In a bid to increase its guarantee capacity for SME financing in Africa, African Guarantee Fund, a firm that was set up to assist financial institutions increase their financing to Small and Medium Scale Enterprises (SMEs) in Africa, through the provision of partial financial guarantees and capacity development assistance has entered into a re-guarantee transaction worth $74 million with GuarantCo.
According to the firm, “SMEs have a large and growing impact on GDP in emerging markets and are a key source of job creation. Strengthening Africa’s infrastructure is critical for development as it is through this that African countries become more competitive at a global level. With this increased capacity, AGF will be able to support larger local currency transactions for SMEs involved in infrastructure. Over the past 6 years, AGF has led the guarantee market in Africa by issuing financial guarantees to a tune of $690 million. This has enabled its partner financial institutions to issue loans estimated at $729 million to about 7600 African SMEs.”
GuarantCo on its own is a part of the Private Infrastructure Development Group (PIDG) – a global guarantee fund that has issued over $900 million of guarantees since inception in 2005 with a mandate to enable local currency finance for infrastructure.
In 2012, the African Development Bank (AfDB), the Government of Denmark through the Danish International Development Agency (Danida) and the Government of Spain through the Spanish Agency for International Development Co-operation (AECIDc) established GuarantCo, to mobilise local currency investment for infrastructure projects and support the development of financial markets in low income countries. It is supported by the governments of the UK, Switzerland, Sweden, the Netherlands and Australia. Commenting on the AGF-GuarantCo partnership.