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Monday,
January 24, 2022 / 2.30 PM / Release by African Guarantee Fund / Header Image Credit: African Guarantee Fund
Limited access to capital remains a high barrier to growth for many
small- and medium-sized enterprises (SMEs) operating in West Africa, a
challenge compounded by the COVID-19 pandemic. In its continued efforts
to support high-potential SMEs in the region and the companies that finance
them during this crisis, the USAID-funded West Africa Trade & Investment
Hub awarded a $2.5 million co-investment grant to the African Guarantee Fund (AGF) for Small and
Medium-sized Enterprises.
AGF,
a leading non-bank financial institution, will leverage this grant, as well as
$20 million of private equity to support its two-part COVID-19 Guarantee
Facility. The combined $22.5 million co-investment will allow AGF to
absorb additional pandemic-related risk and guarantee its partner financial
institutions (PFIs) on more favorable terms and conditions while remaining
financially sustainable.
Through
the COVID-19 Guarantee Facility, AGF expects to issue loan guarantees to 30
partner financial institutions (PFIs), allowing them to unlock up to $160
million in financing for approximately 3,000 West Africa-based SMEs impacted by
the pandemic. In addition, it will provide technical assistance to the
PFIs and SMEs benefiting from the COVID-19 Guarantee Facility to accelerate
their post-pandemic recovery.
During
AGF's three-year partnership with the Trade Hub, the COVID-19 Guarantee
Facility is expected to help SMEs create 15,000 new jobs, maintain 20,000
existing jobs, and collectively generate $100 million in sales and $8 million
in exports.
"Despite
the internationally recognized importance of SMEs, African small businesses
often have difficulties accessing financing for growth and innovation from the
formal financial sector. Over the past two years, SME financing challenges have
further escalated due to economic uncertainties brought about by the impact of
the pandemic," said Jules Ngankam, AGF's Group Chief Executive
Officer. "Our COVID-19 Guarantee Facility is a response to this
challenge, and we are excited to partner with the Trade Hub to increase our
capacity in bridging the SME financing gap through this innovative initiative,"
he added.
The
Trade Hub's partnerships with AGF represent its forward-thinking approach to
helping high-potential West Africa-based businesses with the financing needed
to rebound from the COVID-19 pandemic.
"Similar
partnerships with Cordaid Investment
Management and Cross-Boundary,
launched in 2021, are already showing success in bringing together the
partners, capital, and resources that create a more stable environment for SMEs
to grow and make a positive impact in the region," says Robin Wheeler, the
Trade Hub's Chief of Party. "We are excited to add AGF as a co-investment
partner," he added.
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