(Agence Ecofin) – SMEs in sub-Saharan Africa continue to suffer from the effects of Covid-19 and the current cost of living crisis. A commitment under review by the IFC should help provide a very small solution to the latter’s financing needs.
The Board of Directors, which makes decisions on investments in the International Finance Corporation (IFC), should decide before the end of 2022 whether the institution can sign a risk-sharing agreement for a total amount of $77 million with the Bank of Africa. (BOA). This resource will enable ten subsidiaries of the banking group, which is majority controlled by Moroccan capital, to provide loans totaling $154 million to small and medium-sized enterprises (SMEs) in their respective markets.
The subsidiaries BOA Benin, BOA Burkina Faso, BOA Cote d’Ivoire, BOA Ghana, BOA Madagascar, BOA Mali, BOA Niger, BOA Senegal, BOA Tanzania and BOA Togo are concerned about this project. “Under this project, IFC will support the expansion of SME loans from this regional banking group in sub-Saharan Africa”explained the IFC.
The operation is expected to span a period of eight years, and in addition to financing, IFC plans to provide advice to enable effective utilization of the opportunity that will be created.
African SMEs’ access to relevant and long-term financing is quite complex. Commercial banks consider the sector to be risky and regulatory restrictions push them to choose the most profitable fund investments.
By guaranteeing part of the loans that will be granted, IFC will have a leverage effect on the capacity of the project’s partner banks to explore business niches with SMEs. The IFC initiative contributes to a package of existing responses to enable African SMEs to recover from a difficult period of Covid-19 and a crisis with the high cost of living, which affects the liquidity of agents’ finances.
In 2021, the African Development Bank (AfDB) drew attention to a possible widening of the $421 billion financing gap that the continent’s SMEs were already suffering from.
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