchen Bruce, her staff and seven skilled volunteers who together provided more than 100 days of service. “We call ourselves financial doctors,” Ms. Bruce described IBEX. “We analyze the problem and come up with solutions.” In providing technical assistance for DCA partner banks, Ms. Bruce recognized that others could benefit from the training IBEX offered, so she invited credit unions to participate at the same time. Similarly, when IBEX could not provide financial management for all the businesses looking for IBEX assistance, IBEX partnered 25 college students with SME beneficiaries, giving SMEs access to below market-rate accounting services and adding workforce development to the IBEX portfolio.
Ms. Bruce, a former banker based in Maryland, is an active representative of the Liberian diaspora. She is a member of the Maryland Liberia Sister State Executive Committee and the Maryland Governor’s Commission of African Affairs. In IBEX, Ms. Bruce saw a way to contribute to the economic development of her birth country. She has also made good use of her network, tapping other diaspora members to provide volunteer technical assistance under IBEX.
The impact volunteers have is huge because they are not charging customers. Clients know they are not doing it for the money, they are doing it to help; this builds immediate trust.
– Watchen Harris Bruce, IBEX Chief of Party
Highly skilled volunteers were key to the success of IBEX. Lucretia Freeman-Buster, a Liberian-American and the associate director of the D.C. Small Business Development Network at Howard University’s School of Business in Washington, DC, was eager for the opportunity to return to Liberia and give back by sharing her knowledge and experience to help people get back on their feet after the civil war. Over a two-week period, she trained 40 bankers from 10 financial institutions on best practices, policies and standards in underwriting and lending to small businesses. Lucretia was struck that the banking system lacked many standards for analyzing risks or markets, and many bankers did not know how to analyze financial statements. Without these basic tools, banks could not follow set processes for loan approval.
She also trained business service providers to teach them how to work with businesses, many of which were not registered and had no legal documents and few resources for obtaining capital and growing. She brought various sample business plans for a range of sectors to instruct people in how to of sectors to instruct people in how to write business plans, and many businesses and service providers are still using these samples today. She has stayed in touch with many of the bankers she trained and responds to their calls for information about particular industries or help analyzing cash flow and collateral when approving loans.
In March 2014, two years into the IBEX program, the horrific Ebola outbreak in West Africa occurred. Due to this crisis, many fell ill and many lives were lost. In addition, throughout the region livelihoods were put at risk as many SMEs struggled to survive. Despite the significant restrictions on the movement of people, goods and money brought about by efforts to control Ebola, IBEX’s local experts continued to provide Liberian SMEs with essential advice and mentoring on acquiring loans and accessing credit. In addition, the IBEX team continued to work with the banks and borrowers to restructure loans to allow for more flexible repayment terms for those adversely affected by the Ebola outbreak.
With Liberia beginning to get back on its feet after the civil war, I thought it was a great opportunity to share my knowledge with bankers and business technical assistance providers because that’s what I do.
– Volunteer Mike Sturdivant
IBEX’s accomplishments did not go unnoticed. In July 2014, IBEX received the Golden Image Award, International Category, for Economic Empowerment of Local Businesses—a national award given each year by the Liberia Crusaders for Peace to organizations that “have made a selfless contribution to peace and humanity, nationally and internationally.” United States Ambassador to Liberia, Deborah Malac, attended the award ceremony honoring IBEX.