AfDB offers Financial Assistance to the Ghana Export oriented SME Guarantee Program

19/03/2008
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Tunis, 19 March 2008 - The Board of Directors of the African Development Bank (AfDB) approved on Wednesday in Tunis a proposal to extend a Partial Credit Guarantee Facility of US$ 24 million for export- oriented SMEs in Ghana and a US$ 1 million grant for technical assistance. The technical assistance component is funded by a grant from the Fund for African Private Sector Assistance (FAPA), supported by the Government of Japan. FAPA will focus on capacity building for producers’ associations, the implementation of an SME credit scoring mechanism for partner banks, and the strengthening of SME linkages to markets, including through Fair Trade.

The target beneficiaries are export-oriented SMEs, in particular producers of non-traditional exports, that are too small for corporate loans, but whose needs are larger than micro-loans (the "missing middle"). The project will support Ghana’s export development strategy and will expand access to credit and technical assistance to the target beneficiaries.

This program is in line with the recently approved Bank strategy for Private Sector Operations which is anchored on the following principles: (i) innovation; by offering market-based risk-sharing mechanism to support SME development; (ii) demonstration effect, by helping reduce asymmetric information and reducing the high risk perception of SMEs in banks; (iii) additionality, by redirecting some of the abundant capital held by banks in liquid assets towards productive private sector firms, and (iv) partnerships, by using local partner banks to directly implement the Partial Credit Guarantee Facility and risk share.

This project takes a "holistic" approach to addressing the most serious constraints faced by export-oriented SMEs and, particularly, small and medium-sized businesses owned by women. Through a partial credit guarantee facility, the ADB will encourage two local partner banks to expand lending to the target SMEs and SME associations. Through this facility, the Bank will catalyze up to US$ 48 million of new lending to about 200 SMEs and 10 SME organizations, about 20% of which will be women-owned enterprises. It is estimated that this additional finance will increase exports by about US$ 339 million, which will boost taxes and help the balance of payments. It is estimated that the project will create at least 500 permanent jobs. Through the associated technical assistance program, the Bank will help to build capacity within the value chain to maximize the effects of improved access to credit for SMEs. The project is closely linked with the other public sector operations in the country and it aptly illustrates the Bank’s unique valued added in private sector development.

Contacts:

G. Kyokunda, g.kyokunda@afdb.org, +216 7110 3697 / O. Nicol-Houra, o.nicol@afdb.org, +216 7110 3227