ImpactAlpha, December 8 — British International Investment is investing $75 million in Nairobi-based African Guarantee Fund to guarantee loans from partner financial institutions to small and mid-sized businesses in Africa, especially women-led firms focused on climate solutions.
The partners say the investment qualifies under the 2X Challenge, which incentivizes funds to emphasize women’s employment, entrepreneurship and leadership. By covering up to 75% of the risks on SME loans, BII and African Guarantee Fund say it will help financial institutions deploy $150 million in loans to more than 17,000 small businesses.
“We are certain of increased economic growth across the 40 African countries wherein our guarantee products are utilized,” said African Guarantee Fund’s Constant N’zi.
SMEs are key drivers of economic growth in Africa, but have difficulties accessing financing for growth from traditional lenders mainly due to being often perceived as high risk.
The African Guarantee Fund, since it launched in 2011, has provided $1.8 billion in partial guarantees and risk-sharing facilities to lenders, catalyzing more than $3 billion in financing for SMEs. Through its guarantee growth program, African Guarantee Fund aims to unlock up to $5 billion in financing for African women enterprises by 2026.
The African Guarantee Fund is backed by France’s development financing arm Proparco, the Nordic Development Fund, Germany’s KfW Development Bank and several other DFIs.