Africa Guarantee Fund Seeks to Raise $400 Million in Three Years

LAGOS (Capital Markets in Africa) – The Africa Guarantee Fund, which finances small and medium enterprises, intends to raise as much as $400 million by 2020 for its lending programs, said Chief Executive Officer Felix Bikpo.

The Danish government-backed fund expects to receive the first of the sum by the end of this year to finance businesses focused on infrastructure, Bikpo said in a March 2 interview in the Kenyan capital, Nairobi. The next batch of funding is likely by the end of 2019.

“This year we target $120 million and I think we’ll be able to raise this money fairly easily,” Bikpo said. “The financing gap for small and medium enterprises in Africa is more than $150 billion, so this is a drop in the ocean.”

The institution, also backed by the African Development Bank, has provided guarantees totaling $690 million over the past six years, enabling partner financial institutions to lend about $729 million to 7,600 businesses, it said in a statement. Even after all that financing, the AGF’s bad-loan levels are lower than conventional banks, Bikpo said.

“Our non-performing loan ratio is less than 2 percent of the company’s portfolio of $400 million as of today,” he said. “If you look at the financial sector in Africa, the average per region is between 4 percent to 10 percent and most of them are not doing small and medium enterprises. The SME sector is not that risky.

Source: Bloomberg Business News