The African Development Bank has established a Fund to absolve the risk of SME funding on the continent. The Fund takes on 50 percent of the risk of commercial banks in lending to Small and Medium Enterprises (SMEs) in Africa, according to the AfDB.
The Fund will address African SMEs’ and entrepreneurs’ key constraint of access to finance, an official has said.
Speaking to journalists at the Bank’s headquarters in Tunis, Tunisia, Wednesday, Director of the Private Sector Department of the Bank, Tim Turner said the African Guarantee Fund was established two years ago with the help of the governments of Denmark and Spain.
The Fund which is now operational is headquartered in Nairobi, Kenya.
“The Fund will have a Pan-African mandate, and will help financial institutions that are lending to SMEs to scale up their business, ” he said.
“It was created to help commercial banks to lend to SMEs,” he said.
He said Denmark and Spain provided $40 million and the AfDB provided $10 million to start the Fund.