The most important part of GDA is to leverage private sector resources. USAID is not interested in subsidizing private sector investment but recognizes that private sector resources should promote their core interest. For example, a private company wants to invent a cost effective solution for a product. They need 1 million USD as investment but have 0.7 million USD. USAID is not just interested in funding the rest of the amount that the company can raise from other sources such as bank loan, capital market, but it also, wants that its contribution should work in combination with private sector resources to enable them to achieve a set of outcomes, with results and impacts that serve both core businesses of private sector and USIAD’s development objectives in the respective country or region that would not have been possible without public-private collaboration. This joint venture also must contribute to a broader socio-economic achievement that others can replicate to advance social and economic development. If private sector contribution does not significantly enhance the scale, efficiency, effectiveness and sustainability of USAID investment, it will not count those resources as 1:1 leverage.
Both cash and in-kind contribution is counted as leverage. Examples of in-kind contribution includes but is not limited to:
- Commodities such as drugs, foodstuffs or equipment.
- Use of training or other purpose-specific facilities necessary to a program’s implementation.
- Value of time donated by technical consultants or company employees whose work and expertise is necessary to a project.
- Value of salaries for staff dedicated to a project.
- Technology, communications and capital assets.
- Intellectual property rights.
- Licenses.
Leverage must satisfy the following four criteria:
Nature and Origin: Leverage should be derived from the private sector such as private pro-profit entities such as a business, corporation, or private firm; private equity or private financial institutions, including private investment firms, mutual funds, or insurance companies; private investors; Private businesses or industry associations such as chamber of commerce; private grant-making foundations or philanthropic entities; or private individuals and philanthropists.
Value Proposition and Development Impact: Both combinations of USAID and private sector resources must have comparative advancement over not using an alliance. Suppose, a national NGO, a private sector company and USAID have formed an alliance where USAID provides $1 and private sector provides $4, a total $5. If the private sector had managed $1 from other sources, then, the USAID’s combined effect would be worth of $5. But in GDA, the combined effect must be worth of much more than $5. Wondering how it is possible? Suppose an NGO is providing health services in an area near a busy industrial zone, this NGO can collaborate with some of the companies in that zone to provide easy access to health services for their employees and mobilize resources from GDA. USAID and private sectors’ contribution along with NGO experience and existing health facilities would give an added benefit to this joint initiative.
Measurable: The contribution and resources must be measurable i.e. something of value that permits evaluation of the contribution’s impact on achieving desired results.
The resources and contributions must be of such value that can be measured in some form.
Composition: At least 25% of private sector contribution should be in cash.
