WASHINGTON, D.C. - The U.S. Agency for International Development announced that it will invest in an innovative new credit product that could unleash the economic potential of entrepreneurs in the developing world.

Announcing the award during Public-Private Partnerships Week, USAID Administrator Raj Shah said, "In the past year, we launched Development Innovation Ventures (DIV) to identify and evaluate high-potential development solutions and scale proven successes. Today, we are happy to announce a DIV grant to Innovations for Poverty Action for a project that is supported by Coca-Cola, Safaricom, Equity Bank and Financial Sector Deepening."

Access to finance constrains the growth of small businesses everywhere, and particularly in poor countries. In Kenya, entrepreneurs running retail shops and kiosks often have to place inventory orders in small and frequent increments. Loans to expand their inventories could free them to make other investments, expand their businesses, and generate more income. However, access to this type of finance is limited by lenders' concerns of repayment, since inventory credit is typically too small to be enforced through courts.

With the $360,000 USAID grant, Innovations for Poverty in Action (IPA), Financial Sector Deepening, and partners will implement and evaluate a credit product for small-scale entrepreneurs in Kenya. The product is designed to help lenders monitor the shop owners' performance and facilitate repayment for borrowers, using an electronic inventory management software system and a mobile phone-based money transfer system. Over 1,200 Coca-Cola retailers in Kenya will participate in the trial.

"In this project we work to bring two large private sector firms together to develop and test a new product that we hope will enable very small scale entrepreneurs to gain access to sorely needed financial services," said Dr. William Jack, Assistant Professor at Georgetown University and one of the project's primary investigators.

Innovation in development is a key piece of President Obama's Global Development Policy, as well as a pillar of USAID's reform agenda. As part of the Agency's increased commitment to cost-efficient development, USAID launched Development Innovation Ventures to encourage entrepreneurs, innovators, businesses, academics, non-governmental organizations and non-traditional players to submit proposals with the potential to substantially improve development outcomes rather than make incremental changes.