AFD and AGF sign deal www.businesstoday.co.ke
The agreement was signed in Paris on 28th November 2019 by Mr Rémy Rioux (right), AFD Chief Executive Officer, and AGF Group CEO Mr Félix Bikpo on 28th November in Paris. [ Photo / Courtesy ]

The French Development Agency supports African SMEs via a counter-guarantee of $30 million (Ksh3 billion) to the African Guarantee Fund

The French Development Agency (AFD) and the African Guarantee Fund for Small and Medium-Sized Enterprises (AGF) have signed a new agreement of $30 million to improve access to credit to SMEs in Africa.

The deal was signed in Paris on 28th November 2019 by Mr Rémy Rioux, AFD Chief Executive Officer, and AGF Group CEO Mr Félix Bikpo.

Counter guarantee

The sub-participation agreement broadens the existing cooperation between the two entities, by providing AGF with a counter-guarantee of $30 million, using the ARIZ risk-sharing mechanism: a support for the risk of financing private investment.

It consists of a final loss guarantee offered to financial institutions by AFD to cover 50% to 75% of an individual loan or a loan portfolio for SMEs and microfinance institutions (MFIs).

Through its leverage effect, this counter-guarantee will enable AGF to extend guarantees of $60 million to local financial institutions, thereby allowing the latter to lend up to $120 million to African SMEs. It is estimated that such an amount of loans would benefit 1,800 SMEs and support 5,400 jobs.

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After the signing ceremony, Mr Rioux and Mr Bikpo discussed further areas of collaboration in the near future.  Special emphasis was placed on increasing African women’s access to finance through the Affirmative Finance Action for Women in Africa (AFAWA) initiative that will be implemented through AGF.

AFAWA was officially launched earlier this week at the Global Gender Summit having already received commitment from the government of France during the Biarritz Summit in August 2019. AFD and AGF are currently exploring different modalities of support for this initiative.

African Guarantee Fund                                      

African Guarantee Fund is a non-bank financial institution whose objective is to promote economic development, increase employment and reduce poverty in Africa by providing financial institutions with guarantee products and capacity development assistance specifically intended to support SMEs in Africa.

African Guarantee Fund was founded by 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) and the African Development Bank (AfDB).

Other shareholders include French Development Agency (AFD), Nordic Development Fund (NDF), Investment Fund for Developing Countries (IFU) and KfW Development Bank (KfW). AGF has a rating of AA- by Fitch Ratings Agency.

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