 |
NOTE 6. Loans Receivable and Liabilities for Loan Guarantees
USAID operates the following loan and/or loan guarantee programs:
- Direct Loan Program (Direct Loan)
- Urban and Environmental Program (UE)
- Micro and Small Enterprise Development Program (MSED)
- Israel Loan Guarantee Program (Israel Loan)
- Development Credit Authority Program (DCA)
- Egypt Loan Guarantee Program
Direct loans resulting from obligations made prior to FY 1992 are reported net of allowance for estimated uncollectible loans. Estimated losses from defaults on loan guarantees resulting from obligations made prior to FY 1992 are reported as a liability.
The Credit Reform Act of 1990 prescribes an alternative method of accounting for direct loans and guarantees resulting from obligations made after FY 1991. Subsidy cost, which is the net present value of the cash flows (i.e. interest rates, interest supplements, estimated defaults, fees, and other cash flows) associated with direct loans and guarantees, is required by the Act to be recognized as an expense in the year in which the direct loan or guarantee is disbursed. Subsidy cost is calculated by agency program offices prior to obligation using a model prescribed by the Office of Management and Budget (OMB). Subsidy relating to existing loans and guarantees is generally required to be reestimated on an annual basis to adjust for changes in risk and interest rate assumptions. Direct loans are reported net of an allowance for this subsidy cost (allowance for subsidy). The subsidy costs associated with loan guarantees are reported as loan guarantee liability.
An analysis of loans receivable, loan guarantees, liability for loan guarantees, and the nature and amounts of the subsidy costs associated with the loans and loan guarantees are provided in the following sections.
The following net loan receivable amounts are not the same as the proceeds that USAID would expect to receive from selling its loans. Actual proceeds may be higher or lower depending on the borrower and the status of the loan.
Summary of Loans Receivables, Net
(Dollars in Thousands)
| |
FY 2005 |
FY 2004 |
| Net Direct Loans Obligated Prior to
FY 1992 (Allowance for Loss Method) |
$4,494,975 |
$5,780,367 |
| Net Direct Loans Obligated After
FY 1991 (Present Value Method) |
335,572 |
32,248 |
| Defaulted Guaranteed Loans from
Pre-1992 Guarantees (Allowance for Loss Method) |
269,702 |
295,637 |
| Total Loans Receivable, Net as
reported on the Balance Sheet |
$5,100,249 |
$6,108,252 |
Direct Loans
Direct Loans
(Dollars in Thousands)
| Loan Programs |
Loans Receivables Gross |
Interest Receivable |
Allowance for Loan Losses |
Value of Assets Related to Direct Loans |
| Direct Loans Obligated Prior to
FY 1992 (Allowance for Loss Method) as of September 30, 2005: |
| Direct Loans |
$5,867,779 |
$316,253 |
$1,688,991 |
$4,495,041 |
| MSED |
643 |
96 |
805 |
(66) |
| Total |
$5,868,422 |
$316,349 |
$1,689,796 |
$4,494,975 |
| Direct Loans Obligated Prior to
FY 1992 (Allowance for Loss Method) as of September 30, 2004: |
| Direct Loans |
$7,748,796 |
$296,481 |
$2,264,834 |
$5,780,443 |
| MSED |
677 |
89 |
842 |
(76) |
| Total |
$7,749,473 |
$296,570 |
$2,265,676 |
$5,780,367 |
| Direct Loans Obligated After FY 1991 as of September 30, 2005: |
| Direct Loans |
$1,043,132 |
$9,145 |
$716,853 |
$335,424 |
| MSED |
150 |
24 |
27 |
147 |
| Total |
$1,043,282 |
$9,169 |
$716,880 |
$335,572 |
| Direct Loans Obligated After FY 1991 as of September 30, 2004: |
| Direct Loans |
$259,542 |
$9,774 |
$237,215 |
$32,101 |
| MSED |
150 |
24 |
27 |
147 |
| Total |
$259,692 |
$9,798 |
$237,242 |
$32,248 |
Total Amount of Direct Loans Disbursed
(Dollars in Thousands)
| Direct Loan Programs |
FY 2005 |
FY 2004 |
| Direct Loans |
$6,910,911 |
$8,008,339 |
| MSED |
793 |
827 |
| Total |
$6,911,704 |
$8,009,166 |
Subsidy Expense for Direct Loans by Program and Component
(Dollars in Thousands)
| Direct Loan Programs |
Total Modifications |
Interest Rate Reestimates |
Technical Reestimates |
Total Reestimates |
| Modifications and Reestimates (FY 2005) |
| N/A |
$– |
$– |
$– |
$– |
| Total |
$– |
$– |
$– |
$– |
| Modifications and Reestimates (FY 2004) |
| MSED |
$– |
$– |
$(29) |
$(29) |
| Total |
$– |
$– |
$(29) |
$(29) |
Total Direct Loans Subsidy Expense
(Dollars in Thousands)
| Direct Loan Programs |
FY 2005 |
FY 2004 |
| MSED |
$– |
$(29) |
| Direct Loans |
– |
– |
| Total |
$– |
$(29) |
Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
(Dollars in Thousandss)
| |
FY 2005 |
FY 2004 |
| Direct Loan |
MSED |
Total |
Direct Loan |
MSED |
Total |
| Beginning Balance, Changes, and Ending Balance |
|
|
|
|
|
|
| Beginning balance of the subsidy cost allowance |
$237,215 |
$27 |
$237,242 |
$213,993 |
$879 |
$214,872 |
| Add: subsidy expense for direct loans
disbursed during the reporting years by component: |
|
|
|
|
|
|
| (a) Interest rate differential costs |
– |
– |
– |
– |
– |
– |
| (b) Default costs (net of recoveries) |
– |
– |
– |
– |
– |
– |
| (c) Fees and other collections |
– |
– |
– |
– |
– |
– |
| (d) Other subsidy costs |
– |
– |
– |
– |
– |
– |
| Total of the above subsidy expense components |
– |
– |
– |
– |
– |
– |
| Adjustments: |
|
|
|
|
|
|
| (a) Loan modifications |
$480,625 |
$– |
$480,625 |
$– |
$– |
$– |
| (b) Fees received |
– |
– |
– |
– |
– |
– |
| (c) Foreclosed property acquired |
– |
– |
– |
– |
– |
– |
| (d) Loans written off |
– |
– |
– |
– |
– |
– |
| (e) Subsidy allowance amortization |
(2,874) |
– |
(2,874) |
10,585 |
(716) |
9,869 |
| (f) Other |
1,887 |
– |
1,887 |
12,637 |
(107) |
12,530 |
| Ending balance of the subsidy cost
allowance before reestimates |
$716,853 |
$27 |
$716,880 |
$237,215 |
$56 |
$237,271 |
| Add or subtract subsidy reestimates by component: |
|
|
|
|
|
|
| (a) Interest rate reestimate |
– |
– |
– |
– |
– |
– |
| (b) Technical/default reestimate |
– |
– |
– |
– |
(29) |
(29) |
| Total of the above reestimate components |
– |
– |
– |
– |
(29) |
(29) |
| Ending balance of the subsidy cost allowance |
$716,853 |
$27 |
$716,880 |
$237,215 |
$27 |
$237,242 |
Defaulted Guaranteed Loans
(Dollars in Thousands)
| Loan Guarantee Programs |
Defaulted Guaranteed Loans Receivable, Gross |
Interest Receivable |
Allowance For Loan Losses |
Value of Assets Related to Defaulted
Guaranteed Loans Receivable, Net |
| Defaulted Guaranteed Loans from
Pre-1992 Guarantees (Allowance for Loss Method): FY 2005 |
| UE |
$382,264 |
$46,915 |
$159,477 |
$269,702 |
| Total |
$382,264 |
$46,915 |
$159,477 |
$269,702 |
| Defaulted Guaranteed Loans from Pre-1992 Guarantees (Allowance for Loss Method): FY 2004 |
| UE |
$452,432 |
$22,517 |
$179,312 |
$295,637 |
| Total |
$452,432 |
$22,517 |
$179,312 |
$295,637 |
Defaulted Guaranteed Loans from Post-1991 Guarantees
In FY 2005, the UE Program experienced $4.2 million in defaults on payments.
In FY 2004, the UE Program experienced $4.4 million in defaults on payments.
Guaranteed Loans Outstanding:
Guaranteed Loans Outstanding
(Dollars in Thousands)
| Loan Guarantee Programs |
Outstanding Principal, Guaranteed Loans, Face Value |
Amount of Outstanding Principal Guaranteed |
| Guaranteed Loans Outstanding (FY 2005): |
| UE |
$1,652,480 |
$1,652,480 |
| MSED |
47,427 |
23,714 |
| Israel |
12,987,372 |
12,987,372 |
| DCA |
911,071 |
405,810 |
| Egypt |
1,250,000 |
1,250,000 |
| Total |
$16,848,350 |
$16,319,376 |
| Guaranteed Loans Outstanding (FY 2004): |
| UE |
$1,832,755 |
$1,832,755 |
| MSED |
76,400 |
38,200 |
| Israel |
12,322,417 |
12,322,417 |
| DCA |
789,799 |
341,500 |
| Total |
$15,021,371 |
$14,534,872 |
| New Guaranteed Loans Disbursed (FY 2005): |
| UE |
$– |
$– |
| MSED |
– |
– |
| DCA |
177,254 |
88,627 |
| Israel |
750,000 |
750,000 |
| Egypt |
1,250,00 |
1,250,000 |
| Total |
$2,177,254 |
$2,088,627 |
| New Guaranteed Loans Disbursed (FY 2004): |
| UE |
$– |
$– |
| MSED |
5,000 |
2,500 |
| DCA |
250,233 |
109,417 |
| Israel |
3,350,000 |
3,350,000 |
| Total |
$3,605,233 |
$3,461,917 |
Liability for Loan Guarantees
(Dollars in Thousands)
| Loan Guarantee Programs |
Liabilities for Losses on
Pre-1992 Guarantees, Estimated Future Default Claims |
Liabilities for Loan Guarantees for Post-1991
Guarantees, Present Value |
Total Liabilities for Loan Guarantees |
| Liability for Loan Guarantees
(Estimated Future Default Claims for pre-1992 guarantees) as of September 30, 2005: |
| UE |
$195,344 |
$149,557 |
$344,901 |
| MSED |
– |
(1,811) |
(1,811) |
| Israel |
– |
1,066,734 |
1,066,734 |
| DCA |
– |
4,610 |
4,610 |
| Egypt |
– |
148,051 |
148,051 |
| Total |
$195,344 |
$1,367,141 |
$1,562,485 |
| Liability for Loan Guarantees (Estimated
Future Default Claims for pre-1992 guarantees) as of September 30, 2004: |
| UE |
$242,171 |
$103,788 |
$345,959 |
| MSED |
– |
(3,902) |
(3,902) |
| Israel |
– |
700,855 |
700,855 |
| DCA |
– |
(2,975) |
(2,975) |
| Total |
$242,171 |
$797,766 |
$1,039,937 |
Subsidy Expense for Loan Guarantees by Program and Component:
Subsidy Expense for Loan Guarantees by Program and Component
(Dollars in Thousands)
| Loan Guarantee Programs |
Interest Supplements |
Defaults |
Fees and Other Collections |
Other |
Total |
| Subsidy Expense for New Loan Guarantees (FY 2005): |
| DCA |
$– |
$4,297 |
$– |
$– |
$4,297 |
| MSED |
– |
1,110 |
– |
– |
1,110 |
| Total |
$– |
$5,407 |
$– |
$– |
$5,407 |
| Subsidy Expense for New Loan Guarantees (FY 2004): |
| DCA |
$– |
$993 |
$– |
$– |
$993 |
| MSED |
– |
1,466 |
– |
– |
1,466 |
| Total |
$– |
$2,459 |
$– |
$– |
$2,459 |
Subsidy Expense for Loan Guarantees by Program and Component
(Dollars in Thousands)
| Loan Guarantee Programs |
Total Modifications |
Interest Rate Reestimates |
Technical Reestimates |
Total Reestimates |
| Modifications and Reestimates (FY 2005): |
| UE |
$– |
$– |
$532 |
$532 |
| MSED |
– |
– |
– |
– |
| DCA |
– |
– |
211 |
211 |
| Israel |
– |
– |
187,892 |
187,892 |
| Egypt |
– |
– |
7,335 |
7,335 |
| Total |
$– |
$– |
$195,970 |
$195,970 |
| Modifications and Reestimates (FY 2004): |
| UE |
$– |
$– |
$2,194 |
$2,194 |
| MSED |
– |
– |
610 |
610 |
| DCA |
– |
– |
64 |
64 |
| Total |
$– |
$– |
$2,868 |
$2,868 |
Total Loan Guarantee Subsidy Expense
(Dollars in Thousands)
| Loan Guarantee Programs |
FY 2005 |
FY 2004 |
| DCA |
$4,508 |
$1,057 |
| UE |
532 |
2,194 |
| MSED |
1,110 |
2,076 |
| Israel |
187,892 |
– |
| Egypt |
7,335 |
– |
| Total |
$201,377 |
$5,327 |
Subsidy Rates for Loan Guarantees by Program and Component:
Budget Subsidy Rates for Loan Guarantees for the Current Year’s Cohorts
(Percent)
| Loan Guarantee Programs |
Interest Supplements (%) |
Defaults (%) |
Fees and Other Collections (%) |
Other (%) |
Total (%) |
| DCA |
– |
5,14% |
– |
– |
5.14% |
Schedule for Reconciling Loan Guarantee Liability Balances
(Dollars in Thousands)
| (Post-1991 Loan Guarantees) |
DCA |
MSED |
UE |
Israel |
Egypt |
Total |
| FY 2005 |
| Beginning Balance, Changes, and Ending Balance |
|
|
|
|
|
|
| Beginning balance of the loan guarantee liability |
$(2,975) |
$(3,902) |
$103,787 |
$700,856 |
$– |
$797,766 |
| Add: subsidy expense for guaranteed
loans disbursed during the reporting years by component: |
|
|
|
|
|
|
| (a) Interest supplement costs |
– |
– |
– |
– |
– |
– |
| (b) Default costs (net of recoveries) |
– |
– |
– |
– |
– |
– |
| (c) Fees and other collections |
– |
– |
– |
– |
– |
– |
| (d) Other subsidy costs |
4,298 |
1,110 |
– |
– |
– |
5,408 |
| Total of the above subsidy expense components |
$4,298 |
$1,110 |
$– |
$– |
$– |
$5,408 |
| Adjustments: |
|
|
|
|
|
|
| (a) Loan guarantee modifications |
– |
– |
– |
– |
– |
– |
| (b) Fees received |
1,443 |
209 |
2,591 |
29,250 |
137,250 |
170,743 |
| (c) Interest supplements paid |
– |
– |
– |
– |
– |
– |
| (d) Foreclosed property and loans acquired |
– |
– |
– |
– |
– |
– |
| (e) Claim payments to lenders |
(310) |
(586) |
(4,167) |
– |
– |
(5,063) |
| (f) Interest accumulation on the liability balance |
– |
– |
8,279 |
47,110 |
3,109 |
58,498 |
| (g) Other |
3,736 |
4,784 |
48,555 |
(14,153) |
– |
42,922 |
| Ending balance of the loan guarantee liability before reestimates |
$6,192 |
$1,615 |
$159,045 |
$763,063 |
$140,359 |
$1,070,274 |
| Add or subtract subsidy reestimates by component: |
|
|
|
|
|
|
| (a) Interest rate reestimate |
– |
– |
– |
– |
– |
– |
| (b) Technical/default reestimate |
(1,582) |
(3,426) |
(9,488) |
303,671 |
7,692 |
296,867 |
| Total of the above reestimate components |
$(1,582) |
$(3,426) |
$(9,488) |
$303,671 |
$7,692 |
$296,867 |
| Ending balance of the loan guarantee liability |
$4,610 |
$(1,811) |
$149,557 |
$1,066,734 |
$148,051 |
$1,367,141 |
| FY 2004 |
| Beginning Balance, Changes, and Ending Balance |
|
|
|
|
|
|
| Beginning balance of the loan guarantee liability |
$(1,014) |
$264 |
$175,521 |
$673,262 |
$– |
$848,032 |
| Add: subsidy expense for guaranteed loans disbursed during the reporting years by component: |
|
|
|
|
|
|
| (a) Interest supplement costs |
– |
– |
– |
– |
– |
– |
| (b) Default costs (net of recoveries) |
– |
– |
– |
– |
– |
– |
| (c) Fees and other collections |
– |
– |
– |
– |
– |
– |
| (d) Other subsidy costs |
993 |
1,466 |
– |
– |
– |
2,459 |
| Total of the above subsidy expense components |
$993 |
$1,466 |
$– |
$– |
$– |
$2,459 |
| Adjustments: |
|
|
|
|
|
|
| (a) Loan guarantee modifications |
– |
– |
– |
– |
– |
– |
| (b) Fees received |
– |
– |
2,468 |
88,200 |
– |
90,668 |
| (c) Interest supplements paid |
– |
– |
– |
– |
– |
– |
| (d) Foreclosed property and loans acquired |
– |
– |
– |
– |
– |
– |
| (e) Claim payments to lenders |
– |
– |
(4,380) |
– |
– |
(4,380) |
| (f) Interest accumulation on the liability balance |
– |
– |
3,528 |
55,987 |
– |
59,515 |
| (g) Other |
(765) |
(3,522) |
(71,514) |
19,512 |
– |
(56,289) |
| Ending balance of the loan guarantee liability before reestimates |
$(787) |
$(1,792) |
$105,621 |
$836,960 |
$– |
$940,005 |
| Add or subtract subsidy reestimates by component: |
|
|
|
|
|
|
| (a) Interest rate reestimate |
– |
– |
– |
– |
– |
– |
| (b) Technical/default reestimate |
(2,188) |
(2,111) |
(1,834) |
(136,105) |
– |
(142,237) |
| Total of the above reestimate components |
$(2,188) |
$(2,111) |
$(1,834) |
$(136,105) |
$– |
$(142,237) |
| Ending balance of the loan guarantee liability |
$(2,975) |
$(3,902) |
$103,787 |
$700,855 |
$– |
$797,766 |
Administrative Expense
(Dollars in Thousands)
| Loan Programs |
FY 2005 |
FY 2004 |
| DCA |
$9,615 |
$8,862 |
| UE |
217 |
594 |
| MSED |
2 |
161 |
| Total |
$9,834 |
$9,617 |
Other Information
- Allowance for Loss for Liquidating account (pre-Credit Reform Act) receivables have been calculated in accordance with OMB guidance using a present value method which assigns risk ratings to receivables based upon the country of debtor. Fourteen countries are in violation of Section 620q of the Foreign Assistance Act (FAA), owing $43.6 million that is more than six months delinquent. Eleven countries are in violation of the Brooke-Alexander Amendment to the Foreign Operations Export Financing and Related Programs Appropriations Act, owing $439.9 million that is more than one year delinquent. Outstanding direct loans receivable for countries in violation of Section 620q totaled $37.2 million. Outstanding direct loans receivable for countries in violation of the Brooke Amendment totaled $421 million.
- The MSED Liquidating Account general ledger has a loan receivable balance of $643 thousand. This includes two loans pending closure. These loans are being carried at 100% bad debt allowance.
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