British International Investment (BII), the UK’s development finance institution and impact investor, and African Guarantee Fund (AGF), a prominent Pan-African guarantee provider, have announced a $75 million re-guarantee deal for SMEs across Africa.
AGF and BII will provide credit guarantees to partner financial institutions for up to 75% of the risk on SME loans through this facility, boosting access to credit and reducing collateral requirements for these SMEs. As a result of the eight-year cooperation, up to $150 million in loans to 17,300 SMEs would be made possible through partner financial institutions. This collaboration will also boost funding to women-owned or led SMEs, as well as climate-focused SMEs.
Access to credit remains a big barrier for African SMEs. Financial institutions are frequently restrained by regulatory restrictions, a limited demand for a segment thought to be higher risk, a lack of suitable collateral available from SMEs, lender knowledge gaps, and SME borrower skill gaps.
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Risk-sharing facilities are an important instrument for lenders to use in filling knowledge gaps and widening their SME lending while minimising risk and allowing them to establish capabilities and a track record in serving this market segment. As a result, at least half of the overall facility will specifically target SMEs in the most vulnerable African economies in order to encourage promising enterprises that may contribute to long-term productive economic development.
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.”
Constant N’zi, Deputy Group Chief Executive Officer and Group Chief Risk Officer, African Guarantee Fund 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 utilized.”
Jo Fry, Investment Director & Head of Intermediated Credit, British International Investment (BII) 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.”
The combined facility helps to achieve UN Sustainable Development Goal 8 of encouraging equitable and sustainable economic growth. The investment also qualifies for the 2X Challenge, a G7 initiative to mobilise resources to support improved economic empowerment for women in emerging nations through development finance institutions (DFIs).
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh