MICROCAPITAL BRIEF: African Development Bank (AfDB), Governments of Denmark and Spain to Create African Guarantee Fund (AGF) to Bring Economic Resources to African Businesses Including Microfinance Institutions (MFIs)

The governments of Denmark and Spain, as well as the African Development Bank (AfDB) have combined resources to create the African Guarantee Fund (AGF), a non-bank financial institution intended to boost the economy and reduce poverty in Africa through improved access to funds for small and medium-sized enterprises (SMEs).

AGF is intended to service all of Africa, but will initially operate in Ghana, Kenya, Mozambique, Uganda and Zambia. Prior to its launch, feasibility studies in these countries indicated an unmet demand for planned AGF offerings, particularly loan guarantees, for which there will be an estimated demand of USD 2.5 billion.

The AGF anticipates it will drum up USD 50 million in capital by the end of 2010 and up to USD 90 million by 2012. While this initial capital will come primarily from donors and development finance institutions, the AGF intends to offer shares to private investors in later funding rounds. The fund hopes to increase its total capital to USD 300 million[1].

About the African Development Bank (AfDB): Established in 1964, the African Development Bank (AfDB) is a development finance insitution that provides loans and grants to governments and private companies in Africa. AfDB commits approximately USD 3 billion annually to African countries. Owned and funded by member governments, the bank has a public-interest mandate to reduce poverty and promote sustainable development. AfDB shareholders consist of 77 member countries, which include 53 African countries. The AfDB is controlled by a Board of Executive Directors, made up of representatives of its member countries. As of 2010, the president of AfDB is Donald Kaberuka.

By John Howard-Smith, Research Associate

[1] allAfrica: “New Public-Private Fund to Boost SMEs in Africa”, http://allafrica.com/stories/201010251082.html

MicroCapital’s Microfinance Universe profile: African Development Bank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=African+Development+Bank++(AfDB)

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