RISK MITIGATION: What are Updates & Proposals on Risk Mitigation Products?

Product Name African Guarantee Fund for Small and Medium Enterprises
Link to Product Website
Provider Name AfDB (African Development Bank)
Product Definition AGF was established to address this mismatch in the supply and demand of SME financing. A joint venture between the African Development Bank, the Danish and Spanish Governments, AGF was initiated in 2010 to partner with financial institutions to help them increase their exposure to SMEs in Africa.

To accomplish this, AGF has two lines of activities:

1. Partial Credit Guarantees: Provision of partial guarantees for financial institutions in African countries to incentivize them to increase debt and equity investments into SMEs. Based on an assessment of the needs of financial institutions and SMEs in the region, AGF will offer three types of guarantees with different fee structures: a) portfolio and individual loan guarantees, b) Bank fund raising guarantees; and c) equity guarantees.

2. Capacity Development: A separate entity will help financial institutions develop their capacity to appraise and manage SME portfolios. AGF will allocate a portion of its budget to capacity building, with financial institution partners covering most of the costs. Additional grants are being sought to supplement AGF’s capacity development trust of USD 2.5 million committed by Danida for this purpose. Capacity development of SMEs will be managed and implemented through existing local service providers.
AGF’s products are expected to have a scalable positive impact in the following three ways:

1. Improve SME financial product offerings: by helping banks to better address working capital and long-term financing needs of SMEs.

2. Expand bankable SME segments: by changing Bank’s perception of bankable SMEs and permanently increasing their exposure to SMEs.

3. Increase Banks’ capacity to appraise SMEs: by providing technical assistance and strategies to further develop SME engagement.

Product Type Partial Credit Guarantee
Defined Risks Covered n.a.
Eligible Form of Investments Bonds
Bank Loans
Equity
Eligible Currency of Underlying Investment Covered by this Product Both local and foreign currency
Eligible Countries & Regions Other
Eligible Applicants All
Eligible Sector No Specific Sector
Maximum Tenor 5+ to 10 years
Max. Absolute Amount (USD) 0 to 50 MM
More on Maximum Absolute Amount
Max. % of Project Costs Covered 25+% to 50%
More on Maximum Project Costs Covered
Max. % of Export Content Covered Max./under 50%
Fees Market-based
Pricing may vary across banks depending on the quality of the portfolio as measured by among others, the default rate. Below are indicative prices of guarantees:

1. Portfolio Loan Guarantee: 0.75% (Originating fees - Flat), 2.00% (Guarantee Commissions - Per Annum)

2. Individual Loan Guarantee: 0.75% (Originating fees - Flat), 1.75% (Guarantee Commissions - Per Annum)

3. Equity Guarantee: 1.00% (Originating fees - Flat), 5.00% (Guarantee Commissions - Per Annum)

4. Bank Fund Raising Guarantee: 1.00% (Originating fees - Flat), 2.50% (Guarantee Commissions - Per Annum)

Tenors

The tenor of each guarantee shall be set at 80% of the life of the underlying transaction, with the remaining period catering for transaction winding up and recovery.



More on Fees

Other Conditions Sovereign Counterguarantee: No
Anti-Corruption and Governance Standards: Yes
Environmental standards: Yes
Social standards (incl. Human Rights Standards; Labor Rights Standards): Yes
Others:
More on Other Standards
Source(s) n.a.
For more information, contact n.a.
Attachments n.a.
Additional Links n.a.
Deals n.a.

Provider Name AfDB (African Development Bank)
Institution Type PUBLIC: Multilateral Development Bank
Ownership n.a.
Head Office Statutory Headquarters Rue Joseph Anoma, 01 BP 1387 Abidjan 01 Côte d'Ivoire
Provider Home Country Cote dIvoire
Rating n.a.
Main Risk Mitigation Products Partial Credit Guarantee (AfDB)
Policy-Based Guarantee (AfDB)
Sub-sovereign Finance (AfDB)
Attachments n.a.
Additional Links

Entered On: 01/30/2008 at 09:37 AM
Updated On: 04/19/2013 at 09:56 AM