African Guarantee Fund (AGF) for Small and Medium-sized Enterprises, has announced its COVID-19 response aimed at reducing the uncertainties facing financial institutions in Africa as a result of the global COVID-19 pandemic.
African Guarantee Fund’s response sets the platform for economic stabilization, followed by an economic revival through AGF’s newly developed COVID-19 Guarantee Facility. The facility will provide more comfort to financial institutions to restructure facilities that become non-performing because of COVID-19. It will also provide commercial stimulus to the financial sector with the aim of mitigating the deterioration of SMEs’ perceived risk.
Commenting on the announcement, AGF CEO, Mr. Felix Bikpo said, “The consequences of 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. It is because of this that we must develop a commercial response in addition to the regulatory responses given by the different central banks and governments in the continent. Therefore, in line with our mandate we have launched the COVID-19 Guarantee Facility.”
AGF 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. This will allow analyzing the impact of the pandemic on the financial institutions, so as to forge the best possible responses to adapt effectively.
The African Guarantee Fund recently received a third time AA- Rating by Fitch, which was first assigned in November 2017, a first for a guarantee fund in Africa.