African Guarantee Fund has received a capital increase of US$20 million from the Danish Investment Fund for Developing Countries (IFU) to facilitate green SME financing in Africa. The capital increase is partially financed by the Danish Government, as part of the Danish COVID-19 Development Assistance package. This raises the total Danish investment in AGF amounts to $72 million.
The capital increment into the African Guarantee Fund will increase the Fund’s capacity to unlock financing for Small and Medium Enterprises (SMEs) in Africa. SMEs in the continent have experienced a deterioration in their credit-worthiness as a result of the economic impact of Covid-19.
The United Nations Economic Commission for Africa 2020 survey reports business closure, lack of operational cashflow and a drop in demand as the top challenges facing African SMEs as a result of the pandemic.
“The initial Danish capital injection into the African Guarantee Fund not only generated economic and social impact but also helped to attract more capital from other Development Finance Institutions. AGF is currently supporting financial institutions and SMEs to contain the impact of Covid-19 and to eventually recover in the post-Covid context.
“Our target,” said AGF’s CEO, Jules Ngankam, “is to keep SMEs afloat while maintaining their workforce and to ensure SMEs’ green transition. With this capital increment, our capacity to offer more green guarantees to financial institutions is enhanced and will facilitate sustainable financing for green transition in Africa.”
Private SMEs are vital for creating and safeguarding decent jobs in Africa, but they face huge challenges in the Covid-19 crisis. AGF seeks to ease the negative consequences and help African SMEs to build back better and greener. IFU’s $20 dollars investment provides funding of SMEs’ green transition, making more companies fit for a low carbon climate resilient future and create jobs.
“We are confident that our investment will attract other investors to exploit the proven potential of AGF filling the huge gap in SME financing in Africa,” said IFU’s CEO, Torben Huss.
African Guarantee Fund’s (AGF) key objective is to reduce the SME financing gap currently estimated at more than $300 billion. With IFU’s capital increase, AGF will achieve even more economic and social impact, given the investment will unlock more than $400 million of financing for SMEs.
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