SMEs in Africa are set to get guarantee capacity for financing following a move by The African Guarantee Fund to re- guarantee transaction of an amount of up to $74 million with GuarantCo.
According to a statement from APO, over the past 6 years, AGF has led the guarantee market in Africa by issuing financial guarantees to a tune of USD 690 million.
AGF was officially launched on June 2nd, 2012, in Arusha, Tanzania, by Dr. Donald Kaberuka, the President of the African Development Bank (AfDB), which together with the governments of Denmark (through Danida) and Spain (through aecid), are the founding shareholders.
AGF’s key mandate is to assist financial institutions increase their financing to African Small and Medium Sized Enterprises (SMEs) through the provision of partial financial guarantees and capacity development assistance.
SME’s have a large and growing impact on GDP in emerging markets and are a key source of job creation. Strengthening Africa’s infrastructure is critical for development as it is through this that African countries become more competitive at a global level. With this increased capacity, AGF will be able to support larger local currency transactions for SMEs involved in infrastructure.
This has enabled its partner financial institutions to issue loans estimated at USD 729 million to about 7600 African SMEs. GuarantCo is part of the Private Infrastructure Development Group, (PIDG), and is a global guarantee fund that has issued over USD 900 million of guarantees since inception in 2005 with a mandate to enable local currency finance for infrastructure.
“AGF is glad to be joined by GuarantCo in bridging the infrastructure financing gap. This partnership aims to put in place an even stronger collaboration that will work on the entire value chain of infrastructure projects in Africa. We are looking forward to supporting other SMEs that work with key players in the infrastructure sector.” Felix BIKPO, AGF’s Chief Executive Officer stated.
GuarantCo was established to help address and overcome existing constraints in the supply of local financing to infrastructure projects and to help the development of local financial markets. GuarantCo is part of the Private Infrastructure Development Group and sponsored by five G12 governments which include: Australia, UK, Sweden, Switzerland and Netherlands.
On his part, GuarantCo’s Chief Executive Officer Lasitha PERERA, said “We are delighted to be able to partner with the African Guarantee Fund and increase support to SMEs active in the infrastructure sector in Africa. This collaboration between two local currency focussed guarantors offers the potential for us to engage local financial institutions and investors in financing the entire value chain in an African infrastructure project.”
The transaction will enable AGF and GuarantCo to explore further partnership opportunities of working together in contributing towards economic growth in Africa.