VZCZCXRO9357
RR RUEHMA RUEHPA
DE RUEHMV #0993/01 3401104
ZNR UUUUU ZZH
R 051104Z DEC 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0582
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 MONROVIA 000993 
 
SENSITIVE 
SIPDIS 
 
PLEASE PASS OPIC FOR KARL CHRISTENSEN AND AMY BAILEY 
 
E.O.12958: N/A 
TAGS: EINV EFIN ETRD ECON OPIC LI
SUBJECT: LIBERIA:  LEDFC AT ONE -- LESSONS LEARNED 
 
REF:  07 MONROVIA 1260 
 
¶1. (SBU) SUMMARY:  The OPIC-funded Liberia Enterprises DevQopment 
Finance Company (LEDFC) is faltering but can probably be salvaged. 
Both the recently-resigned LEDFC General Manager and current CHF 
International caretakers cite the lack of adequate business service 
support and mentoring as a factor in clients' struggles.  A 
commercial banker very familiar with LEDFC's operations attributes 
the problems to delays in disbursing funds and overly-rigorous 
standards for LEDFC borrowers.  After a year of stumbling, LEDFC 
needs to become an effective financing entity or close its doors. 
END SUMMARY. 
 
What is LEDFC? 
-------------- 
 
¶2. (SBU) LEDFC was an experiment to determine if small and medium 
Liberian firms are credit-worthy for longer-term loans.  It was 
conceived as a $30 million partnership by OPIC, CHF International 
and the Robert L. Johnson Foundation (reftel).  OPIC provided $20 
million over five years for on-lending to Liberian small and medium 
enterprises.  RLJ provided $3 million over three years to cover 
LEDFC's initial operating costs.  LEDFC's owner, CHF International, 
was expected to contribute $7 million dollars to support business 
development services for LEDFC's target market:  small to medium 
entrepreneurs with viable ideas but little experience in business. 
However, CHF never provided the funding for business development 
services, a gap that seems to have had far-reaching impact on the 
success of the project and placed an unanticipated burden on LEDFC's 
clients and credit officers. 
 
Who is in Charge? 
---------------- 
 
¶3. (SBU) CHF Liberia (and thus LEDFC) is in a state of transition. 
LEDFC's General Manager Gus Erskine, resigned in October due to 
frustration about ineffective management he attributes to CHF's bias 
towards micro-credit projects.  CHF Country Director Laurin Banner 
had resigned in June or July and his successor too has since 
returned to the United States.  LEDFC's Finance Director, who joined 
CHF in May, is acting LEDFC General Manager.  Lloyd Guzha-Chanetsu, 
a consultant from South Africa who was sent two months ago to train 
credit officers, is serving as CHF Country Director. 
 
Who is at fault? 
---------------- 
 
¶4. (SBU) During a review of LEDFC's first year, Erskine (who had 
just resigned) said LEDFC fills an important role but is hobbled by 
CHF's lack of experience in SME lending and lack of commitment to 
Liberia.  LEDFC started operations last October with broad public 
interest and hundreds of applications.  In the past year, LEDFC has 
cultivated only eight approved projects, with another sixteen in the 
pipeline.  However, there have been no new project approvals since 
May.  Thus far, most of the clients have been repaying their loans 
but Erskine said Liberian firms' interest in LEDFC has dropped as 
applications languish six to nine months without approval and he has 
heard rumors people think LEDFC is actually a front for a Nigerian 
scam operation. 
 
¶5. (SBU) According to Erskine, CHF appears to be struggling to find 
an effective management structure.  He said the LEDFC board, which 
should approve projects, had not met in the past year and CHF has 
changed the management structure four times over the year.  Rather 
than reporting to its board, LEDFC reports to CHF's Office of Global 
Operations.  (Note:  Apparently the board did meet later in November 
to begin the search for a new GM. End note.)  Erskine reports that 
CHF did not respond adequately to requests for capacity building of 
LEDFC staff, sending one consultant for two weeks.  He said LEDFC is 
the only CHF activity in Liberia and $900,000 of RLJ's $3 million 
for LEDFC operating costs goes to supporting CHF operations. 
 
CHF blames former management 
---------------------------- 
 
¶6. (SBU) During a subsequent introductory meeting with Econoff at 
CHF/LEDFC, Guzha-Chanetsu and the acting LEDFC GM said the eight 
current projects are weak but they will be able to salvage the 
portfolio.  They criticized the lack of mentoring and market 
linkages for LEDFC clients and said the focus on start-up firms 
created an extra burden for the credit officers.  (Note:  Neither 
seemed aware that one of LEDFC's initial goals was to reach Qond 
borrowers who had traditionally had access to finance, and they said 
they did not know the LEDFC model had been based on an understanding 
CHF would provide $7 million for business support services to assist 
clients early in the application process.  End note.) 
 
¶7. (SBU) Michael Carson, CHF International's Regional Director for 
Africa Operations, told the Ambassador in a November 21 meeting that 
overall things are going well but there have been management issues. 
 
MONROVIA 00000993  002 OF 002 
 
 
 Noting that the average of 30 new jobs per LEDFC client was an 
unexpected bonus, he said lenders are repaying, despite struggles, 
and LEDFC's December interest payment to OPIC will be 100% from 
client repayments (up from 80% in June).  He said despite the rough 
start, the portfolio is "very salvageable." 
 
¶8. (SBU) The Ambassador told Carson she had heard troubling reports 
of LEDFC since her arrival and it is important to for CHF to get it 
right.  (Note:  The reports came from LEDFC clients and others, not 
CHF or LEDFC.  End note)  The new jobs are important, and failure by 
LEDFC clients will cast a shadow on USG economic revitalization 
initiatives.  She said it seems they need to move faster, and need 
more outreach.  Carson agreed, and confirmed the new General Manager 
should be in place by the end of the year.  CHF plans to expand 
links to other organizations and will be using funding from Goldman 
Sachs to boost women's entrepreneurship. (Comment:  Carson's 
description of CHF plans to boost business outreach made no mention 
of the fact such support is long overdue.  End comment.) 
 
The bank blames CHF 
------------------ 
 
¶9. (SBU) A commercial banker very familiar with LEDFC operations 
attributes the problems to delays in disbursing funds and 
overly-rigorous standards for LEDFC borrowers.  While noting the 
clients required time-consuming support, he feels the businesses had 
strong potential if their funding had arrived more expeditiously. 
The banker said he knows first-hand that President Sirleaf has 
received a memo blasting LEDFC's lack of performance (he did not 
know the author of the memo) and has been told by the Governor of 
the Central Bank that there are concerns about LEDFC's relations 
with its clients.  Asked about the current LEDFC/CHF Liberia 
officials' claims the portfolio was substandard, he agreed the 
projects were risky but noted LEDFC knew that going in and was 
trying to address a market that had not previously had access to 
credit.  He felt most, if not all, of the existing projects could 
have succeeded had they not been crippled by the slow and erratic 
disbursement. 
 
What next? 
---------- 
 
¶10. (SBU) Comment: Carson's plan to expand linkages, improve 
management and provide more support to new entrepreneurs is very 
welcome, but over a year late.  The LEDFC model could work but the 
perception here is that LEDFC is so slow in approving projects and 
disbursing funds that clients are put at risk.   Initial concerns 
that LEDFC would be a vehicle for channeling funds to the former 
elite seem to be unfounded.  However, grass-roots clients are 
extremely labor-intensive for credit officers.  LEDFC's shortcomings 
have drawn attention from the highest levels of the Liberian 
government.  Although there is a strong need for its products, after 
a year of stumbling LEDFC needs to find its feet or risk tarnishing 
the reputation of future USG efforts to assist the private sector. 
End comment. 
 
THOMAS-GREENFIELD