Liquidity—the ability for financial institutions, businesses, and individuals to access money—is a key indicator of a healthy financial system that supports economic growth. In times of crisis (such as the COVID-19 pandemic), a lack of liquidity threatens the entire economy. Emerging and developing markets are particularly hard hit, as capital moves to what is perceived as safer markets. For example, in developing Asia, foreign investors pulled an estimated $25 billion early on in the COVID-19 pandemic. The challenges for governments to implement appropriate stimulus become compounded, as some measures intended to help one problem can put strenuous demands on the financial sector that limit investment, tie up capital, and inhibit liquidity. Moreover, many sectors are typically overlooked when stimulus trickles down into the economy, including informal and/or micro, small and medium-sized enterprises. In the context of the economic and liquidity challenges that businesses and individuals are facing as the COVID-19 pandemic continues, USAID/Asia Bureau and the US-SEGA project, implemented by Nathan, created the USAID Liquidity Toolkit.

This Toolkit draws on information from interviews with USAID, the DFC, nongovernmental organizations, impact investors, banks, and the broader private sector conducted from June through August 2020, as well as a desk review of online secondary sources, including reports, government agency and project websites, and analyses from investment banks, donors, and companies involved in mechanisms affecting liquidity and capital markets. This Toolkit builds on the Preliminary Review of Capital Markets in the Asia-Pacific and Potential Opportunities for USAID, diving deeper into the issue of liquidity.

This report was produced by the US-Support for Economic Growth in Asia (US-SEGA) program, implemented by Nathan Associates. The principal authors of the report are Sean Keogh, Allyson Cross, Caroline Rubin, and Donovan Hambley from Nathan Associates. US-SEGA Chief of Party, Ann Katsiak, and Deputy Chief of Party, Jeremy Schanck, provided technical support and oversight. The authors were guided by USAID/Asia Bureau.