The African Guarantee Fund (AGF) and the British International Investment (BII) have signed an agreement for the implementation of a $75 million program to finance African Small and Medium Enterprises (SMEs), announced to the British institution Wednesday, December 7, 2022.
The Ecofin Agency, which provides the information, specified that this financing will make it possible to provide “credit guarantees to partner financial institutions for a maximum of 75% of the risk on loans to SMEs”. The initiative will thus increase access to credit and reduce collateral requirements for these SMEs.
Thus, due to a lack of adequate guarantees, several African SMEs are having difficulty accessing loans in order to develop their activities. In order to overcome this problem, several initiatives are implemented to facilitate the obtaining of credits by these SMEs, relayed the Ecofin Agency.
This partnership, which extends over eight years, aims to “facilitate the granting of loans of a maximum amount of $150 million to 17,300 SMEs through the intermediary of partner financial institutions”. Women-owned/led SMEs and climate-focused SMEs are a priority for the program. “This investment will improve access to finance for SMEs on the African continent, with a focus on those in the most challenging contexts. The partnership, which will also target financing for climate-focused businesses as well as women-owned and led SMEs, will contribute to increasing Africa’s inclusive and sustainable development,” Jo Fry, Managing Director, told Agence Ecofin. of investments and responsible for intermediated credit at BII.
According to the briefing note, “at least half of the overall facility will specifically target SMEs in Africa’s most fragile economies”. The ultimate goal is to “support promising businesses that can contribute to long-term productive economic development”.
Finally, the Ecofin Agency recalls that 90% of companies in sub-Saharan Africa are SMEs and they represent 38% of the region’s GDP, according to the World Bank. The International Finance Corporation (IFC) estimated the financing gap for these SMEs at $331 billion before the advent of Covid-19. These financing needs have been intensified, not only by prolonged business closures, lower demand and disruptions to the value chain caused by the pandemic, but also by the additional challenges related to the war in Ukraine and the the inflationary situation the world is experiencing.
Moctar STAYED / VivAfrik
