African Guarantee Fund, GuarantCo plan $74m guarantee for SMEs

The African Guarantee Fund for small and medium-sized enterprises (AGF) said it has entered into a re-guarantee transaction of an amount of up to $74 million with GuarantCo, to increase its guarantee capacity for SME financing in Africa.

AGF was specifically set up to assist financial institutions increase their financing to Small and Medium Sized Enterprises (SMEs) in Africa through the provision of partial financial guarantees and capacity development assistance.

The Fund, in a statement made available to Vanguard, stated: “SMEs 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.

“Over the past 6 years, AGF has led the guarantee market in Africa by issuing financial guarantees to a tune of $690 million. This has enabled its partner financial institutions to issue loans estimated at $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 $900 million of guarantees since inception in 2005 with a mandate to enable local currency finance for infrastructure.”

AGF was established in 2012 by the African Development Bank (AfDB), the Government of Denmark through the Danish International Development Agency (Danida) and the Government of Spain through the Spanish Agency for International Development Co-operation (aecid).

GuarantCo was established to mobilise local currency investment for infrastructure projects and support the development of financial markets in low income countries. It is supported by the governments of the UK, Switzerland, Sweden, the Netherlands and Australia.

Commenting on the AGF-GuarantCo partnership, Felix Bikpo, AGF’s Chief Executive Officer, said, “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.”

Also speaking on the deal, Lasitha PERERA, GuarantCo’s Chief Executive Officer, stated: “We are delighted to be able to partner with AGF 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.”