Saturday, December 9, 2023

Botswana could turn into African Guarantee Fund’s regional hub

African Guarantee Fund for Small and Medium-sized Enterprises (AGF) has announced its intent to establish geographical presence in Botswana, following its Board meeting held at Avani hotel in the capital Gaborone on Thursday.

The move, if it materialise would see Botswana becoming AGF’s Southern African hub, from where the pan-African guarantee fund would intensify its support to its regional client base.

AGF believes Botswana has the experience, expertise and reputation, as well as reach and network, to contribute positively to economic growth. AFG Group Chief Executive officer, Felix Bikpo said to the local media that, “Botswana is promising and we can use the quality of its business environment here to tap on SMEs for their growth. Our strategy is to decentralize our operations across the continent in order to increase our support to SMEs, who are the real drivers of economic growth.”

He added that “AGF’s prospected geographical presence in Botswana would not only bridge the Southern African strategic gap but would have an overall continental multiplier effect.”

Southern Africa is home to a number of leading commercial banks and financial institutions, many of which have presence in up to 20 countries. This would provide a tremendous reach to an Africa wide customer base whilst supporting Botswana’s SME sector to grow the national economy.

Growth in economies internationally is led by SMEs, but not in Africa where it is largely driven by commodities. This is where AGF is needed to give power to the local SMEs.

As President Mokgweetsi Masisi, noted in the State of the Nation Address delivered this week, positive prospects for the medium-term outlook are strongly underpinned by increased performance in non-mining sectors, and this is precisely where AGF seeks to deliver impact.

Access to finance remains the biggest challenge for SMEs to excel and there is no appropriate collateral when there seek financing. Bank lending to SMEs has remained stagnant at around 6 percent of GDP over the past five years. AGF therefore strongly believes it can and must change this ecosystem and this narrative.

As a potential host country, Botswana could offer AGF a unique operational platform on the continent by virtue of its possible business and regulatory climate as an established business base. It’s listing among the top 10 African performers in the IFC global Doing Business ranking pinpoints it’s strong and reputed financial services, infrastructure, connectivity and human capital readiness.

Botswana’s strong, stable and broad-based financial services sector is, it is believed to be conducive to growth and development of this nature, with SMEs often dubbed the veritable engine for the economy, and in need of funding and guarantees to propel them into sustainable success.

AGF which was established in 2011, founded by the government of Denmark through the Danish International Development Agency (DANIDA), the government of Spain through the Spanish Agency for International Cooperation and Development (AECID) and the African Development Bank (AfDB). Other shareholders include: Agence Française de Développement (AFD), Nordic Development Fund (NDF), Investment Fund for Developing Countries (IFU) and KfW Development Bank (KfW).

The Fund has partnered with 10 banks in Southern Africa and only three in Botswana and every bank is eligible to its guarantee.

AGF contributes to the promotion of economic development in Africa through the provision of partial guarantees to financial institutions to facilitate access to finance for Small and Medium-sized Enterprises. AGF offers three types of guarantees: Loan Guarantees, Resource Mobilization Guarantees and Equity Guarantees.

It also provides capacity development support to the Partner Financial Institutions to improve their ability to properly assess SME risks and to the Small and Medium-sized Enterprises to build their capacity for easier access to finance.


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