Crimson experts recently completed a Market Assessment and Action Package to facilitate a USAID Development Credit Authority (DCA) Loan Portfolio Guarantee (LPG) Program in Peru. The proposed DCA LPG program will provide a 50% risk guarantee for a $4 million portfolio of loans to qualified target borrowers. Borrowers will be small-scale agricultural producers in San Martin, Huanuco and Ucayali geographic zones. To date, the business operations of these agricultural producers have been hampered by the lack of access to formal credit.
The DCA LPG will be introduced through an innovative financial product, developed with the support of the USAID-funded Alternative Development Program. This product will allow targeted borrowers to access credit without prohibitive collateral requirements. Through this product, small-scale agricultural producers open a savings account and are extended a line of credit. When they sell their crops to buyers, the buyers deposit the sales proceeds into the individual savings accounts of each producer. The partner financial institution, in turn, uses the deposits as a source of funds to extend credit to the producers.
Agreements between the partner financial institution and select small-scale agricultural producers and buyers are in place and the partner financial institution has already pilot-tested the new financial product with more than 100 small-scale producers. With the additional assurance provided by the DCA LPG, the partner financial institution estimates that it can roll out the program to more than 2,000 small-scale producers and fully utilize the guarantee in just two years.