African Guarantee Fund gets Sh2.8bn to finance SMEs

The African Guarantee Fund for Small and Medium-Sized Enterprises (AGF) has received a capital injection amounting to 25 million euros (about Ksh2.8 billion) from the KfW Entwicklungsbank (KfW Development Bank), the German government-owned development bank, based in Frankfurt, that provides financing to governments, public enterprises and commercial banks engaged in microfinance and SME promotion in developing countries.

Speaking during the onboarding of the new shareholders, AGF Chief Executive Officer, Felix BIKPO said the fund has acquired more capacity to address the financing barrier which remains a key challenge for African SMEs. “AGF will now be able to channel more guarantees and technical assistance to financial institutions thereby generating enhanced growth in the African SME sector,” he said.

KfW’s Director for Regional Funds, Thomas Duve noted that AGF is a good example of an ‘African solution to an African problem’. The institutional and economic strength of AGF, mirrored in its AA- credit rating, makes AGF a perfect partner for commercial African banks who are willing to finances SMEs, he added.

“Our investment into AGF forms part of KfW’s strategy to promote private investment and financial markets in Africa,” he said.

African Guarantee Fund is the first African institution dedicated to mobilizing private resources for SME development on the African continent. It has over the past six years led the guarantee market in Africa by issuing guarantee products to more than 100 financial institutions, that have in turn made available $1.6 billion of financing for SMEs across the 39 countries in Africa.

With KfW’s capital injection, AGF has now successfully concluded $90 million first closing of its fundraising campaign. AGF’s key objective is to reduce the SME financing gap currently estimated at more than $155 billion. This is to be achieved by raising $320 million additional capital over the next four years.

Officially launched on 1st June 2012, AGF is a Pan-African financial institution aiming to promote economic development, increase employment and reduce poverty in Africa by providing financial institutions with guarantees and other similar or related financial products specifically intended to support SMEs in Africa.

AGF shareholders include the government of Denmark through the Danish International Development Agency (DANIDA), the government of Spain through the Spanish Agency for International Cooperation and Development (AECID), the African Development Bank (AfDB), Agence Française de Développement (AFD), the Nordic Development Fund (NDF) and the Investment Fund for Developing Countries (IFU).