BUUMBA CHIMBULU writes
AFRICA Guarantee Fund for Small and Medium-Sized Enterprises (AGF) has announced its Covid-19 response aimed at reducing uncertainties facing financial institutions in Africa as a result of the global pandemic.
AGF’s Covid-19 response is built on the imperative need for commercial solutions over and above the regulatory efforts already provided by the various Central Banks and Governments in the continent.
Chief Executive Officer, Felix Bikpo, said the consequences of Covid-19 pandemic would continue to have escalating negative effects on SMEs in Africa both on the supply and demand sides.
“Consequently, we must assume that there follows a deterioration of these SMEs’ creditworthiness. This is likely to increase the cost of credit for the financial sector which will surely increase their reluctance to finance the SME sector if there is no external stimulus,” Mr Bikpo said in a statement.
He said it was because of this that AGF must develop a commercial response in addition to the regulatory response given by the different Central Banks and Governments in the Continent.
Mr Bikpo said in line with their mandate they had launched the covid-19 Guarantee Facility.
He said AGF would also continue to use its technical assistance support to increase the capacity of financial institutions in their risk assessment of SMEs during the crisis period.
This will allow analysing the impact of the pandemic on the financial institutions, so as to forge the best possible responses to adapt effectively.
The African Guarantee Fund recently received a third time AA- Rating by Fitch, which was first assigned in November 2017, a first for a guarantee fund in Africa.
“This exceptional rating is a sign of confidence and trust in AGF’s operational excellence, particularly now that financial institutions are in need of cushioning to continue lending to SMEs, who hold the key to the economic recovery of their respective countries,” Mr Bikpo said.
Since inception, AGF has boosted SME lending in Africa by issuing guarantees to financial institutions thereby unlocking loans worth US$2.5 billion.