Financial Inclusion for Rural Microenterprises Quarterly Report: April – June 2012

The program, implemented by DAI, focuses on providing financial inclusion to small-scale farmers, microfinance institutions, and other rural microenterprises. FIRM's work in agriculture finance continued to expand during the reporting period, with the program growing its existing relationships with current partners and initiating new activities. The program also made significant gains toward the realization of important program indicators, including the development of a relationship with FMO, a Dutch development bank, to partner with the Kenyan Pension Fund Initiative on private equity. FIRM facilitated several exchange visits and exploratory meetings with key industry participants, including the Fund Manager's Association and individual pension funds. The program also worked closely with USAID Washington and Kenya to structure three new loan guarantee facilities, including a USD 13 million, 7-year, competitive/multi-party loan portfolio guarantee (LPG) co-guaranteed by the Swedish International Development Agency (Sida). The LPG facility is designed to encourage three proposed partner financial institutions to lend to the agriculture and energy sectors in Kenya. The three institutions, Kenya Women's Finance Trust (KWFT), Micro Africa, and SMEP, will enter into one multi-party agreement that lists the two guarantors' specific guarantee percentages and the initial maximum cumulative disbursements (MCD) designated to each partner institution. The expected results of the LPG facility include the facilitation of the flow of up to $13 million to borrowers operating projects in the agriculture and energy sectors, an increase in the partners' related lending measured by client base and loan portfolio, and a reduction in collateral requirements. The outcomes of the guarantee include a larger lending portfolio to borrowers engaged in the agriculture and energy sector, the establishment and/or deepening of the credit histories of targeted borrowers, and the continuation of lending to those borrowers with which the partners had a positive lending experience. The impacts of the LPG facility include the strengthening of the interest of other microfinance institutions (MFIs) in lending to the agriculture and energy sectors, the incenting of more MFIs to institute agriculture and energy lending programs characterized by longer loan tenors, and the potential for increased access to financial services for rural microenterprises in Kenya. FIRM's work in policy continued with the National Economic and Social Council in credit guarantee schemes and with the Kenya Credit Information Sharing Initiative. The program also expanded partnerships with financial institutions in agriculture, clean/renewable energy, and ICT, and further prepared two new Development Credit Loan guarantee facilities. The program's quarterly report highlights major process achievements that will significantly and positively contribute to performance results. The report also discusses potential changes and provides analysis as appropriate. FIRM anticipates that it will report on quantitative targets in the September and Year End quarterly reports. FIRM's budget for the reporting period was USD 1.4 million, with a total budget of USD 5.6 million for the fiscal year. The program's budget analysis indicates that FIRM is on track to meet its budget targets, with a total expenditure of USD 1.3 million for the reporting period. Overall, FIRM's work in the reporting period demonstrates significant progress toward the realization of important program indicators, including the development of relationships with key industry participants, the structuring of new loan guarantee facilities, and the expansion of partnerships with financial institutions. The program's quarterly report highlights major process achievements and provides analysis of potential changes and their impact on performance results.