MICROCAPITAL BRIEF: Kenya-based Gulf African Bank, African Guarantee Fund Partner to Lend $1.2m to Small, Medium-Sized Businesses

The African Guarantee Fund (AGF), a Kenya-based organization backed by the African Development Bank (AfDB) that aims to increase financial access in Africa by underwriting commercial bank lending to small and medium-sized enterprises (SMEs), reportedly has agreed to guarantee an unspecified portion of KES 100 million (USD 1.2 million) to be loaned by Gulf African Bank (GAB), a Kenya-based bank offering Shari’ah-compliant products and services, to SMEs in Kenya. Shari’ah-compliant financial products are designed in accordance with Islamic Law, which limits the types of investments Muslims may make. After the signing of the agreement, GAB Managing Director Asad Ahmed reportedly expressed his belief that the deal will help to increase the bank’s financing and risk management capabilities.

AGF was established in Kenya in June 2012 with initial capital sufficient to issue partial guarantees of loans totaling USD 50 million. AGF has branches in nine African countries as of March 2013.

As of March 2011, GAB had total assets of KES 9.6 billion (USD 112.3 million) and customer deposits of KES 8.2 billion (USD 96 million).

By Makai McClintock, Research Associate

About African Guarantee Fund (AGF)
The African Guarantee Fund (AGF) was established in Kenya in June 2012 with initial capital sufficient to guarantee loans of USD 50 million. Its goal is to increase financial access for small and medium-sized enterprises (SMEs) in Africa. It provides partial financial guarantees to support loans and equity capital financing to client SMEs as well as capacity development support for SME financing. AGF is headquartered in Mauritius, but its operations are managed out of Kenya. It also has offices in eight other African countries as of March 2013.

About African Development Bank (AfDB)
Established in 1964, the African Development Bank (AfDB) provides loans and grants to governments and private companies in Africa. Owned and funded by member governments, the bank has a mandate to reduce poverty and promote sustainable development. AfDB shareholders consist of 77 member countries, including 53 African countries to which it commits an approximate total of USD 3 billion annually. Donald Kaberuka serves as president of AfDB as of 2012.

Sources and Additional Resources

Ventures Africa Article, “Kenya: Gulf African Bank in $1.2m Deal with AGF to Support SME Lending,” http://www.ventures-africa.com/2013/04/gulf-african-bank-in-1-2-million-deal-with-agf-to-support-sme-lending/

MicroCapital. April 17, 2013, “MICROCAPITAL BRIEF: African Guarantee Fund (AGF) Guarantees $3.5m in Loans from Commercial Bank of Africa, Investments & Mortgages Limited to SMEs in East Africa,” https://www.microcapital.org/microcapital-brief-african-guarantee-fund-agf-guarantees-3-5m-in-loans-from-commercial-bank-of-africa-investments-mortgages-limited-to-smes-in-east-africa/

MicroCapital. October 22, 2012, “MICROCAPITAL BRIEF: Small and Micro Enterprise Programme (SMEP) Deposit Taking Microfinance Institution of Kenya Looking to Raise $18.5m in Share Capital,” https://www.microcapital.org/microcapital-brief-small-and-micro-enterprise-programme-smep-deposit-taking-microfinance-institution-of-kenya-looking-to-raise-18-5m-in-share-capital/

MicroCapital. November 2, 2010, “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),” https://www.microcapital.org/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-in/

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