Apply For 2022/2023 African Guarantee Fund for Small and Medium Enterprises (SMEs).

Apply For 2022/2023 African Guarantee Fund For Small And Medium Enterprises (SMEs).

African Guarantee fund

Table of contents.

1.1 Introduction to the African guarantee fund.

1.2 Areas of Focus / Sub-Sectors.

1.3 To accomplish this, AGF has two lines of activities.

1.4 AGF’s products are expected to have a scalable positive impact in the following three waysways.

1.5 Target Beneficiaries.

1.6 The AGF provides.

1.7 How to BenefitsBenefits.

1.1 Introduction to the African guarantee fund.

African Guarantee Fund for Small and Medium Enterprises (SMEs) – A general consensus has emerged around the key role that small and medium enterprises (SMEs) can have in reducing poverty and achieving the MDGs in African countries.

In order to make use of their potential, SMEs need increased access to bank credit. African SMEs historically lack access to finance, and this is likely to be exacerbated by the effects of the financial and economic crisis on the continent.

There is a strong economic case for scaling up support for African SMEs. Development assistance for SMEs in Africa remains highly fragmented, with several donors and development finance institutions (DFIs) running a number of SME programs in an uncoordinated way. A regionalization of support and a pooling of resources are required to avoid duplications and inefficiencies, in the spirit of the Paris Declaration and the Accra Agenda for Action.

On 1st June 2012, during the AfDB’s Annual Meetings, held in Arusha, Tanzania, the AfDB’s President Donald Kaberuka, announced the official launch of the African Guarantee Fund (AGF), a market-friendly guarantee scheme aims at easing access to finance for African small SMEs.

The AGF, designed and funded by the AfDB in partnership with the governments of Denmark and Spain, will provide financial guarantees to financial institutions to stimulate financing to SMEs and unlock their potential to deliver inclusive growth in the region – African Guarantee Fund for Small and Medium Enterprises (SMEs).

The AGF is a truly public-private partnership, with other donors, development finance institutions and private investors expected to join to provide additional capital and scale up its operations.SMEs are the best candidates to achieve inclusive growth in Africa as they contribute significantly to income generation and job creation. However, financial access is consistently reported as one of the major obstacles to SME’s growth and development. Only 20 percent of African SMEs have a line of credit from a financial institution. 

The AGF will help fill this gap.

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1.2 Areas of Focus / Sub-Sectors.

AGF was established to address this mismatch in the supply and demand of SME financing. A joint venture between the African Development Bank, the Danish and Spanish Governments, AGF was initiated in 2010 to partner with financial institutions to help them increase their exposure to SMEs in Africa – African Guarantee Fund for Small and Medium Enterprises (SMEs).

1.3 To accomplish this, AGF has two lines of activities:

– Partial Credit Guarantees: Provision of partial guarantees for financial institutions in African countries to incentivize them to increase debt and equity investments into SMEs. Based on an assessment of the needs of financial institutions and SMEs in the region, AGF will offer three types of guarantees with different fee structures: a) portfolio and individual loan guarantees, b) Bank fund raising guarantees; and c) equity guarantees.

-Capacity Development: A separate entity will help financial institutions develop their capacity to appraise and manage SME portfolios. AGF will allocate a portion of its budget to capacity building, with financial institution partners covering most of the costs. Additional grants are being sought to supplement AGF’s capacity development trust of USD 2.5 million committed by Danida for this purpose. Capacity development of SMEs will be managed and implemented through existing local service providers.

1.4 AGF’s products are expected to have a scalable positive impact in the following three ways:

-Improve SME financial product offerings: 

by helping banks to better address working capital and long-term financing needs of SMEs.

-Expand bankable SME segments: 

by changing Bank’s perception of bankable SMEs and permanently increasing their exposure to SMEs.

-Increase Banks’ capacity to appraise SMEs: 

by providing technical assistance and strategies to further develop SME engagement.

1.5 Target Beneficiaries.

-As the definition of SMEs varies across countries and financial institutions, AGF will not prescribe qualifying characteristics for SMEs other than the one defined by the banking sector of the countries where AGF will operate. Within these limits, AGF will target all African SMEs with a valid operating license regardless of sector, industry, location, and ownership. AGF will have a rigorous partner selection process, with partner financial institutions demonstrating a clear commitment to growing their SME portfolio and improving financial product offerings to this segment.

1.6 The AGF provides:

  • -Loan portfolio guarantees to Partner Lending Institutions (PLIs).
  • -Financial guarantees to PLIs.
  • -Capacity development support for PLIs.
  • Capacity development support for SMEs.

Through the supply of these products and services, the AGF will help improve access to credit for SMEs as they start and grow their businesses. It will also contribute to address the issue of limited technical capacity of both PLIs and SMEs – African Guarantee Fund for Small and Medium Enterprises (SMEs).

The AGF will mobilize substantial financial resources for African SMEs thus contributing to private sector development, job creation and ultimately poverty reduction. 

It will provide countercyclical support to financial institutions through easing access to liquidity and strengthening their capacity to create credit.

It will also provide capacity development support for both PLIs and SMEs thus increasing productivity and competitiveness. 

The AGF will finally contribute to increasing aid effectiveness in the context of shrinking development support for SMEs through channeling financial assistance into a regional conduit.

1.7 How to Benefits?

Interested African can contact AGF at their Head Office in Nairobi Kenya.

The African Guarantee Fund

Mayfair Center, 7th Floor, Ralph Bunche Road, Upper Hill,

Nairobi, Kenya. 

Tel: +254 733 997 747 
Fax: +254 272 1517

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