New fund aims to boost African SMEs

By Thandisizwe Mgudlwa

The African small and medium enterprises (SMEs) sector is fast proving to be the main driving force for the continent’s upliftment.

And president of the African Development Bank (AFDB), Donald Kaberuka, who recently revealed the official launch of the African Guarantee Fund (AGF), says this is a market-friendly guarantee scheme aimed at easing access to finance for African SMEs.

This announcement was made at the AfDB’s Annual Meetings, being held in Arusha, Tanzania.

An official report highlights that 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.

Furthermore, 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.

Opening the AGF Official Launch session, Mr Kaberuka praised the Danish and Spanish Governments for their continued support for the initiative, especially in times of fiscal austerity, and celebrated a two-year long successful partnership triggered by the Africa Commission’s recommendation in 2009 to implement the AGF as one of the initiatives to address youth unemployment in the continent.

Kaberuka had said: “The African Development Bank is strongly committed to promote inclusive private sector-led growth and employment creation across the continent.

Accordingly, it always looks at innovative and efficient modes of financing to reach out to SMEs. The AGF will contribute to rationalize the provision of financial
guarantees for the purpose of mobilizing financial resources for SMEs. Likewise, the AGF will complement other Bank’s products and services for private sector development through SMEs.”

He also urged the development community and the private sector to join the AGF and contribute to its success.

A statement reports that during the session, which gathered together African and international entrepreneurs, representatives from banks, financial institutions, investment funds, central banks, and government agencies, the official AGF logo was unveiled and the AGF’s features and expected developmental impact on Africa presented.

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