Access to finance strategy shift made trade happen, review shows

Thursday, January 31 2013

Joe Lamport

Access to finance remains a significant constraint for thousands of companies across West Africa, but a strategic initiative launched by the USAID Trade Hub in 2009 has helped SME exporting companies finance their activities and grow, a review of the initiative shows.

Financing made possible a majojr order for Matamiss, an exporter in Ghana,
Financing made possible a majojr order for Matamiss, an exporter in Ghana.
“What made the USAID Trade Hub’s approach different was its attention to the details,” said Roger Brou, director of finance and a former banker himself. Brou reviewed the initiative with Amanda Fernandez, a Carana Corporation executive and development expert, and Peter White, a former commercial banker and investment officer with the World Bank’s International Investment Corporation (IFC). Carana Corp. implements the USAID Trade Hub.

“When I had an order from Pier 1, I didn’t have enough space and I needed more workers,” said Matilda Amissah of Matamiss, a pottery producer in Ghana. “It wouldn’t have been possible without financing. The Trade Hub brought me to Root Capital and that loan made it possible.”

“It sounds simple, but ultimately making loans comes down to detailed analyses of the opportunities complemented by a broad understanding of the financial landscape,” Brou said. “The USAID Trade Hub brought in financial service providers who worked one-on-one with companies – and crucially – with banks, handling each situation on its own.”

Three financial services providers worked with exporting companies across West A
Three financial services providers worked with exporting companies across West Africa under the USAID Trade Hub's revised strategy.

The results speak well of the approach: the financial consulting approach has facilitated over $20 million in loans and debt restructurings to exporting companies, most of them small.  This was done over a brief three year period.

The strong results only started to occur, however, after the USAID Trade Hub shifted its access to finance strategy in 2009. Up to that point, the project had studied the finance sector in the region and responded to specific requests from companies for help getting loans.

But in 2009, the project, following a pilot initiative undertaken with Ecobank, the International Executive Services Corps and VEGA, shifted its approach. In that initiative, USAID signed a memorandum of understanding with Ecobank to provide financing to USAID Trade Hub-assisted exporting companies and also created a Development Credit Authority Guarantee to assist the companies.

Over the course of a year, hundreds of companies and dozens of Ecobank account managers were trained and $1.2 million in financing was mobilized. The new strategy was based on that experience: it was oriented around performance-based contracts to three financial facilitators from across West Africa. They identified prospective financing candidates from the USAID Trade Hub’s portfolio of exporting companies and leveraged their own private sector and institutional relationships in the region.

“It has largely succeeded and it demonstrates the value financial facilitation,” said Amanda Fernandez of Carana. “Looking at the current context – the market dynamics and USAID’s and other donors’ prioritization of West Africa, there are exciting and urgent opportunities for expanded access to finance activities.”

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