AfDB Supports SMEs in Liberia, Approves Equity Investment and Technical Assistance Grant

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Tunis, 23 April 2008 –The Board of Directors of the African Development Bank (AfDB) approved on Wednesday in Tunis an Equity investment of US$900,000 in Access Bank Liberia (ABL) and a US$ 1 million grant from the Fund for African Private Sector Assistance (FAPA) to support small businesses and post-conflict recovery efforts in Liberia.

Presenting the Project at the Board, the AfDB Private Sector Department Director, Tim Turner, said  that the ABL will be established as a greenfield microfinance bank to provide financial services to the low-income population of Liberia. In five years, the ABL is projected to have expanded to 12 branches, with a workforce of about 400 people, an active client base of around 27,000, and total assets of USD 38 million, he added.

ABL will mobilize resources mainly in US Dollars and local currency through deposit-taking activities and other savings products. The Bank is expected to attract about 81,000 voluntary depositors and mobilize resources of almost US$ 23 million with an average deposit amount of US$ 300 to US$ 1,000 per saver.

ABL has two primary sponsors: (i) the investment company, Access Holding AG (AH), a Berlin-based commercial microfinance holding company, which will provide most of the seed capital and (ii) LFS Financial Systems GmBH (LFS), its associated consulting company, which will provide technical assistance to ABL as the project manager.

"This project, evidently, underscores the importance of rejuvenating the financial sector in Liberia so that it can play a key role in channeling domestic savings into productive activities.

"It also articulates the importance of harnessing the potential of SMEs to create jobs and sustainable economic growth. It will jump start the provision of microfinance services in Liberia, where access to finance is sparse for the entire population and low income sectors in particular," Liberia’s Executive Director at the AfDB, Francis T. Karpeh, said after the approval.

Mr. Karpeh noted that the investment will achieve a big impact and send a strong message in assuring others that it is worthwhile to invest in the financial sector in Liberia. "We look forward, in this regard, to cooperation with other financial institutions, especially the Liberian Bank for Development and Investment (LBDI) that has been engaging the AfDB for the pat five years or more," he added.

The proposed investment in a greenfield microfinance bank supports Liberia’s national development strategy and is well aligned to the joint interim country strategy of the Bank Group and World Bank, which emphasizes support toward improving the living conditions of the vulnerable population groups in Liberia.

ABL will have an initial shareholder capital of USD 4.0 million that will increase to USD 6 million within 18 months, in line with anticipated the minimum capital requirement of the Central Bank of Liberia. The founding shareholder agreed to commit USD 6 million from the beginning to demonstrate commitment to the CBL in the licensing and start up phase. Under this scenario, the AfDB’s total contribution will amount to USD .9 million in equity and USD 1 million in technical assistance. The proposed initial ownership structure gives AH approximately 52% of ABL shares, EIB and the AfDB approximately 15% each, and the IFC 18%.

Rounding off the session, AfDB President Donald Kaberuka explained that the investment is "an example of what the Bank can do in Fragile States", citing the recent agreement with the United States Agency for International Development (USAID) on providing co-guarantees to MFIs and SME’s in Africa as an invaluable tool in this regard.

The Bank Group’s experience in KREP-Bank of Kenya, one of the most successful microfinance banks in the region, and the recent experience with the Access Holding start-up in Tanzania, are providing good examples in the Bank Group’s Private Sector Department’s efforts to leverage support to Micro- and SMEs in Africa.

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