The African Guarantee Fund for small and medium-sized enterprises (AGF), has received a capital injection of EUR 25 million (about Sh2.9 billion) from the German government-owned KfW Entwicklungsbank (KfW Development Bank).
“Through the increased capital, AGF has acquired more capacity to address the financing barrier which remains a key challenge for African SMEs,” AGF chief executive officer Felix Bikpo said in a statement.
“AGF will now be able to channel more guarantees and technical assistance to financial institutions thereby generating enhanced growth in the African SME sector.” SMEs in the country have been hard hit following the September 2016 ceilings on loan charges at four percentage points above the Central Bank Rate, now at nine per cent.
Private sector credit grew by 4.4 percent growth in the 12 months to October compared to September 3.9 percent.
The credit growth remained well below the central bank’s target rate of 12-15 percent, a growth adequate to support economic development.
“Our investment into AGF forms part of KfW’s strategy to promote private investment and financial markets in Africa,” said KfW director for regional funds Thomas Duve.
African Guarantee Fund launched six years ago says it has led the guarantee market in Africa by issuing guarantee products to more than 100 financial institutions that have in turn made available $1.6 billion of financing for SMEs across 39 countries in Africa.
Kenya introduced interest rate controls in September 2016 with the enactment of a law that limits lending rates to not more than four percentage points above the Central Bank Rate in response to the high cost of credit that saw banks lend to private businesses and individuals at more than 20 percent.