The French Development Agency (AFD) is to provide about $30 million through the African Guarantee Fund for Small and Medium-Sized Enterprises (AGF), to improve access to credit to small and medium-sized enterprises (SMEs) throughout Africa.
Mr Rémy Rioux, AFD Chief Executive Officer, and Mr. Félix Bikpo, AGF Group Chief Executive signed a sub-participation agreement of $30 million, in Paris, on November 28.
The sub-participation agreement signed between AFD and AGF 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.
A document made available to the Ghana News Agency in Accra explained that the risk-sharing mechanism consisted in a final loss guarantee offered to financial institutions by AFD to cover 50 per cent to 75 per cent of an individual loan or a loan portfolio for SMEs and microfinance institutions (MFIs).
It explained that through its leverage effect, this counter-guarantee would enable AGF to extend guarantees of $60 million to local financial institutions, thereby allowing the latter to lend a total of $120 million to African SMEs.
It is estimated that such an amount of loans would benefit 1,800 SMEs and support 5,400 jobs.
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 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.
AGF 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.
It 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).
AFD Group funds, supports and accelerates the transition to a fairer and more sustainable world focusing on climate, biodiversity, peace, education, urban development, health and governance.
It carries out more than 4,000 projects in France’s overseas departments and territories and another 115 countries.