HomeNewsFresh capital for SMEs on cards

Fresh capital for SMEs on cards

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THE African Guarantee Fund (AGF) says it is in talks with a foreign-owned bank with a Zimbabwean subsidiary for a $2 million facility for the country’s small to medium enterprises, an official has said.

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The move is a major breakthrough for SMEs to access lines of credit from local financial institutions.

AGF was launched last year to give guarantee to financial institutions for SMEs to access lines of credit. It also provides support for capacity development of the client financial institutions to help them improve their SME financing capabilities.

AGF chief executive officer Felix Bikpo, told NewsDay last week discussions with the banking group would be concluded by end of June.“One banking group came to us for a guarantee for a Zimbabwean subsidiary. Shortly, we will have something signed on Zimbabwe. This bank is looking for $2 million for on lending to SMEs. It (discussions) will be completed end of June latest,” Bikpo said.

AGF has a capital base of $50 million and Zimbabwe’s allocation is $5 million, representing a tenth of the total capital.

The country’s allocation will increase if AGF’s capital base increases. Bikpo said AGF is in the process of increasing its capital base to $500 million.

This means Zimbabwe’s allocation would rise to $50 million. Bikpo said AGF anticipates that through leveraging its guarantee capital by three times, it would generate approximately $2 billion of new lending to SMEs as per its objective of impacting at least 10 000 SMEs on the continent. AGF is a joint venture between the African Development Bank and Danish and Spanish governments.

The idea of an African guarantee fund was mooted by the African Commission in 2009 to play a key role in reducing poverty and help the continent to achieve Millennium Development Goals. It was envisaged that a fund would channel guarantees and technical assistance to financial institutions aimed at increasing the growth of the African SME sector.

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