This groundbreaking public-private initiative will formalise a collaborative arrangement to focus on accelerating investment in African small and medium enterprises (SMEs).
The signing ceremony signifies the important relationship between the AfDB and USAID in promoting private sector development in Africa, where entrepreneurship is thriving and creating employment and economic growth. “Small and medium sized enterprises, as we know, create employment and are a critical component of economic growth. This partnership is a prime example of how development organisations can build upon and reinforce one another's strengths. The result is a much-needed expansion of financial services for African entrepreneurs,” said Henrietta Fore, USAID Administrator.
This will be the first time that these two partners have joined efforts to extend a joint guarantee. The ability of entrepreneurs, small businesses and individuals to obtain loans is severely limited, so the benefits of launching such a partnership will enable local and international banks to have greater access to catalytic guarantees, providing a bridge to encourage greater lending to SMEs. By demonstrating to the market the viability of SMEs, private financial institutions will gain the experience necessary to continue lending without additional USAID-AfDB support.
It is anticipated that in less than six months USAID and the AfDB will mobilise up to $125 million in private financing for SMEs to grow their businesses. Of these, a minimum of 25% will be women-owned businesses. These are enterprises that without the joint guarantee would probably not have access to the financing essential for day-to-day business operations, upgrading equipment and technology and capital investments.
The collaborative relationship established under the MOU will last a minimum of five years, and USAID and the AfDB fully expect a fruitful ongoing partnership.
