▁projects ▁offer ▁several ▁distinct ▁and ▁very ▁attract ive ▁advantages ▁over ▁other ▁forms ▁of ▁assistance : ▁▁ ▁They ▁promote ▁private ▁sector ▁invest ment : ▁Lar ge ▁res erves ▁of ▁un t apped ▁private ▁capital ▁are ▁present ▁in ▁the ▁private ▁sector ▁of ▁developing ▁countries . ▁To ▁encou rage ▁financial ▁institutions ▁to ▁l end ▁that ▁capital ▁for ▁development ally ▁benef icial ▁projects , ▁credit ▁guarante es ▁can ▁be ▁used ▁to ▁cover ▁part ▁of ▁the ▁risk ▁on ▁new ▁lo ans ▁where ▁finan cing ▁had ▁been ▁un available ▁or ▁in access ible . ▁ ▁They ▁encou rage ▁l ending ▁by ▁reducing ▁risk : ▁USA ID ▁guarante es ▁up ▁to ▁ 5 0 ▁percent ▁of ▁the ▁net ▁loss ▁on ▁principal ▁for ▁invest ments ▁covered ▁by ▁a ▁guarantee , ▁sharing ▁the ▁risk ▁with ▁the ▁private - se ctor ▁partner . ▁ ▁They ▁enh ance ▁banks ' ▁l ending ▁capac ities : ▁Gu arante es ▁provide ▁local ▁financial ▁institutions ▁with ▁the ▁security ▁to ▁extend ▁credit ▁and ▁expand ▁into ▁new ▁se ctors . ▁In ▁this ▁way , ▁banks ▁can ▁develop ▁their ▁capacity ▁to ▁l end ▁into ▁new ▁and ▁potentially ▁prof itable ▁mark ets ▁while ▁increasing ▁the ▁credit ▁available ▁to ▁developing ▁areas . ▁These ▁guarante es ▁are ▁often ▁couple d ▁with ▁training ▁and ▁professional ▁assistance ▁from ▁USA ID ▁to ▁strength en ▁a ▁financial ▁institution ' s ▁long - term ▁invol vement ▁in ▁local ▁credit ▁mark ets , ▁beyond ▁the ▁coverage ▁of ▁a ▁partial ▁guarantee . ▁ ▁The ▁value ▁of ▁U . S . ▁Government ▁fund ing ▁is ▁maxim ized : ▁By ▁using ▁credit