USAID Innovations

The following is being released by the U.S. Agency for International Development:


Financing Developing Market Growth

The USAID Development Credit Authority (DCA) is an innovative model for development assistance that provides financial services and opportunities for underserved but creditworthy populations. By using private sector wealth to stimulate sustainable economic growth, DCA supports USAID’s poverty reduction goals in base of the pyramid markets while supporting growth in developing economies. Since DCA was established in late 1999, more than 267 partial credit guarantees have facilitated over$2.3 billion of private capital debt financing in more than 64 countries. Through the DCA guarantee mechanism, USAID is able to leverage an average of $28 in private sector funds for every dollar spent by the U.S. Government. Claims on the DCA portfolio are approximately 1 percent, demonstrating that the targeted borrowers are both a creditworthy and profitable source of business. After the 2004 and 2005 tsunamis in Indonesia, for example, DCA stepped up to provide loan guarantees for small- and micro-enterprises (SMEs). With a total of 4,805 loans in Aceh, North Sumatra, and Yogyakarta ($8.4 million, 51.4% of the total $16.3 million in guaranteed loans), the program inspired growth in SME-lending and agricultural lending of the implementing bank of 231%, doubling the number of local units, and increasing nationwide outstanding loan value from $332 million to $1.1 billion.

Maximizing economic opportunities and purchasing power for rural farmers

Rigorous evaluation is a crucial component of innovative projects, and it is a hallmark of USAID Development Innovation Ventures’ $230,145 grant to Innovations for Poverty Action in Sierra Leone. In Sierra Leone, poor farmers are often forced to sell their crops at harvest time, when prices are lowest, because they need immediate income and lack access to crop storage. In partnership with the Government of Sierra Leone and several banks, Innovations for Poverty Action is addressing these problems by allowing farmers to store crops with local banks, which then use the crops as collateral and give a loan to the farmer, erasing the damaging effects of price seasonality.  The approach will be rigorously tested for palm oil producing farmers, which make up 50% of households in Sierra Leone but could be adapted for use with other agricultural products that exhibit seasonal price volatility. A randomized evaluation will assess the impacts of the program, which are expected to include increased incomes, investment, savings, and food security among farming households. In a prior proof of concept stage, results indicate that farmers were able to sell their crops at prices that are 50% higher than the usual sale price, increasing the average farmers’ annual income by 25%.

Empowering women to protect themselves from HIV

The potential to reach wide scale adoption is an important aspect of cost-efficient innovations. According to 2008 data from UNAIDS, an estimated 33.4 million people are living with HIV worldwide, with the virus continuing to infect more than 2 million people each year. In sub-Saharan Africa, where USAID has invested in the research and development of microbicides, women constitute nearly 60 percent of HIV infections. Microbicides are products that women can apply vaginally prior to sexual intercourse to greatly reduce the risk of HIV transmission. Most recently, the Centre for the AIDS Programme of Research inSouth Africa (CAPRISA) 004 microbicide trial, funded by USAID and the South African Technology Innovation Agency ($16.5 million and $1.1 million, respectively), produced evidence for the first time that a microbicide may effectively and safely reduce the risk of HIV and genital herpes transmission from men to women. Women who used the microbicide gel experienced an overall 39 percent lower HIV incidence rate than those who did not. In addition, the gel reduced the risk of acquiring genital herpes by 51%. Women who contract genital herpes are about 45% more likely to become infected with HIV than those who do not. Statistical modeling conducted by CAPRISA 004 researchers estimate that this microbicide can prevent up to 1.3 million new HIV infections and over 800,000 deaths over the next 20 years in South Africa alone.

Global Alliances for Effective Disaster Relief

In a series of innovative new partnerships, USAID has created an integrated strategy for identifying strategic partners to respond quickly to natural disasters, enabling USAID connections and expertise to leverage and mobilize private sector resources. These partnerships address each stage of USAID disaster relief: preparedness and mitigation, acute response, recovery, reconstruction, and transition. After the 2005 earthquake in Pakistan, President Bush called on private sector CEOs to establish the South Asia Earthquake Relief Fund (SAERF), which – along with the Committee Encouraging Corporate Philanthropy – administered nearly $ 20 million to NGOs for relief, reconstruction, and rehabilitation. USAID technical staff provided key expertise to this powerful partnership. In Angola, where ChevronTexaco has a local presence, USAID solicited $10 million in matching funds for a $20 million post-conflict portfolio that included agricultural extension services; bank guarantees to provide credit for small- and micro-enterprises (SMEs); and vocational training, placement, and small-business opportunities for ex-combatants.

Reducing maternal mortality

Cost-effective technological innovations can affect drastic improvements in aid delivery, especially in the health sector. With a$100,000 grant from USAID’s Development Innovation Ventures, Jhpiego Corporation is developing an affordable, reliable test to detect pre-eclampsia among pregnant women. Pre-eclampsia and eclampsia are the second highest cause of maternal deaths worldwide. Current tests are too costly for poor women and involve lab work or multiple trips to the health center. This self-test is significantly cheaper and is designed to be easy for both semi-literate health care workers and pregnant women to use. Pre-eclampsia detection test costs are expected to be significantly reduced to $0.0033 per test compared to as much as$1.50 for a comparable test using current practices, a 97% reduction in cost. The cost of detection using current test methods in developing countries alone could exceed $1.1 trillion per year. If this technology were widely adopted, the annual cost of the test could drop to $3 million.

Fighting Global Trafficking with Brand Appeal

Innovative projects are especially successful when elements such as powerful partnerships and rigorous impact evaluation are combined. USAID and MTV Networks, for example, together have developed an innovative method to fight human trafficking through MTV EXIT (End Exploitation and Trafficking). From 2006 to 2010, this fruitful partnership leveraged $20 million in partner contributions to reach more than 300 million households in over 25 countries. Music stars and brand appeal have brought unprecedented visibility to a plight that affects over 2.5 million people each year.

Collaborating artists who have donated their support include Radiohead, The Killers, Muse, Placebo, Thievery Corporation, and others who have joined tours across Asia and Europe, including the first-ever live concert at Angkor Wat. High quality impact evaluations by independent monitor Rapid Asia utilize baseline surveys and evaluations before and after MTV EXIT events. Each will use a control group. Preliminary results indicate that the program not only increases awareness of human trafficking but also reduces the likelihood among vulnerable populations of becoming a part of the human trafficking chain. Project results and reporting are not yet available to the public.

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SOURCE U.S. Agency for International Development