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Central to the development of any economy is
an active financial and investment community to finance local
businesses, entrepreneurs, and projects. Many developing countries,
however, lack a vibrant capital markets system. Banks and
investors maintain overly conservative lending and investment
policies, constraining business activity. TCGI works extensively
with governments, nonprofits, and businesses to structure
sound business financing activities/programs in developing
countries. Our approach on project finance, small and medium
enterprise and microfinance, and trade and investment finance
is to:
Design sustainable projects.
We believe all successful business finance projects must meet
two requirements: economic and financial viability, to be
sustainable in the long term. Our project work is characterized
by:
Rigorous financial analysis. As part of our
due diligence process, we perform extensive financial analysis
on the project to ensure financial viability. Drawing on past experience with USAID Development
Credit Authority (DCA), we are experienced professionals
in evaluating businesses and projects in the context of
a developing market. Our evaluation work ranges from: microfinance
feasibility studies to project finance valuations.
Market-based solutions. TCGI believes in
utilizing the “markets” where possible to engage
the private sector in participating in the activity, whether
as an investor, lender, or guarantor. Not only is the private
sector a source of capital, but also a tool for increased
accountability. By tying the project to the private sector,
projects are generally forced to adopt more stringent business
practices. In financing a water project in Jamaica, for
example, commercial lenders were encouraged to supplement
government-related financing.
Multilayered financing. Recognizing that
many of the investment activities we work with are perceived
to be risky by local banks and investors, TCGI, where necessary,
spreads risk amongst several private sector players. In
doing so, we are able to lower the risk of any one individual
investor and make the investment opportunity more attractive.
In the refinancing of loans made by the Tamil Nadu Urban
Development Fund, we structured a multilayered deal to make
the transaction attractive for investors.
Portfolio management. We also engage in the
monitoring of projects and programs to ensure projects are
operationally sustainable. As the past portfolio managers of
the USAID Development Credit Authority and Micro-Small Enterprise
Development programs, we are experienced in compliance,
reporting, and workouts. We managed a USAID portfolio well
over US$650 million and 100+ credit agreements.
Leverage private sector resources.
Our approach to business finance centers on leveraging private
sector resources where possible. In structuring projects,
we actively engage the local capital markets to encourage
local participation in the project. Our domestic and international
work on the Ecolinks program to promote international trade
and finance leveraged private sector resources through corporate
donations and service fees. To leverage private sector resources
in development finance, we use:
Credit enhancements/guarantees. We utilize
the DCA guarantee facility extensively to provide principal
risk sharing with the private sector. The guarantee program
will cover up to 50 percent of principal risk on an investment.
In Latin America, we worked with Conservation International
and Starbucks to structure a loan guarantee to support conservation
coffee farmers. In Africa, we worked with a USAID Kenya
to provide financial organizations a guarantee on a portfolio
of loans to support local SMEs.
Risk management tools. To facilitate private
sector investment, we promote the use of appropriate risk
management practices, including risk assessments and credit
ratings to assist private sector investments. Our work has
included: improving the credit rating for a bond insurer
in the Philippines and establishing credit ratings for an
Indian municipalities. Our risk assessment work has extended
to USAID where we helped the organization develop a comprehensive
risk assessment manual and conduct risk assessments on projects.
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