African Guarantee Fund (AGF), a non-bank financial institution, has received a $2.5 million co-investment grant from the USAID-funded West Africa Trade & Investment Hub to support high-potential SMEs in West Africa.
African Guarantee Fund 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 provide guarantees to its partner financial institutions (PFIs) on more favorable terms and conditions while remaining financially sustainable.
Through the COVID-19 Guarantee Facility, African Guarantee Fund 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 African Guarantee Fund 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 CrossBoundary, 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.
