The AfDB SME Program Approval: Boosting Inclusive Growth in Africa
TUNIS, Tunisia, July 22, 2013/African Press Organization (APO)/ -- The Board of Directors of the African Development Bank (AfDB) (http://www.afdb.org) approved today the Africa Small and Medium Enterprises (SME) Program, a four-year, US $125-million funding program combined with a US $3.98-million technical assistance package granted by the Fund for African Private Sector Assistance (FAPA), aiming at supporting micro, small and medium enterprises (MSMEs) in Africa. The program will provide standardized lines of credit (LoCs), mostly in local currency, and technical assistance to targeted financial institutions, predominantly in low-income countries spread over all five African regions. The SME Program will avail important longer-term resources to thousands of SMEs including women and youth, thus contributing to job creation, poverty reduction and inclusive growth on the continent.
The SME sector is crucial to Africa's growth, contributing more than 45% to employment and 33% to GDP. SMEs continue to face significant challenges. Studies indicate that more than 70% of SMEs lack access to medium-longer-term finance, creating an SME funding gap of more than US $140 billion in Africa alone. Well performing local SME-focused financial institutions lack access to longer-term resources from depositors, capital markets or other potential funders hindering the provision of medium- and long-term SME finance. Of the loans available, almost 60% is for less than one year. Financial institutions also often lack adequate knowledge and systems to assess and monitor SME projects and compensate this by relying on excessive – but mostly unavailable – collateral.
In response to these challenges the AfDB, through this SME Program, will provide the necessary longer-term finance and a technical assistance package to address a number of the constraints faced by around 25 target financial institutions and their SME clients across Africa.
Thus, the program will benefit from the Fund for African Private Sector Assistance (FAPA) support that will grant US $3.98 million to provide technical support to building capacities of the 25 participating financial institutions to improve their operational efficiencies, in areas such as credit assessment and risk management, thereby contributing to better access to finance for African MSMEs sustainable growth. FAPA is a multi-donor thematic trust fund, financed by the Government of Japan, the AfDB, the Austrian Development Bank and the Government of Austria, that provides grant funding for technical assistance and capacity building to support implementation of the AfDB's Private Sector Development Strategy. This US $3.98-million FAPA technical assistance grant for the AfDB Africa SME Program is the highest amount approved in the history of FAPA.
Improved access to financing amongst members of the majority of urban and rural dwellers who depend on smaller-scale business activities will allow further support to their living and that of their families and communities. Women are likely to benefit of the expanded outreach as they tend to operate more often in rural-based smaller enterprises. The social effects of the Africa SME Program will be significant given the particular support to microfinance institutions in low-income countries and fragile states, thus deepening access to finance for micro and small enterprises in severely underfinanced communities in the longer term, resulting in poverty reduction and social inclusion. In addition, the Program will also contribute significantly to capital market, private sector development and government revenue.
Distributed by the African Press Organization on behalf of the African Development Bank (AfDB).
Sabrina Hadjadj Aoul, Senior Communications Officer, T. +216 71 10 26 21 / C. +216 98 70 98 43 / [email protected]
Robert Zegers, Chief Investment Officer, T. +216 71 10 35 51 / [email protected]
Kazuhiro Numasawa, Senior Investment Officer, T. +216 71 10 28 82 / [email protected]
Press releases are also available in the Bank's website at http://j.mp/AfDB_Media
About the Fund for African Private Sector Assistance
The Fund for African Private Sector Assistance (FAPA) is a multi-donor thematic trust fund that provides grant funding for technical assistance and capacity building to support implementation of the Bank's Private Sector Development Strategy. The Government of Japan, African Development Bank, the Austrian Development Bank and the Government of Austria are the contributors to the fund, which to date has provided US $42 million to 47 projects across the African continent. The FAPA portfolio includes regional and national projects in sectors such as Business Enabling Environment, Financial Intermediation, Infrastructure, Trade and Micro, Small and Medium Enterprises.