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African Guarantee Fund Approves $2.6m For Female Entrepreneurs In Benin

April 24, 2022

African Guarantee Fund in collaboration with Ecobank Benin for SME financing African Guarantee Fund for Small and Medium Enterprises (AGF) has granted a line of portfolio guarantee to Ecobank Benin in the amount of CFAF 1.6 billion to support SMEs, women entrepreneurs, and the green economy in Benin. The signing event took place in the offices of Ecobank Benin’s headquarters in Cotonou.

Mr. Lazare NOULEKOU, Managing Director of ECOBANK Benin

This line of guarantee, signed by Lazare NOULEKOU, Managing Director of ECOBANK Benin, and Bendjin KPEGLO, Managing Director of AGF WEST AFRICA, makes it possible, on the one hand, to overcome the difficulties associated with the absence of guarantees encountered by SMEs/PMI and which constitute an impediment to the financing of their activities, and, on the other hand, to further increase its commitment to the SME/SMI segment while promoting the

Bendjin KPEGLO, Managing Director of AGF WEST AFRICA, declared during the signing ceremony:

“Governments in our nations have put in place development plans, with one of the top priorities being support for SMEs and lowering the unemployment rate.” Our subregion’s new banking regulations place additional obligations on banks in the context of their financing activities in order to make them more efficient and solid. To achieve these objectives, banks require dependable partners, particularly in the SME/SMI category, which constitutes the majority of the economic fabric while also being more vulnerable and having problems securing financing.

To that purpose, AGF is one of the continent’s reference partners, owing to the benefits associated with its AA- rating from Fitch Ratings and its illustrious shareholders. In this context, the cooperation between Ecobank Benin and AGF West Africa provides comfort to the bank for the financing of SMEs in Benin, with an emphasis on SMEs carried out by women (under the AFAWA program) and those whose operations are in line with environmental protection.

This portfolio guarantee is part of the AFAWA program, a joint initiative of the AfDB and the African Guarantee Fund aimed at unlocking up to USD 3 billion in loans to African women-owned SMEs.

Mr. Lazare NOULEKOU, Managing Director of ECOBANK Benin, stated, “It is a relationship that provides us greater comfort and flexibility in the financing of Beninese SMEs / SMIs, and we are happy to make it a reality today.” Small and medium-sized enterprises (SMEs/SMIs) are the backbone of the economy, particularly in developing nations where they contribute to job creation and revenue generating. Their influence is considerably higher in Benin, where they account for 90% of the industrial sector. This is why, at Ecobank, we have essentially dedicated a business unit to them: The Commercial Bank.

This collaboration will allow us to better support them based on their needs, specifically the financing of stocks, assets, and contracts for which they are bidding or have been declared successful bidders through the issuance of various guarantees ranging from the bid to the holdback, going through the advance of start, of good end of execution. Furthermore, foreign trade captures our attention with a diverse range of items such as letters of credit, documentary remittances, endorsements, and draft discounts, among others.

Beyond this non-exhaustive list of financing options, Beninese SMEs/SMIs can benefit from Ecobank’s digital banking products, such as EcobankPay, smart Digital Payment Terminals (TPE), Bank Collect, and Omni Lite, which enable them to make secure and autonomous payments and collections, as well as manage cash flow through digital solutions.

Ecobank also encourages female leadership development through its Ellevate initiative, which strives to unlock the potential of women-led or women-focused businesses by providing solutions for better cash management, low-interest loans, and value-added services.

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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

African Guarantee Fund Should Support SME’s Across Africa —- Felix Bipko

August 9, 2020

If the African Guarantee Fund (AGF) fails in its role of vital access to loans for SMEs which is the backbone of most economies, especially against the backdrop of the Covid-19 pandemic, then it should cease to exist. This was the submission of the former CEO of the Fund, Felix Bipko who until June 2020 was the CEO of the African Guarantee Fund (AGF). Shortly before relinquishing his role as CEO , he pointed out how the AGF is mitigating the economic fallout of Covid-19. To paraphrase the ‘godfather of investing’, Warren Buffett, it is only when the tide goes out that you can find out who’s been swimming naked. Covid has unleashed the equivalent of a Tsunami, taking both good and bad businesses in its wake.

Felix Bipko former CEO of the African Guarantee Fund

It is in times of such crises that organisations such as his need to step up and prove their worth, says Felix Bikpo, the outgoing CEO of the African Guarantee Fund (AGF).Although Bikpo accepts that the fallout from Covid-19 will have far reaching impact, he is confident that with the right actions, the impact can be mitigated.

His team, he tells us, has been in overdrive – it has had more discussions with banks than at any previous period. “This is a positive sign,” he says. “it shows that banks understand the critical role that they need to play in the economic recovery plan and in supporting the real economy – that is the SME sector.”

This is the second severe exogenous shock in the space of ten years that African banks have had to deal with – the first being the financial crisis that led to a severe global economic contraction and threatened to bring down the global financial system.Nevertheless, Bikpo is convinced that the financial system, like it did 10 years ago, will prove resilient although it will require concerted action from multiple stakeholders – the banks themselves, development finance institutions such as his, the regulators and to some extent governments, “to make sure they don’t crowd out the private sector” he adds.

The larger companies, he explains, which can draw down on credit lines and will have deeper cash reserves, should be able to weather the storm. “As is often the case, it is the smaller companies, on which our economies depend, that will suffer the brunt of this shock,” he says.

“Lockdowns go against the very essence of economies that depend on markets, street vendors and where the informal sector is still a large component of the economy.” SME lending today represents, on average, 20% of a bank’s portfolio, he says. Without intervention and support to the banks, he’s worried that this figure could down to as low as 2-3%, “which would be catastrophic”. Felix Bikpo joined the African Guarantee Fund as its founding CEO nine years ago. He says he took the job under one condition: that the Fund’s approach to SMEs would have to be completely different from accepted practice.

The founding shareholders, the African Development Bank and the development agencies from Denmark and Spain, supported his approach. “By challenging the whole SME lending model, we have so far unlocked around $2bn worth of lending to the SME sector,” he says. This was done by helping de-risk lending to SMEs and also by working with banks to better manage their SME risk assessment and also to modernise their own internal systems in terms of technology.

With guarantees from the Fund, banks no longer need to layer several provisions when lending to SMEs – making margins in this vital sector financially viable. Banks can leverage the Fund’s AA- Fitch rating whilst sharing the risk. The circle has effectively been squared. Bikpo says that his organisation’s response to the crisis has been a two-pronged approach. “The first is stabilisation – protecting the existing loan portfolio, giving companies the time to build resilience and not default,” he says.

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“The second is stimulus – to assist banks increase lending to SMEs to help kick-start economic growth. Banks will inevitably be more cautious and risk averse, so we’ll bear some of that risk burden to encourage them to lend, spur entrepreneurship and help SMEs be an engine of growth.”

To do this, the Fund is going to market to raise an additional $300m which, Bikpo estimates, will help unlock an additional $1.2bn of lending over the course of the next 18-24 months. The stabilisation aspect of the Fund has even extended guarantees to include loans disbursed by banks pre-Covid, thus helping banks restructure the loans and providing the necessary support for the SME sector.

Will he lose money from this? Yes, he says, “but that is how the business model should work.” Will that impact the Fund’s rating? “No. We have sufficient buffers and liquidity.” This new funding will only solidify AGF’s position and will enable it to extend its services even wider. “The only source of finance for SMEs is financial services. If either collapse, African economies will collapse,” he says, highlighting the urgency of the matter. “If the AGF cannot support the SME sector now,” he argues, “then it shouldn’t exist.”

He says Central Banks across the continent have, on the whole, acted decisively and have done the right thing by, for example, providing flexibility in capital requirement and extending the period before which a loan becomes non-performing – thus providing more time for banks and businesses to restructure these loans and enable a revival of the economy.

What business needs to bounce back, he says, is time on their side, but how much time is the unknown factor. African economies are varied – one-size-fits-all generalisations cannot be made. A great deal will depend on factors such as when travel restrictions are lifted to kick start tourism and hospitality or the speed of global economic recovery for commodity exporters.

It is estimated that two thirds of growth on the continent is from domestic consumption so the “attitude of the consumer will also be critical and it’s hard to predict how quickly this will come back,” he says. Public investment and the role of banks will therefore be key to kick-start growth. What sectors are most affected by the crisis? Tourism, he responds, especially in terms of the loan portfolios his banking clients are involved in. “Followed by transport and logistics – and also energy, especially off-grid providers, will be particularly adversely hit.”

Although the current situation has tempered some of its ambitions, the organisation’s remit will continue to increase. For example, AGF has been chosen by the AfDB and its partners to manage a $300m initiative to increase lending to women-led businesses. It is expected to unlock $3bn worth of financing – the financing gap for women is estimated at $42bn. How does he look back on the last nine years? He says that his biggest achievement was “to show that with a little ingenuity, it is possible to unlock problems and overcome what at first may appear to be deadlocked”.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

African Guarantee Fund To Guarantee The Restructuring Of Loans For African SMEs

June 1, 2020

African-tech-startup-funding-rises-51-to-195M-in-2017

African startups and small businesses who borrowed from banks but are unable to pay back as a result of the coronavirus pandemic may now heave a sigh of relief as the African Guarantee Fund (AGF) a non-bank financial institution jointly owned by the Danish and Spanish governments as well as the African Development Bank (AfDB), have agreed to guarantee small and medium enterprises (SMEs) to have their loans with commercial banks restructured.

“African Guarantee Fund for Small and Medium-sized Enterprises (AGF) has announced its Covid-19 response aimed at reducing the uncertainties facing financial institutions in Africa as a result of the global coronavirus pandemic.

“AGF’s Covid-19 response is built on the imperative need for commercial solutions over and above the regulatory efforts already provided by the various central banks and governments in the continent,” said the AGF in a statement.

Here Is All You Need To Know

The AGF Covid-19 Guarantee facility will allow SMEs to pay less over a given period than what they had been paying and therefore cope better in the face of the Covid-19.

“The African Guarantee Fund’s response sets the platform for economic stabilisation, followed by an economic revival through AGF’s newly developed Covid-19 Guarantee Facility that will, firstly, provide more comfort to financial institutions to restructure facilities that become non-performing because of Covid-19 and, secondly, provide commercial stimulus to the financial sector with the aim of mitigating the deterioration of SMEs’ perceived risk.”

For banks, as Figure 1 shows, lack of collateral and high default rates are the main challenge in lending to SMEs. Credit information gaps and high cost of monitoring borrowers together are cited by 16 percent of banks in the survey. Outside of SME specific constraints, increasing bank lending to the public sector in recent years has crowded out private sector lending in some countries, affecting SME lending in particular.

The AGF, however, did not reveal the amount set aside for guaranteeing the SMEs nor did it give any criteria to be used in determining which entities qualify.
The AGF, designed and funded by the AfDB in partnership with the governments of Denmark and Spain, usually provides financial guarantees to financial institutions to stimulate financing to SMEs and unlock their potential to deliver inclusive growth in the region.

For more enquiries, click on this link: https://africanguaranteefund.com/contact-us/

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.

Small and Medium-Sized Enterprises (SME) in Africa Get $33 Million Support

January 9, 2020

The year 2020 started on a very commendable note for small and medium scale enterprises (SMEs) across Africa as one of the most expansive institution focused on providing financial guarantees for over 10,000 SMEs annually through partner financial institutions received a $33 million boost. Africa’s leading guarantee institution, the African Guarantee Fund (AGF) yesterday announced the receipt of an additional USD 33M financing from German lender KfW Development Bank , in a move that will catapult AGF’s efforts to enable African SMEs continue to play their critical role in driving Africa’s economy.

Felix Bikpo, Group CEO of African Guarantee Fund

This new financing comes at a time when the continent’s SME sector has been singled out as a key driver of growth. This now places AGF firmly on the driver’s seat as the champion that eases access to financing for SMEs across the continent. The African Guarantee Fund is focused on its goal to provide financial guarantees for over 10,000 SMEs annually through partner financial institutions and as a trickledown effect, create 30,000 jobs per year.

“We are excited about the confidence our shareholders and partners have in what we are doing in Africa. This capital injection will go a long way in ensuring that we continue to make a positive impact in the continent. So far, we have cumulatively issued more than USD 1 B worth of guarantees making available about USD 1.7 billion for SME financing through our Partner Financial Institutions. This has led to the creation of more than 100,000 additional jobs,” says Felix Bikpo, Group CEO of African Guarantee Fund.

Out of the 20,000 African SMEs from various economic sectors that have so far benefited from AGF guarantees, the institution is very proud that 60% of these SMEs are owned by youth who are the majority in Africa today, and 30% owned by women, both being demographics that heavily impact Africa’s economy.

“Our experience traversing Africa has shown us that Women in Africa are tenacious entrepreneurs, even though they face a gender financing gap of USD 42 billion. The capital increase from KfW will largely be used to increase financing of women owned or led businesses. This is in addition to our partnership with the African Development Bank through the recently launched Affirmative Finance Action for Women in Africa (AFAWA) which currently has a USD 251 million commitments from G7 countries.” added Mr. Bikpo.

African Guarantee Fund, 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. The institution is 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), and Investment Fund for Developing Countries (IFU) and KfW Development Bank (KfW).

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry