USAID FinGAP Assessment of Incentive Grants and Training Programs on Investment Facilitation

The project focuses on providing training and incentives to participating financial institutions (PFIs) to enhance their capacity to disburse agriculture value chain financing (AGVCF). The assessment evaluates the impact of generic and institution-specific trainings, as well as pay-for-performance grants (P4P grants), on 22 PFIs. A results chain was developed to guide the assessment, anticipating short-term outcomes within the first two years of PFI trainings and P4P grants' utilization, and medium-term outcomes taking three to five years to manifest. The sample consisted of 22 PFIs, including five commercial banks, nine rural and community banks, three savings and loan companies, and five microfinance institutions. The assessment found that PFIs' practices and performances changed as a result of the training programs. The top five PFIs in terms of disbursement and SMiLEs (Small, Medium, including Large Enterprises) showed significant improvements in their ability to disburse finance to maize, rice, and soy value chains. The P4P grants also had a positive impact on PFIs' practices and performances, with 75% of PFIs utilizing grant payments to purchase goods and services. The assessment also found that trainings and P4P grants enabled PFIs to expand their reach to new agribusinesses and to other clients. The health of PFIs' agriculture portfolios improved, with 80% of PFIs reporting an increase in the size of their agriculture portfolios. The assessment concluded that the shift in the way PFIs disburse agricultural financing is likely to be sustainable even without USAID FinGAP support. The assessment identified several key features of USAID FinGAP that were important for an improved capacity to disburse AGVCF. These included the provision of technical assistance, the use of P4P grants, and the development of a results chain to guide the assessment. The assessment also highlighted the importance of institutional focus on agriculture as a viable business line, and the need for PFIs to develop a clear understanding of the agriculture value chain. The findings of the assessment have implications for the design and delivery of PFI trainings and P4P grants. The assessment recommends that future trainings and grants programs should focus on building the capacity of PFIs to disburse AGVCF, and that PFIs should be encouraged to develop a clear understanding of the agriculture value chain. The assessment also recommends that PFIs should be incentivized to expand their reach to new agribusinesses and to other clients, and that the health of PFIs' agriculture portfolios should be regularly monitored and evaluated. The assessment was conducted by the Palladium Group, with funding from the United States Agency for International Development (USAID). The assessment was based on a sample of 22 PFIs, and used a results chain to guide the evaluation. The assessment found that the USAID FinGAP project has had a positive impact on PFIs' practices and performances, and has improved the health of PFIs' agriculture portfolios. The assessment concluded that the shift in the way PFIs disburse agricultural financing is likely to be sustainable even without USAID FinGAP support.