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An Africa Development Bank (AfDB) backed institution on Thursday said that it plans to enable 530,000 African small and medium enterprises (SMEs) to access loans annually.

African Guarantee Fund (AGF) CEO Felix Bikpo told a media briefing in Nairobi that it will sign guarantee agreements with financial institutions in 53 African countries so that they extend loans to the small firms.

“In order to achieve the objective, we are seeking to raise an additional 500 million U.S. dollars from our shareholders which will enable us provide financial guarantees worth 1.5 billion dollars,” Bikpo said when AGF announced that it has received an Insurance Financial Strength rating of “AA” by globally renowned Fitch Ratings.

AGF was founded in 2012 by the AfDB, Danish International Development Agency and the Spanish Agency for International Development Cooperation to assist financial institutions in Africa to scale up their SME financing through the provision of partial loan guarantees and capacity development assistance.

Bikpo said his organization is seeking to bridge the gap between financial institutions and SMEs which is currently estimated at 150 billion dollars.

He noted that SMEs have difficulty in accessing loans because they are perceived to have a high risk of defaulting.

This belief, he added, has made small firm owners to rely on personal savings or funds from friends and family.

The Pan African non-bank financial institution noted that in more advanced economies SMEs play a big role in national development because they can access affordable credit.

“However, in Africa their contribution to the Gross Domestic Product remains limited due to their numerous financing challenges,” he added. Enditem

Source: Xinhua/NewsGhana.com.gh

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