US$5 million credit guarantee for agri-based SMEs rolled out
Small businesses within the agriculture value chain in Africa can now access loans with ease following the rollout of a $5 million (Kes607 million) credit guarantee scheme.
This follows a partnership between the African Guarantee Fund (AGF) and ResponsAbility Investments AG (responsAbility) to offer loan guarantees targeting SMEs engaged in activities related to crops and farming products or commodities.
Founded in 2003 and headquartered in Zurich, responsAbility Investments AG is a leading impact investor focused on private debt and private equity across emerging markets.
The credit guarantee agreement was signed on Thursday in Nairobi, Kenya and is entirely dedicated to increasing the financing of Small and Medium Enterprises (SMEs) in the African agricultural value chain, the organisations noted.
Africa’s agri-SMEs face numerous challenges that hinder them from achieving their full potential mainly. The SMEs struggle with inadequate access to finance that is appropriate and available at different stages of growth as well as poor access to talent and the ability to attract and retain qualified employees.
Across the continent, SMEs struggle to find an ecosystem of support and collaboration between public, private, and financial players and also face limited knowledge that strategically supports development.
Further, access to markets, including information, connections with suppliers and clients, and physical infrastructure remains a pain point for many investors in the segment.
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The AGF-responsAbility partnership will play a critical role in bridging the estimated US$74 billion annual financing gap facing agri-SMEs in sub-Saharan Africa.
AGF Group CEO, Jules Ngankam: “Agri-businesses tend to have higher risk profiles and limited cash flow compared to equivalent SMEs in other sectors. Our risk-sharing partnership will allow responsAbility to scale up lending activities to agribusinesses across Africa enabling agri-SMEs to play a bigger role in connecting different components along the food production value chain.
“This partnership demonstrates our commitment to African SMEs and to the continent’s sustainable development by supporting the growth of agri-SMEs, increasing their productivity and enabling them to adapt to the changing environment.”
Michael Fabbroni, Country Director, Kenya and Head of Financial Institutions Debt Africa, responsAbility added, “this partnership reflects the alignment of our values in fostering a sustainable agricultural sector. Additionally, it shares our vision of Africa’s key role in future global food production.”
ResponsAbility will also use the guarantee facility to increase lending to women-owned/led agribusinesses as well as climate-focused businesses involved in energy efficiency, renewable energy, natural resource management and climate insurance.