The International Finance Corporation (IFC) has announced its investment in a risk-sharing facility for the Bank of Africa Group (BOA). This is aimed at easing access to finance for small and medium enterprises (SMEs) across 10 countries in sub-Saharan Africa. The move is expected to bolster economic activities and job creation in the region, including fragile and conflict-affected countries and the Sahel.
The IFC’s investment of $77 million in the risk-sharing facility will guarantee 50% of an aggregate loan portfolio of up to $154 million to be extended by BOA to SMEs in sectors such as agriculture, trade, energy, and construction, among others. This facility will enable BOA to make 12,000 new loans, with at least 2,000 going to women-owned businesses, which often face significant barriers to accessing finance.
In addition to its financial contribution, the IFC will also provide advisory services to help BOA strengthen its portfolio of women-owned SMEs across its affiliates in the 10 countries, (Benin, Burkina Faso, Côte d’Ivoire, Ghana, Madagascar, Mali, Niger, Senegal, Tanzania, and Togo). The investment is supported by the Global SME Finance Facility (GSMEF), a blended finance partnership with donor funding from the United Kingdom and the Dutch Government; the Women Entrepreneurs Finance Initiative (We-Fi); and the Women Entrepreneurs Opportunity Facility launched by IFC through its Banking on Women Program, and Goldman Sachs 10,000 Women.
According to Aliou Maiga, IFC’s Regional Industry Director for the Financial Institutions Group in Africa, “Ramping up access to finance for SMEs is pivotal when macroeconomic headwinds and supply chains disruptions are hampering growth, innovation, and economic activity in Africa, particularly in fragile, conflict-affected and low-income countries. IFC’s deepening partnership with BOA reflects our strategy to support financial inclusion, access to credit, and more broadly, private sector development on the continent.”
IFC Investment is a Builds on its 2018 Partnership with BOA
The investment builds on a 2018 multi-country risk-sharing facility established by the IFC with BOA’s support, with GSMEF’s backing, aimed at encouraging more negligible business growth in eight African countries. The project also aligns with the IFC’s pledge to support the reduction of the SME financing gap in sub-Saharan Africa under the Alliance for Entrepreneurship in Africa.
The facility’s impact on sub-Saharan African SMEs is expected to be significant. SMEs play a crucial role in driving economic growth and job creation in the region and easing their access to finance that can help unleash their full potential. However, SMEs often face significant challenges in accessing finance, including limited collateral and credit history. This is especially true for women-owned businesses, which tend to have even greater barriers to finance.
By guaranteeing part of BOA’s loan portfolio and providing advisory services, the IFC is expected to enable more SMEs, including women-owned businesses, to access finance, scale up their operations, and create more jobs. This, in turn, can help drive economic growth and reduce poverty in the region, including fragile and conflict-affected countries and the Sahel. As Amine Bouabid, Group Chief Executive Officer of BOA, noted, “We are convinced of the driving role of SMEs. We thank IFC’s initiative that will help BOA to boost our SMEs penetration with more strength and confidence.”
Overall, the IFC’s investment in the risk-sharing facility for BOA is a significant step towards boosting SMEs’ growth and job creation in sub-Saharan Africa. The partnership between the IFC and BOA, along with the support of GSMEF, We-Fi, and other partners, is expected to help ease SMEs’ access to finance, particularly women-owned businesses, and drive private sector development on the continent.