Border post between Kenya and Uganda, with trucks queuing to cross the border.
Photo: TradeMark East Africa
Sida's use of guarantees for market development and poverty reduction
Guarantees positively contribute to private sector development and the development of financial markets.
In cases where financial intermediaries are not able to lend to clients because of the risks involved, guarantees can bridge the risks and allow intermediaries to reach out to clients that could otherwise not be served.
When it comes to overcoming the weaknesses of the financial markets overall, the guarantee is an important instrument but it is not sufficient on its own.
These are two of the main conclusions of the evaluation of four guarantee interventions of Sida.
Sida has used guarantees for approximately ten years and currently has close to 35 on-going guarantees. This is the first evaluation of this instrument and its purpose was to deepen Sida's knowledge of the instrument and to draw lessons of broader relevance from a limited number of interventions covering different types of guarantees, partners and time periods. It presents conclusions and lessons on which instruments work to promote market development and reduce poverty, and which don't, in different circumstances.
The evaluation is based on Sida documents, interviews with Sida staff as well as four case-studies; two in Uganda, one in Bosnia and Herzegovina and one global intervention.