The Nairobi-based pan-African lender, African Guarantee Fund(AGF), on Monday announced it had launched a COVID-19 guarantee facility to boost lending by financial institutions to small and medium-sized enterprises (SME) in the continent amid the COVID-19 pandemic.
Felix Bikpo, CEO of the African Guarantee Fund, said in a statement that its guarantee facility will provide commercial stimulus to the financial sector with the aim of mitigating the deterioration of SMEs’ perceived risk.
Bikpo said the consequences of the COVID-19 pandemic will continue to have escalating negative effects on SMEs in Africa both on the supply and demand sides.
“Consequently, we must assume that there follows a deterioration of these SMEs’ creditworthiness. This is likely to increase the cost of credit for the financial sector which will surely increase their reluctance to finance the SME sector if there is no external stimulus,” he said.
AGF said that the COVID-19 response is built on the imperative need for commercial solutions over and above the regulatory efforts already provided by the various central banks and governments in the continent.
The pan African lender will also continue to use its technical assistance support to increase the capacity of financial institutions in their risk assessment of SMEs during the crisis period. Enditem
