UK-Africa entities sign $75mln pact to fund SMEs

UK-based finance institution British International Investment (BII) and Pan-African guarantee provider African Guarantee Fund have signed a $75 million re-guarantee agreement for small and medium enterprises (SMEs) across Africa. The facility will provide credit guarantees to partner financial institutions for up to 75% of the risk on SME loans, thus increasing access to credit and reducing collateral requirements for these SMEs, BII said in a statement. As a result, the eight-year partnership is expected to facilitate up to $150 million in loans to 17,300 SMEs through partner financial institutions. This partnership will also encourage lending to SMEs that are women-owned or led as well as SMEs that are climate-focused. The statement said that African SMEs continue to face significant challenges in accessing credit. Financial institutions are often constrained by regulatory requirements, limited appetite for a segment that is perceived to be higher risk, a lack of adequate collateral available from SMEs, knowledge gaps by the lenders and skill gaps demonstrated by SME borrowers. Jo Fry, Investment Director and Head of Intermediated Credit, BII, stated that this investment will increase access to finance for SMEs across the African continent, focusing on those in the most challenging contexts. “The partnership, which will target funding at climate-focused businesses as well as SMEs owned and led by women, will contribute toward increasing inclusive and sustainable development for Africa,” he added. (Editing by Seban Scaria seban.scaria@lseg.com )

UK-Africa entities sign $75mln pact to fund SMEs

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