July 12, 2018/AfDB
The African Development Bank has approved an additional US$10 million equity investment in the African Guarantee Fund for SMEs. This support will enable the Fund to continue guaranteeing loans to small and medium sized enterprises across Africa, thereby stimulating private enterprise development and sustainable job creation.
The African Guarantee Fund started operating in 2012. Designed and created by the African Development Bank in collaboration with the Danish Ministry of Foreign Affairs and the Spanish Agency for International Development Cooperation. The French Development Agency and the Nordic Development Fund subsequently joined the Fund. Its mandate was to bridge the financing gap for local SMEs in high-impact sectors and to promote job creation by providing financial guarantees to financial institutions, covering their lending to SMEs, and thus catalyzing private sector resources for financing SMEs.
AGF has so far implemented its business activities in 38 countries including 12 transition states across Africa. It has collaborated with 84 financial intermediaries, enabling banks to increase available financing for lending to SMEs by about US $1.2 billion. Over 8,600 SMEs have benefitted from AGF guaranteed loans, creating about 86,510 jobs. Approximately 60% of these jobs have been for youth and 30% for women.
Stefan Nalletamby, Director of the Financial Sector Development Department, said that the investment would strengthen AGF and help broaden and deepen Africa’s local financial systems. With Bank support, AGF will continue to catalyze lending to critical sectors such as manufacturing and trade, renewable energy, housing, health, education, financial sector and agriculture, in line with the Bank’s High 5 priorities: Industrialize Africa, Light up and power Africa, Feed Africa, and Improve the quality of life for the people of Africa.
The transaction also provides an opportunity to leverage public resources to spur more private sector financing of the real economy, thereby amplifying their scope and impact.
The funding complements the Bank’s current initiatives to help grow private sector financing through financial institutions and capital markets, especially to advance financing for SMEs. The Bank is committed to support approaches that expand mobilization of domestic resources through increased intermediation and deepening financial systems across Africa.