The African Guarantee Fund for Small and Medium-sized Enterprises has entered into a re- guarantee transaction of up to $74m with GuarantCo to increase its guarantee capacity for SME financing.
With the increased capacity, the AGF will be able to support larger local currency transactions for SMEs involved in infrastructure, the Fund said on Friday.
SMEs have a large and growing impact on the Gross Domestic Product in emerging markets and are a key source of job creation.
The AGF said strengthening Africa’s infrastructure was critical for development as it was through this that African countries would become more competitive at a global level.
Over the past six years, the AGF said it had led the guarantee market in Africa by issuing financial guarantees to the tune of $690m.
This has enabled its partner financial institutions to issue loans estimated at $729m to about 7,600 African SMEs. GuarantCo is part of the Private Infrastructure Development Group and is a global guarantee fund that has issued over $900m of guarantees since inception in 2005 with a mandate to enable local currency finance for infrastructure.
While commenting on the GuarantCo-AGF partnership, AGF’s Chief Executive Officer, Felix Bikpo, said, “The 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.”
GuarantCo’s Chief Executive Officer, Lasitha Perera, stated, “We are delighted to be able to partner 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 the AGF and GuarantCo to explore further partnership opportunities of working together in contributing towards Africa’s economic growth.