Small African firms to get $500 mln guarantee fund

Mon Jun 18, 2012 1:25pm GMT

By Kevin Mwanza

NAIROBI (Reuters) - Small and medium-sized businesses (SMEs) in Africa are expected to benefit from a $500 million fund set to guarantee their borrowings from local commercial banks, Africa Guarantee Fund (AGF) chief executive Felix Bikpo said on Monday.

The fund, a joint equity venture of the Danish and Spanish governments and the African Development Bank, will cover only a tiny part of a funding gap for sub-Saharan SMEs estimated by AGF at up to $100 billion.

The AGF chief said the fund would be increased in future, but he declined to say by how much or who else might contribute.

The fund will give guarantees for loans that SMEs take from commercial banks, helping businesses to get credit and supporting their growth.

According to the World Bank, small and medium-sized businesses, which have a capitalisation of between $3 to $15 million, make up of up to 80 percent of Africa's private sector, contribute 50 percent of the new jobs in sub-Saharan Africa and add 20 percent to the continent's gross domestic product (GDP.

Small and mid-sized firms in Africa range from family-owned bakeries and fast food chains to manufacturers and developers.

Bikpo told Reuters in an interview the fund's aim was to raise SMEs' contribution to GDP to over 60 percent through sustainable growth in key industries.

"We're raising today $150 million and the other $350 million will come by the end of next year. All these will come from the initial shareholders," Bikpo said.   Continued...

A man makes footwear from tyres at the open-air Ngara market near the capital Nairobi May 2, 2007. REUTERS/Antony Njuguna
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