Development Credit Authority and Water Finance
USAID has structured Development Credit Authority (DCA) guarantees to improve the availability of affordable water and sanitation services around the world. A few examples are presented below:
India
In India, two DCA bond guarantees have mobilized a total of $29 million for improved water services. USAID guaranteed the issuance of two municipal bonds in India (Tamil Nadu in 2002 and Karnataka in 2003) to raise capital to invest in sanitation and water supply for low-income neighborhoods. The bonds were resold on the secondary market, and resulted in strengthened capital markets and water services in India.
Bulgaria
In Bulgaria in 2005, a DCA guarantee was developed to introduce municipal lending, following on recent legislation giving municipalities the ability to obtain financing. By using a DCA guarantee, USAID was able to capitalize on these recent legislative changes to support better municipal management. The municipality of Montana, for example, used its loan to rehabilitate its water and sewage systems, providing improved services for residents.
Serbia
USAID/Serbia used the DCA in 2005 to mobilize loans to municipalities for infrastructure improvements. This guarantee has resulted in a number of communities with improved capacity to finance necessary capital investments. One such loan was a € 1.4 million financing to the Municipality of Smederevo, which used the proceeds to install underground pipes that link the municipality to the water supply system.
Philippines
The Philippine Water Revolving Fund (PWRF) is a joint effort under the Clean Water for People Initiative between the United States and Japan to attract private investment in water and sanitation infrastructure. A DCA loan portfolio guarantee for $37.5 million was designed to re-guarantee loans covered by a local guarantor, the Local Government Unit Guarantee Corporation (LGUGC) aimed at water investments.
Kenya
In 2008, USAID/Kenya developed a partial credit guarantee designed to increase lending to community-managed small water enterprises. This initiative will increase access to water by reducing the collateral requirements of potential borrowers. In working with partners such as the Government of Kenya, and the World Bank’s Water and Sanitation Program and Global Partnership on Output-Based Aid, this guarantee will increase the availability of water to those who are underserved by the market.
Albania
In 2008, a multi-bank DCA guarantee mobilized $13.5 million to help Albanian municipalities access commercial credit for infrastructure projects. This guarantee complemented recent decentralization that gave local governments more authority for municipal management. These projects will allow for infrastructure investments including improving sewer and wastewater treatment, and better water supply.
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