British International Investment (BII), the UK’s development finance institution and impact investor, and African Guarantee Fund (AGF), a Pan African guarantee provider, have announced their partnership of a $75 million re-guarantee agreement for Small and Medium Enterprises (SMEs) across Africa.
Through this facility, AGF and BII will provide credit guarantees to partner financial institutions for up to 75 per cent of the risk on SME loans, thereby increasing access to credit and reducing collateral requirements for these SMEs.
As a result, the eight-year partnership is expected to facilitate up to $150 million in loans to 17,300 SMEs through partner financial institutions. This partnership will also encourage lending to SMEs that are women-owned or led as well as SMEs that are climate-focused.
SMEs in Africa continue to face significant challenges in accessing credit. Financial institutions are often constrained by regulatory requirements, limited appetite for a segment that is perceived to be higher risk, a lack of adequate collateral available from SMEs, knowledge gaps by the lenders and skill gaps demonstrated by SME borrowers.
UK Foreign Secretary, James Cleverly said: “British International Investment is already a force for good in Kenya, supporting jobs and livelihoods in Africa. This investment shows that when we go together, we can go far.”
Deputy group chief executive officer and group chief risk officer, African Guarantee Fund, Constant N’zi, said: “our partnership with British International Investment marks our first engagement with a UK Development Finance Institution and is the beginning of a journey that will positively impact African SMEs.
“Through this re-guarantee, our capacity to support lending institutions has been increased and we are certain of increased economic growth across the forty African countries wherein our guarantee products are utilised.”
Investment director & head of Intermediated Credit, British International Investment, Jo Fry added, “we are delighted to partner with African Guarantee Fund, a deeply impact-focused African institution, on this critical mission. This investment will increase access to finance for SMEs across the African continent, with a focus on those in the most challenging contexts.
“The partnership, which will also target funding at climate-focused businesses as well as SMEs owned and led by women, will contribute toward increasing inclusive and sustainable development for Africa. The programme represents BII’s commitment to working with best-in-class local institutions who are deeply embedded in the countries and communities that they serve.”
