African Guarantee Fund woos local banks

The African Guarantee Fund (AGF), a pan African development finance firm based in Nairobi, is ready to partner with Rwandan banks to provide funds for onward lending to small-and-medium enterprises (SMEs), Passwell Shapi, the Fund’s business development boss, has said. Speaking during a meeting with local commercial banks at Umubano Hotel in Kigali on Saturday, Shapi said the SME sector plays a key role in poverty alleviation. He, however, noted that most SMEs lack collateral, which he said was still a big challenge for both sectors. “We want banks to identify small-and-medium enterprises which have feasible plans, but lack collateral and come to us for the guarantees,” he said. He added that AGF would raise the funds needed by local banks to help lend to SME sector. “We provide guarantees to the institutions willing to give funds to banks. This could be through the banks issuing Rwandan franc bonds of between seven to 10 years against our guarantee or the banks going to other banks for lines of credit against our guarantee,” he explained. He said under this arrangement, the banks can secure funds at affordable rates, which they too can lend at competitive interest rates. Alex Kanyankole, the Development Bank of Rwanda chief executive officer, noted that the meeting gave an opportunity to find ways they could work with the Fund to give more support to SMEs. In 2012, the government started the Business Development Fund with the same motive of facilitating SMEs to acquire credit by providing financial security to banks. As of August last year, Rwf12.3b of the Rwf17.5b (70 per cent of the loan guarantees) had been used to support projects in the agriculture sector, benefitting coffee, tea, maize, rice and livestock farmers. The remaining Rwf5.2b went to the hospitality, manufacturing, education, artisans, real estate and transport sectors. Innocent Bulindi, the Fund’s chief executive officer, said they would tap into Africa Guarantee Fund’s vast resources and build their capacities.