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We have a powerful business case for increasing aid to Africa's SME. Aid to Africa's small and medium-sized enterprises (SMEs) continues to be heavily fragmentary, with several pledges and financial intermediaries (DFIs) implementing a number of SME programmes without coordination. Regionalisation of aid and concentration of resource is needed to prevent duplication and inefficiency in the context of the Paris Declaration and the Accra Agenda for Action.
AGF is a truly public-private relationship with other providers, financing agencies and retail shareholders who are likely to join forces to raise extra funds and expand their businesses. SME are the best candidate for integrative Africa as they are a key contributor to revenue generating and employment opportunities. Accessibility to financing, however, is repeatedly identified as one of the biggest barriers to the economic and social expansion and expansion of SME.
Just 20 per cent of Africa's small and medium-sized enterprises have a line of credit provided by a finance institute. AGF, a JV between the Africa Development Bank, the Government of Denmark and the Government of Spain, was established in 2010 to work with and help finance banks to enhance their engagement with small and medium-sized enterprises in Africa. Partially loan guarantees:
Providing subguarantees to finance banks in Africa to encourage them to raise leverage and capital investment in SME. On the basis of a needs analysis of regional banks and SME', AGF will provide three kinds of guarantee with different fees structures: a) loan and credit guarantee, b) bank financing guarantee and c) capital guarantee.
Developing capacity: An autonomous unit will help banks to build their ability to evaluate and administer SME portfolio. The AGF will use part of its budgetary resources for developing capacities, with the majority of the cost being borne by the partner banks. Further subsidies are requested to complement the AGF's commitment of $2.5 million in AGF capacities that Danida has pledged for this end.
Building the capacities of small and medium-sized enterprises will be controlled and carried out by means of locally established services. Improving the supply of finance products to SMEs: by assisting banking institutions to better cover the working capital and long run funding needs of SME. Strengthening eligible SME segments: by altering the Bank's perceptions of eligible SME' and continuously enhancing its commitment to them.
Strengthening the banks' ability to evaluate SMEs: by offering financial support and policies to further enhance the commitment of those SME' which are not covered by the banks of the country where AGF will work. The AGF addresses all small and medium-sized enterprises in Africa with a current business licence within these boundaries, irrespective of branch, business branch, site or property.
The AGF will go through a strict partnership identification procedure in which the partners make a clear pledge to expand their SME portfolios and improve their range of finance related services. In the first two years, AGF produces will be launched in nine to fourteen African nations with the goal of covering the whole African Continent by 2016.
Ghana, Mali and Senegal in West Africa, Cameroon in Central Africa, Kenya, Tanzania and Uganda in East Africa and Mozambique and Zambia in South Africa. The AGF commenced its activities in the second half of 2011 on the basis of a guaranteed equity of US$ 50 million already authorised by the three founders (Denmark, Spain and the African Development Bank).
AGF will be a continuous channel for channelling guarantee and tech help channelling to African banks, with the aim of increasing economic activity in the SME segment and thus improving economic job creation, especially for young people. Credit port folio guarantee for partner credit institutes (ÖI), finance guarantee for ÖI, capacity building aid for SME.
By providing these goods and sevices, the AGF will help to increase accessibility to loans for small and medium-sized enterprises when setting up and developing their business. This will also help to tackle the question of the scarcity of technological capacities of both PNIs and SME. AGF will mobilise significant funding for Africa's small and medium-sized enterprises, thus helping to develop the business community, create jobs and eventually fight global impoverishment.
Anti-cyclical measures will be taken to assist banks by facilitating easier availability of cash and enhancing their lending capabilities. In addition, it will help to build capacities for both PNIs and SME', thereby enhancing increased efficiency and competitive ability. Lastly, the AGF will help to increase the efficiency of help related to the reduction of ODA to small and medium-sized enterprises by directing funding towards a local channel.
It is expected that a second subsidiary will be established within a few years in a French-speaking Westafrican state. The AGF will act as a non-banking finance institute with a Board of Directors with overall responsibility for Executive Committee and a Chief Executive Officer who will manage the business. Danish International Development Agency (DANIDA):
AGF is one of five specific projects to support job generation and increase economic activity in the African economy. Spain's Agency for International Development Cooperation (AECID): In 2010, the Spaniard authorities acceded to the AGF as part of their 2009-2012 Africa Economic and Business Development strategy.
Mr. Benn has worked with several banking and finance companies, such as Citibank, Ecobank Group, Atlantic Banking Group, Access Group and Gari Fund. Mr. Bogner was CEO of Access panelafrica (the Access Banking Group's parent corporation responsible for investment outside Nigeria) and CEO of the Access Banking Group.
In his capacity as Chief Executive Officer, he headed the Atlantic Banking Group (a West African banking group). Mr. Benn was President of Ecobank Group, President of Gari Fund (a West African guarantee fund) and served for seven years at Citibank NA as Vice President and Regional Director of Finance-Controls. Managed various finance market strengthening initiatives across Africa.
AGF's Advisory Committee consisted of Africans and non-Africans banking professionals, CBRs, SME agents and other experts in key AGF areas and will continue to exist after the AGF product launch. The AGF expects to raise around $2 billion in new loans for small and medium-sized enterprises (SMEs) in the near future and to achieve around 10,000 small and medium-sized enterprises (SMEs) in Africa by drawing on its framework facility three time.