African Guarantee Fund Announces Response To Economic Impact Of COVID-19

Posted on May 21, 2020

African Guarantee Fund for Small and Medium-sized Enterprises (AGF), has today announced its COVID-19 response aimed at reducing the uncertainties facing financial institutions in Africa as a result of the global coronavirus 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.  

African Guarantee Fund’s response sets the platform for economic stabilization, followed by an economic revival through AGF’s newly developed COVID-19 Guarantee Facility that will, firstly, provide more comfort to financial institutions to restructure facilities that become non-performing because of COVID-19 and, secondly, provide commercial stimulus to the financial sector with the aim of mitigating the deterioration of SMEs’ perceived risk.

Commenting on the announcement, AGF CEO, Mr. Felix Bikpo said, “The consequences of COVID-19 pandemic will 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. It is because of this that we must develop a commercial response in addition to the regulatory responses given by the different central banks and governments in the continent. Therefore, in line with our mandate we have launched the COVID-19 Guarantee Facility.”

AGF will 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 analyzing 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,” concluded AGF CEO, Mr. Felix Bikpo.

Since inception, AGF has boosted SME lending in Africa by issuing guarantees to financial institutions thereby unlocking loans worth USD 2.5 Billion.

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