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African SMEs set to benefit from US$74mn guarantee

The transaction is expected to enable AGF and GuarantCo to explore further business opportunities in Africa. (Image source: GuarantCo)

The African Guarantee Fund for Small and Medium-Sized Enterprises (AGF) has entered into a re- guarantee transaction of an amount of up to US$74mn with GuarantCo, to increase its guarantee capacity for SME financing

The transaction is expected to enable AGF and GuarantCo to explore further partnership opportunities of working together in contributing towards economic growth in Africa.

SME’s have a large and growing impact on GDP in emerging markets and are a major 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 six years, AGF has led the guarantee market in Africa by issuing financial guarantees to a tune of US$690mn. This has enabled its partner financial institutions to issue loans estimated at US$729mn to about 7600 African SMEs.

GuarantCo is part of the Private Infrastructure Development Group (PIDG) and is a global guarantee fund that has issued more than US$900mn of guarantees since inception in 2005 with a mandate to enable local currency finance for infrastructure.

While commenting on the GuarantCo AGF partnership, Felix BIKPO, CEO of AGF, stated, “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.”

Lasitha Perera, CEO of GuarantCo, 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.”

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