DCA Loan Guarantee Proves Particularly Successful for Women Entrepreneurs

  • IMPACT Highlights

DCA Loan Guarantee Proves Particularly Successful for Women Entrepreneurs


Asnakech Thomas, Diaspora owner of Amaro Gayo Coffee Mill, was able to utilize USAID’s DCA loan facility to expand her exports of her premium brand of specialty coffee.

When USAID/Ethiopia initiated its loan guarantee credit facility in 2009, its principal aim was to mitigate the perceived risk of lending to women entrepreneurs and Diaspora investors. The facility has proven particularly success for women. Since the activity’s inception, over 4 million USD in loans have been extended to both local and Diaspora women borrowers. These entrepreneurs run the gamut, from import distributors to garment manufacturers.

“Due to the availability of a collateral guarantee from USAID, my company was able to access ten times the amount of financing than I would have without the guarantee,” notes the owner of MAKY, a local import and distribution company. “The loan allowed me to purchase and distribute materials in mass quantity and to introduce new product lines.”

The DCA program has also gone a long way in helping to change the perception of women borrowers in the banking community at large. According to Bank of Abyssinia representatives, women borrowers are “clearly credit worth” based on the performances of the women so far. “Lending to this customer category is unquestionable.”

Nib International Bank has similar things to say about its women borrowers. “The USAID DCA credit guarantee has been a source of confidence to the bank in mediating risks associated with financing projects/businesses owned by local and Diaspora women entrepreneurs.” It also stated that lending to this customer category without the guarantee would have limited the size of credit exposure to this customer group.

Expert Volunteer Assistance

The VEGA AGOA+ Program utilized IESC Volunteer Experts (VEs), Geek Corps Volunteers (GCVs) and professional consultants to impart business expertise and information technology (IT) skills to firms, government institutions and business membership organizations servicing the private sector. Over the life of the program, 18 VEs, of which six were Ethiopian Diaspora volunteers, completed 19 projects. An additional seven senior level experts, including two Ethiopian Diaspora, completed Short-term Technical Assistance (STTA) projects. Where appropriate, the VEGA AGOA+ strategy for its VE consultancies involves: (1) needs-based approach that responds to a specific business and/or organization problem identified by the beneficiary, (2) targeted expertise aimed to solve real problems that the beneficiary encounters on a daily basis and (3) utilization of VEs as a gateway to market products from the companies they support.

Examples of successful volunteer experts include:

  • Training to local banking staff from Finance VE on basic credit analysis, risk management, financial statement analysis for SMEs, with a sector specific case study session dedicated to the agriculture section.
  • Onsite assessment and training from Customs VE to the Ethiopian Revenue and Customs Authority (ERCA) on US entry requirements for GSP/AGOA privileges, international customs standards, and ways to increasing operational efficiency within in the Ethiopia customs system.
  • Briefing from horticulture VE on how to prepare and what to expect at the Miami International Flower Show. Focus was placed on how to handle logistics and support during the show.
  • Hands on training and mentoring visit to Muya Ethiopia Plc from handicraft VE that covered market-led product development and design for pottery handicrafts and tactics to penetrate new markets.

Program Background and Impact

The VEGA AGOA+ program was a six year program providing export capacity building and trade facilitation assistance with life of program funding totaling $3,424,278 U.S. dollars (USD).

Since the beginning, VEGA AGOA+ undertook three primary activities: (1) trade capacity building and export promotion, (2) institutional strengthening for Business Membership Organizations (BMOs) and government agencies and (3) promoting access to finance – first through investment finance from the Diaspora and later loan finance through USAID’s DCA loan guarantee program. Particular focus was placed on support to small and medium sized enterprises (SMEs), women entrepreneurs and Diaspora investors.

As a result, Ethiopia AGOA/GSP exports have increased from three million USD in the 2005 baseline year to 10.3 million USD in 2010. Based on sales estimates from AGOA trade show orders the total value of AGOA/GSP exports for the last half of 2011 will put Ethiopia at around USD $15 million. Even using more conservative figures for 2011, Ethiopia will have seen an increase of between than 400- 500% from the Program’s inception. Sales directly attributed to AGOA+ grew from a little over a million dollars in 2005 to 5 million USD in 2011, yielding a life of project total of USD $19.07 million. For every dollar spent, the USAID Mission saw $4.57 US in export trade generated from program activities.

VEGA AGOA+ also assisted 1,920 firms with advice, information and technical support, creating 5,668 new job opportunities linked to AGOA-related trade. The Program sponsored 21 different events to bring buyers from the textiles and apparel, leather, and handicrafts from the U.S. to explore market linkages with Ethiopian firms.  In addition, 58 firms attended 21 different trade show and other business to business events as a result of program activities. This assistance has translated into 19 million USD in sales under AGOA, directly attributable to the Program.

The program provided USD 158,240 in volunteer donated services as cost share to the program, more than doubling the budgeted amount of USD 76,800. A total of 18 volunteers completed a total of 19 projects. Of the 18 volunteers, six (6) were Ethiopian Diaspora.

Finally, as a result of DDI activities and DCA loan guarantee, VEGA AGOA+ mobilized nearly USD 6.5 million in private finance through loans extended to 22 women and 36 Diaspora-owned businesses. The latter translated into approximately 1,053 new jobs. In addition, 223 firms received program assistance to improve their management practices through the facility’s proposals review, analysis and commenting process. Further, three trainings and technical assistance to 124 bank personnel was provided by VEGA AGOA+ to introduce new loan assessment techniques so that Diaspora and women entrepreneurs are viewed as distinctive clientele with a unique profile and methodology for underwriting loans.