NAIROBI, Kenya, Dec 7 – Kenyans Banks working with SMEs are set to benefit from a new fund that is targeting increase of financing to local banks working with Small Medium Enterprises.
The African Guarantee Fund has planned to support banks in Kenya working with the SMEs as it seeks to help 10, 000 SMEs per year in Kenya.
Chief Executive Felix Kipko says the fund is seeking Sh50 billion from its partners to increase investments in SMEs so as to improve their access to finance which has been a major challenge in developing countries.
The fund received an insurance financial strength rating of AA- by global renewed Fitch Ratings and is working with six banks in Kenya.
This is the first time a guarantee fund in Africa has been assigned this status and the second Africa-based Financial Institution – after the AAA of African Development Bank – to be recognized in this way.
The assignment of a high Fitch rating further acknowledges AGF’s position as a strong Financial Institution. By harnessing public funds for private sector development of SMEs, AGF has also been successful in demonstrating profitability as an institution.
“As AGF’s primary objective is to reduce the funding gap for African SMEs, profitability is not the main performance metric. However, the company was profitable in 2015 and 2016 – just four years after its incorporation in 2011 – and has therefore proven its business model. AGF has a long-term return on capital target of 2.5%-5%, which Fitch views as an achievable target,” reads the statement from Fitch Ratings.
In December 2015 the African Guarantee Fund for Small and Medium Enterprises (AGF) completed its first external growth operation with a USD 35 million acquisition of Guarantee Fund for Private Investments in Africa (GARI Fund).
This strategic acquisition was made in order to accelerate AGF’s presence across the continent, strengthening its already robust pipeline, resulting in a real Pan-African guarantee fund.
Furthermore, AGF acknowledges the high importance of the Economic Community of West African States (ECOWAS). In 2016, AGF launched a green guarantee facility aimed at unlocking finance for SMEs investing in low carbon, green growth and climate resilient development.
African Guarantee Fund was launched in June 2012, created by Africa Development Bank, The Danish International Development agency and the Spanish Agency for International Development Cooperation with a mandate to assist Financial institutions in Africa scale up their SME financing through loan guarantees