SME LENDING IN AFRICA: CHALLENGES, CURRENT TRENDS,

AND USAID INITIATIVES

September, 2008

This briefing paper is the result of research conducted by Angela Sapp Mancini, Myla Yee, and Sandeep Jain of the Financial Services Volunteer Corps for USAID’s Office of Development Credit, in preparation for the “Banking on the Future: Lending to African Small and Medium Enterprises” conference held in Johannesburg, South Africa on October 20-21, 2008. The primary goal of this paper is to provide general background related to current trends in SME lending in Africa, and ongoing USAID initiatives to promote SME lending in Sub-Saharan Africa. This paper is not meant to serve as a comprehensive review of the literature on SME financing in Africa; as such, the research presented is selective and illustrative. To prepare this paper, FSVC reviewed USAID materials, including the USAID Strategic Framework for Africa, Office of Development Credit reports, and individual Mission budgets and programs. FSVC also drew from published materials from the Making Finance Work for Africa Initiative, as well as sources such as the World Bank, the African Development Bank, the International Monetary Fund, the International Finance Corporation, and publicly available information from the top 100 banks in Africa, among others. See endnotes for specific references.

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SME LENDING IN AFRICA: CHALLENGES, CURRENT TRENDS, AND USAID INITIATIVES

Small and medium-sized enterprises (SMEs) play a critical role in economic development

in Africa and around the world. SMEs are often a key driver in creating employment, strengthening and expanding the private sector, and increasing per capita GDP. For many countries in Africa, SMEs and the informal sector represent over 90% of business and account for 60% of employment1. For African countries to achieve long-term, sustainable growth, it is critical that they encourage and enable small and medium-sized entrepreneurs to launch and expand businesses, and enter the formal economy, thus helping SMEs to serve as an engine of growth.

The U.S. government recognizes the importance of the private sector in driving economic

growth. Key priorities of the U.S. Agency for International Development (USAID) assistance to Africa include improving standards of living and quality of life. These goals are achieved in part by programming to support increased capacity of African institutions to promote a vibrant private sector and increased trade and investment.

USAID’s Strategic Framework for Africa addresses Sub-Saharan Africa (SSA). This

report reflects this focus. The purpose of this paper is to:

• Provide a brief overview of the obstacles to SME development in Africa, particularly related to access to finance, and discuss possible means to increase financing to SMEs;

• Describe approaches utilized by African banks to increase credit to SMEs,

including a discussion of specific initiatives taken by banks, private equity, venture capital players and others to improve SMEs’ access to finance; and

• Briefly discuss current initiatives USAID is undertaking to promote SME lending

in Africa.

INTRODUCTION

Africa consists of 53 countries that together form the world’s second most populous continent with a total population of nearly a billion people. Crude oil dominates total exports and the seven largest African oil economies hold nearly 30% of the continent’s population. With the resolution of longstanding conflicts, concerted efforts to pursue structural reforms and booming prices for oil and commodities, African countries have boosted trade with the world and have begun to support the development of the private sector as a means to help prevent recurrent economic crisis. This has led to average growth rates in the region of over 5% per annum from 1996 to 2006. The International Monetary Fund (IMF) forecasts a 2008 growth rate of nearly 7% for the region – the highest in the last 30 years. African economies have become

1 International Institute for Environment and Development, “Small and Medium-Sized Enterprises (SMEs) and Corporate Social Responsibility: A Discussion Paper”, June 2005.

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increasingly dynamic in recent years, and interest from foreign investors has risen dramatically. For example, a report published by the International Finance Corporation (IFC) for the fiscal year ending 2007 noted that private equity investments in Sub-Saharan Africa had increased from $500 million to $1.37 billion in just two years2.

As Africa develops, policymakers are keen to ensure that economic growth is sustainable,

span across sectors, not be too heavily driven by commodities, and reach all classes in the population to reduce income disparities. Developing SMEs is a key way to help support broad based growth that can benefit many segments of the population.

The development of the private sector varies greatly throughout the African continent,

and the investment environment is noticeably more attractive in certain countries. South Africa, Botswana, and Tunisia have more favorable investment climates due to relatively modern financial systems and attractive government policies for the private sector. South Africa, for example, is currently ranked the 18th most attractive foreign direct investment destination worldwide in the latest Foreign Direct Investment Confidence Index, and the resource-heavy South African Johannesburg Stock Exchange was one of world's best performing stock markets in 2006, thanks to high commodity and precious metal prices and strong earnings from industrial stocks.

In other parts of Africa, however, the rise of small businesses has been hindered by political reasons and/or significant dependence of certain SSA economies on raw materials extraction. In Congo, Equatorial Guinea, Gabon and Chad, the dominance of oil has adversely affected the growth of non-oil businesses. Senegal and Kenya have created conditions for private sector growth but are still held back by a relatively inadequate financial system. In Nigeria, SMEs (about 95% of formal manufacturing activity) are a vital part of the economy but insecurity, corruption, and poor infrastructure continue to prevent them from playing as large of a role in growth as they might in a more conducive environment.3

CHALLENGES AND POLICY APPROACHES FOR SME ACCESS TO FINANCE

There is a consensus among policymakers that development of SMEs in many SSA countries is handicapped by practical difficulties in accessing the necessary finance to create, sustain and expand business. Key challenges that must be addressed include improving the enabling environment to foster a thriving private sector, and helping to develop banking sectors that heretofore have been shallow and/or unsupportive of SME lending.

1. Importance of an Enabling Environment for SMEs

Many SSA countries have been improving their enabling environments for private sector and SME growth. According to the World Bank’s Doing Business 2009 report, Botswana, Burkina Faso, and Senegal were deemed “top reformers” for their policy support of starting a business, encouraging employment, and increasing trade across borders. As can be seen in the

2 C. Corbett, “Huge Potential to Tap”, The Banker, May 2008. 3 C. Kauffmann, “Financing SMEs in Africa”, African Development Bank and the Organization for Economic Co-operation and Development, African Economic Outlook 2004/2005.

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following chart, several SSA countries have improved their rankings. For example, Rwanda’s reforms to create an environment more conducive to doing business moved it standing from 148th place out of 181 countries to 139th place (Refer to Annex A for list of countries and their ranking).4

However, many SSA countries still fall short in various areas surveyed in the “Ease of

Doing Business” index, many of which directly impact SME growth. These parameters include starting a business, dealing with licenses, employing workers, registering property, obtaining loans, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.

To achieve vibrant and thriving SME sectors in Africa, a business-friendly regulatory

environment is needed. Cumbersome procedures and rigorous paper work increase the cost of doing business, which disproportionately impacts SMEs. The cost of business licensing and registering remains high, and it can take up to eight years in some SSA countries to merely register a business. Red tape and bureaucratic hurdles further increase transaction costs, and the lack of reliable market and customer information accessible by SMEs and banks hinders business expansion and lending. Policy approaches that SSA governments can employ to improve the regulatory environment for SMEs include simplifying legal and accounting procedures for registering companies, lowering tax rates to stimulate retained earnings and future investment, and fostering the development of alternative financial instruments as well as non-bank financial companies such as leasing companies and discounting, factoring, and warehousing firms that provide working capital financing against inventories and other receivables.

Many banks are averse to lending to SMEs because of the lack of reliable borrower

information. Credit bureaus can offer valuable data that allow banks to better assess risks, thus increasing lending and lowering SMEs’ borrowing costs. Unfortunately, very few SSA countries have a functioning credit bureau, and for those that do, data quality and access are problematic. Furthermore, borrowers may not have unique citizen identification numbers. Some SSA countries are addressing this last issue. For example, in Uganda, the central bank is developing a

4 Doing Business: Comparing Regulation in 181 Economies, World Bank, 2009.

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credit bureau that incorporates biometric data for each borrower. In Kenya, a 2003 amendment to the Banking Act allowed for information sharing among banks, although other finance providers such as leasing, hire purchase, and factoring companies have yet to be given access to a common information sharing mechanism. In Mozambique, a public credit registry was established in 1997, but the coverage of borrowers remains low. By supporting the development of functioning credit bureaus which include all lenders, including non-bank financial companies, SSA countries would reduce banks’ risk, lower SME borrowing costs, and ultimately increase SME loans provided.

In many SSA countries, it is difficult to collect loans due to weak or slow judicial

processes. Banks have a disincentive to make loans they perceive as risky, as credit recovery is hampered by complicated and slow legal and judicial procedures in many SSA countries. In Mozambique, it takes 540 days to recover the debt outside insolvency as compared to 80 days in South Africa. SSA countries can continue to strengthen judicial processes related to collection, thus providing stronger incentives for banks to extend loans to SMEs.

Business support services are also key elements to a thriving SME sector, but are underdeveloped in many SSA countries. Trade associations, governments, privately owned research institutes, and commercial or not-for-profit organizations can offer needed training, organize trade fairs, and promote partnerships between SMEs and larger organizations. Business support services also can help provide financial literacy education to select SME owners, and help SMEs improve the quality of their financial statements, business plans and loan applications. SMEs can also receive support from programs such as the International Finance Corporation’s (IFC) “SME Solutions Centers”, which promote access to finance for SMEs in the region and provide capacity building services. Pilot initiatives are currently underway in Kenya and Madagascar. The African Development Bank (AfDB) has sponsored a “Growth Oriented Women Entrepreneurs Program” to enhance the economic growth and contribution of women by facilitating access to finance and relevant business development services. Business support services can help SMEs become more “bankable” and able to attract necessary financing.

2. Importance of Deep Banking Sector, With a Focus on SME Lending

A shallow banking sector poses real challenges to SMEs who are trying to access the financing critical to their growth. Banking sector penetration in many SSA countries stands at 1% of GDP, far below transitional economies such as Brazil (25%), or many industrialized countries (85%). Emilio Sacerdoti in an IMF working paper “Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies” notes that the stock of bank credit in SSA as a percentage of private sector GDP remains very low when compared to other developing countries, indicating a need to increase financial intermediation. In developing countries such as Brazil and India, the bank credit to private sector GDP ratio is between 20-30%. However, the ratio in most SSA countries is between 10%-20%, and for some countries, such as Madagascar, Malawi, Tanzania, Uganda, and Zambia, this ratio can drop to below 10%. SMEs will remain hard-pressed to access finance in countries with depressed levels of bank credit. As can be seen in the chart below, SSA bank lending to the private sector is the lowest worldwide.5 5 E. Sacerdoti, “Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies”, IMF Working Paper WP/05/166.

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Promoting deeper levels of financial intermediation will help increase the stock of bank

credit to the private sector, and increase lending to all sectors of the economy, including SMEs.

____________________________________________

Source: Making Finance Work for Africa, World Bank6

Certain bank lending practices also stymie SMEs’ access to finance. Until recently, many commercial banks in SSA have not pursued SME lending due to risk perceptions of the borrower (e.g., certain SMEs may not furnish reliable financial statements and/or may not be able to provide the necessary collateral to guarantee loans). Many banks prefer to invest in government treasuries or lend to larger, more established companies they deem as “safer” investments. Even when banks are provided with proper SME financial statements and related information, many banks will only offer credit in the form of expensive overdrafts.

According to the World Bank’s Making Finance Work for Africa report, “relationship

banking” still remains prevalent in SSA. Less biased lending approaches such as risk-based lending and credit scoring are often not fully understood or practiced rigorously by SSA banks, thus hampering the ability of SMEs to compete on a level playing field for loans.

Many SSA banks still do not have a dedicated SME unit with loan officers who

understand unique SME borrower needs, nor do they offer SME-appropriate products and services. Many banks review SME applications under retail or commercial bank loan criteria because a comparative underwriting policy for SME loans does not exist. This can result in an inaccurate analysis of risk and higher cost of capital for small business borrowers, leading SME owners to seek other forms of financing, or simply maintain their current size of operations. Some banks in SSA countries that do see the potential for profitability in lending to SMEs have created standalone SME lending departments, and are beginning to implement risk management, credit portfolio management practices, and marketing techniques specific to SMEs. In Senegal, Nigeria, South Africa, and Ghana, for example, this has resulted in more competitive financial products in the marketplace.

6 Making Finance Work for Africa, World Bank, November 2006.

Although most of Africa still faces communication challenges, a growing number of SSA countries have benefited from cellular telephony and Internet services. Internet and Communication Technology (ICT) also has been widely adopted by banks to market to potential customers and service current clients. With greater access to potential customers even in remote areas through ICT, many banks across Sub-Saharan Africa are expanding their lending to underserved population. Mobile finance has grown at a rapid pace and has benefited SMEs by reducing cost and time of financial transfers.

The use of loan guarantee mechanisms can be a significant way for SSA countries to

facilitate SMEs’ access to credit. USAID’s Development Credit Authority (DCA), the AfDB, the IFC, and some governments’ financing arm are among the lead providers of credit guarantees to commercial banks. These programs help the banks reduce perceived risk, thus providing a stronger incentive for banks to lend to SMEs. (Please refer to Current USAID Initiatives to Promote SME Development in Africa section for a further discussion of DCA loan guarantees)

Non-bank financial institutions such as private equity firms offer another financing

option to SMEs. Banks have control over neither the commercial success of the small businesses they invest in, nor repayment of their loans, and frequently complain that SMEs have too little equity capital to prudently cushion the debt used to finance operations. As many, if not most, SME firms are closely held, and their equity capital and management expertise can be thin. SMEs with only family management expertise and retained earnings as capital can be seen by debt financers as easily stressed and thus risky, especially if these firms have high debt to equity ratios and little ability to access more equity to balance debt. Over the past 15 years, private equity players have begun to seriously invest in emerging growth SMEs in Africa, with the Maghreb and South Africa as standouts for growth. These firms can provide badly needed equity capital for banks and provide access to wider and more professional management.

The Emerging Markets Private Equity Association yearly fundraising report7 noted that

SSA risk capital funds raised jumped from $791 million in 2005 to $2.3 billion in 2007. In 2003, the combined funds raised in the Middle East North Africa (MENA) and Sub-Saharan Africa were a mere $350 million. The more than doubling of funds raised and under management highlights the successes of the last generation of risk capital funds, which gained reasonable returns, and bolsters optimism for future improvements. An all-African private equity association, the African Venture Capital Association, is in place to try to promote more investment in the private sector, particularly in growth oriented firms. A number of regional and pan-African continental private equity or risk capital fund management have recently emerged. Aureos Capital, for example, manages several regional Africa funds (Southern, Western and Eastern Africa) investing in growth-oriented SMEs, and is raising $400 million for a pan-African (North and Sub-Saharan) Fund to invest in firms with market capitalization between $10 million-$20 million across the continent. In 2007, the U.S. government launched the Africa Financial Sector Initiative8 through which the Overseas Private Investment Corporation invested $750 million in African businesses. OPIC will invest an additional $875 million in SMEs operating in a number of sectors, including healthcare, housing, and telecommunications.

7 http://www.empea.net/ 8 http://www.whitehouse.gov/news/releases/2007/06/20070608-14.html

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SME FINANCE THAT WORKS: A REVIEW OF SME FINANCE IN SELECT SSA COUNTRIES

Banks in Sub-Saharan Africa play a pivotal role in the economic development of their countries, and can serve as a key driver of SME development. According to the African Business 2007 list of “Africa’s Top 100 Banks,” 77 of the top 100 banks are in SSA (See Annex B). The top 100 banks collectively represent approximately $650 billion in assets; of that, over $470 billion, or 73% of those assets are in SSA banks. South African banks hold the top five rankings, and $377 billion or 58% of the total assets. Nigerian banks hold $52 billion or 8%, while Kenya and Ghana hold $7 billion and $2 billion, respectively9.

This section discusses current trends in SME lending and certain innovative programs

that are underway in select SSA countries. Countries discussed below were selected based upon a combination of relative SSA GDP ranking and total banking assets10.

South Africa

The government of South Africa has developed one of the leading enabling environments

for SME lending in SSA. The government actively promotes SME lending through its small business finance agency Khula Enterprise Finance11. Khula offers credit, seed funding, and a Credit Indemnity Scheme to SMEs that are not able to provide adequate collateral for a bank loan. The credit guarantee facility provides guarantees for 50%-90% of small business loans. ABSA Bank, FirstRand Bank, Nedbank, and Standard Bank of South Africa have signed credit guarantee agreements with Khula. Applicants with solid business plans but little or no collateral can submit an application to a loan officer at one of these banks. The loan officer will review the borrower’s business plan and application using his/her bank’s lending criteria. He/she also determines whether the borrower fits Khula other requirements (e.g., full-time owner managing the daily operations of a South Africa-based business, ability to pay required contribution, etc.). Once the bank approves the borrower’s application, a bank representative presents the application to Khula for review. If Khula approves the application, then they will supply a guarantee to the bank such that the SME entrepreneur can formally qualify for a business loan.

South African banks are also active in the SME lending market, and leading commercial banks are implementing novel ways to provide financing to SMEs. Through its Small Business Services program, Nedbank12 has developed partnerships with firms that can offer their SME clients access to business expertise and mentorship, including help in developing supporting documents for loan applications. These partnerships also offer short-term technical assistance in various business areas, and mentors to serve as turnaround managers that can help design and implement measures to restore profitability for SMEs in financial distress.

9 “Africa’s Top 100 Banks”, African Business, October 2007. 10 In addition to reviewing USAID and other materials as noted previously, FSVC researched publicly available information for the SSA banks listed in the “Africa’s Top 100 Banks” listing. FSVC included Malawi and Tanzania in this listing due to specific innovative SME lending programs being conducted in that country. 11 http://www.khula.org.za/ 12 http://www.nedbank.co.za/

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ABSA Bank13 also offers mentors to SME owners who can provide guidance as small businesses mature. Through this program, SMEs learn how to create a business plan, fill out a business loan application, and find supporting data. SMEs that have obtained credit can receive monthly monitoring visits from a new enterprise banker or mentor who can review the borrower’s progress and provide guidance, as needed. ABSA also has begun to upgrade its credit risk management systems, including a review of SME strategies and polices to better serve its clients.

The Standard Bank of South Africa14 has also shown commitment to SME

development. The bank offers an SME business mortgage, which gives SMEs an opportunity to buy residential properties that can be used for business purposes. Through its joint venture with a GSM cellular network provider, Standard Bank also supports SMEs who prefer to conduct financial transactions via mobile banking.

WIZZIT Bank15, a pioneer in the field of mobile banking, also offers unique support to SMEs. WIZZIT does not require a bank account, and is structured so that SMEs can conduct personal and business transactions directly between individual cell phones, and receive debit cards to access cash at ATMs or make direct payments to retailers.

Nigeria

Nigeria’s banking industry has benefited from recent significant consolidation. Led by the Central Bank of Nigeria16 (CBN), the total number of banks in Nigeria was reduced from 89 in 2005 to 24 in 2008, and the remaining banks were able to expand their capital base and attract large investments from foreign funds. Nigerian banks still focus on lending to large and medium-sized corporations, while many depositors are smaller firms and individuals. Loans to individuals and SMEs are less common due to the perception that these are higher risk and the absence of adequate collateral. This situation is slowly changing, as the banks have much-improved non-performing loan (NPL) ration following consolidation. By way of comparison, prior to consolidation, the NPL ratio was approximately 20%; as of late 2007, the NPL ratio had dropped below 9%17. As banks consolidate, improve polices, and reduce NPL ratios, there has been an increased focus on increasing consumer credit and mortgages, particularly for middle-class workers in the extractive and financial services industries. There may also be a stronger focus on diversifying lending portfolios into the SME sector.

In part to diversify the manufacturing sector, the CBN established the Small and Medium

Industries Equity Investment Scheme (SMIEIS) in 2001. This program requires banks to set aside at least 10% of gross profit to finance SMEs. Contributions can be in the form of equity/debt participation or advisory services. The scheme seeks to stimulate economic growth and development, develop local technology, and generate employment. A number of venture

13 http://www.absa.co.za/ab 14 http://www.standardbank.co.za/ 15 http://www.wizzit.co.za/ 16 http://www.cenbank.org 17 “Country Finance Report: Nigeria”, Economist Intelligence Unit, July 2008.

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capital firms – including Capital Alliance, Leapfrog Venture Capital, and SME Managers – are conduits for these funds. As of December 2007, N42.02 billion ($336 million) had been invested in 327 projects, compared with N17.5 billion ($140 million) in 248 projects the previous year. According to the CBN, bank credit available for SMEs grew from N35 billion ($270 million) in 2003 to about N204 billion ($1.63 billion) in 2007, an increase of 83%18.

Shell Petroleum Development Company, Diamond Bank Plc19 and GroFin, a private equity fund from South Africa partnered to float a $30 million fund branded ASPIRE NIGERIA to serve as a catalyst for the development and growth of Nigerian SMEs in June 2007.

The Economist Intelligence Unit reports that some banks have formed syndicates to manage funds set aside for SMEs. Earlier this year, Intercontinental Bank partnered with Blue Financial Services, a South African microfinance company, to support companies owned and operated by self-employed Nigerians. Investments start with an N3 billion ($24 million) capital base. Most Nigerian banks, however, have yet to embrace this effort.20

Other government agencies also could support the goal of expanding SME access to credit. A pilot project in Nigeria will see the country’s SME Development Agency conduct credit checks on SME loan applications on behalf of banks. This service reduces bank risk and transaction costs to banks, freeing up additional capital to lend.

Kenya

In Kenya, banks are taking a number of innovative steps to increase lending to SMEs. Kenya Commercial Bank (KCB)21 entered into partnership agreements with business development experts to offer business incubation services and expert knowledge on conventional ways of doing business to its SME customers. KCBs “Biashara Club” is a platform for entrepreneurs who want to tap into the wealth of business opportunities across the country and the region at large. The bank offers financial advice to business owners in the Club who wish to conduct business in neighboring and other African markets.

Barclays Bank of Kenya22 has also developed “Business Clubs” for SMEs to help share

best practices among its members. These clubs offer services that specifically address the needs and interest of the markets where Club members do business. After recent political disturbance in the country, Barclays sponsored a countrywide seminar program, together with the IFC, for its Business Club members. The program covered topics such as business crisis management, continuity planning, and business recovery. The bank also offers “CreditFocus Classic”, a system that allows its business account holders to check the credit ratings of up to five of their most important customers or suppliers, enabling them to better handle their exposure to late payments and bad debt.

18 “Country Finance Report: Nigeria”, Economist Intelligence Unit, July 2008 19 http://www.diamondbank.com/ 20 “Country Finance Report: Nigeria”, Economist Intelligence Unit, July 2008 21 http://www.kcbbankgroup.com/ke/index.php?option=com_content&task=view&id=464&Itemid=264> 22 http://www.barclays.com/africa/kenya/index.php

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In Kenya collective loan guarantee programs for small and microenterprises are on the rise. In this model of loan guarantee, legally constituted communities can apply for loans, with members of the group guaranteeing the loan and undertaking repayment if an individual borrower defaults. In June 2008, Equity Bank23 launched a branch to cater specifically for women in the SME sector, though male applicants who meet the requirements will also be considered. The bank has set aside Ksh5 billion ($74.6 million) to fund this project, which will offer loans from as little as Ksh1,000 ($15) to several million, depending on eligibility and need.

Ghana

As interest rates in Ghana have fallen, thus reducing returns on government treasury bills, banks in Ghana have increased their portfolios of SME loans .24 Most banks in Ghana have established SME banking departments, including Barclays Bank, Merchant Bank, Standard Chartered Bank, Ecobank, Ghana Commercial Bank, and Metropolitan Allied bank.

Standard Chartered Bank Ghana25 offers a number of SME-specific products and

services, including a “Business Installment Loan” which is available to applicants with little or no collateral to secure the loan. This product also has a maximum tenor of three years and allows SMEs to structure their debt repayments according to their cash flows.

Ecobank Ghana26 has a $10 million credit guarantee agreement with USAID for a pool

of SME loans. The program, which offers a 50% principal guarantee, has allowed the bank to extend more loans to SMEs seeking financing. To help build the capacity of local SMEs, Ecobank Ghana has developed strategic partnerships with USAID, the African Project Development Facility, and EMPRETEC, a United Nations initiative to promote the creation of SMEs. Together, they have produced a training program for SME managers to improve their skills in several areas including financial planning, recording keeping, reporting, and general management. Ghana Commercial Bank27 also provides similar training. Through its business advisory services, SMEs receive training in strategic planning, business practices, and proposal writing.

Some SMEs also benefit from the AfDB’s Partial Credit Guarantee Facility of $24

million for export-oriented businesses. In this program, AfDB will catalyze up to $48 million of new lending to about 200 individual SMEs and 10 SME organizations, about 20% of which will be women-owned enterprises. In addition, a $1 million grant for technical assistance will support capacity building for producers’ associations, developing an SME credit scoring mechanism for partner banks, and strengthening SME linkages to markets. Producers of non-traditional exports that are too small for corporate loans but whose needs are larger than micro-loans (the “missing middle”) will benefit the most. This assistance supports Ghana’s export development strategy and expands access to credit and technical assistance to SMEs. It also addresses serious constraints faced by export-oriented SMEs owned by women.

23 http://www.equitybank.co.ke/ 24 “Woes of SME in Ghana”, Ghanaian Chronicle, 10 July 2006. 25 http://www.standardchartered.com/gh/ 26 http://www.ecobank.com/english/others/home.aspx 27 http://www.gcb.com.gh/index.do

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Malawi

The banking sector in Malawi has changed rapidly with the advent of biometric cards and GPRS technology. With over 80% of the population living in rural areas, the use of ICT has provided farmers, SMEs, and rural families access to banking services. The central bank created the Malawi Switch Center (Malswitch) to facilitate the use of a secure and guaranteed electronic payment system in the country. Malswitch has currently partnered with five banks whose Smartcards are interoperable. These are Opportunity International Bank of Malawi (OIBM), Nedbank, Indebank, Malawi Savings Bank, and Ecobank. Malswitch is offering the service to customers to facilitate financial transactions at all Point of Sale outlets across the country. In addition to retail shopping, the Malswitch Smartcard can be used for cash withdrawals from ATMs, transferring money from one card to another (card to card), for receiving salaries, or cash from participating retailers, and for purchasing fuel at petrol filling stations. These cards contain multiple “envelopes” that permit deposits and debits for petrol, fertilizer, and other purchases. Mobile provider Zain (formerly Celtel) is working with Malswitch to expand the service to the unbanked population through the partner banks with as little cost to their operations by using mobile banking outlets.

The banking sector has also adjusted their lending to meet customer needs. Many banks

offer cost recovery interest rates which are competitive, and encourage voluntary community savings through local media advertising and collective village saving schemes. Banks are also introducing effective incentives to repay loans through reduced interest rates in follow-on loans.

New partnerships are being created through the recently signed agreement between the

USAID Development Credit Authority and Standard Bank of Malawi28 to guarantee 50% of the principal amount of loans extended to qualified applicants. This $6 million guarantee is intended to strengthen Standard Bank’s ability to finance loans to Micro, Small and Medium-sized Enterprises (MSMEs) in Malawi’s agriculture and agriculturally linked business sectors, and other sectors, thereby creating employment and stimulating economic growth. Qualified borrowers include processors of agricultural products, buyers and traders of agricultural products and supplies, fisheries, dairies, agricultural input suppliers and suppliers of support services to agriculture and related businesses. Qualified borrowers can access up to $200,000. MSMEs may not employ more than 100 people, unless otherwise approved by USAID. Through this facility, Standard Bank hopes to increase lending to SME and agro-sector, both of which are both large and potential elements of the Malawi economy. The guarantee facility will not only increase loans to SMEs, but also enhance the bank’s role in the social and economic transformation of Malawi.

NBS Bank29 (formerly New Building Society Bank) has intensified training for SMEs in

all the regions of the country. The program, which started in July and finished in August, has provided participants with training to develop skills in business plan preparation, cash flow management, proposal writing, and business management. A similar training, conducted in conjunction with the IFC, targets SMEs owned and managed by women. So far 25 women entrepreneurs have been trained with 75 more to receive training in the coming months. 28 http://www.standardbank.co.mw/SBIC/Frontdoor_07_02/0,2493,10158205_10195429_0,00.html 29 http://www.nbsmw.com/

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First Merchant Bank of Malawi30 (FMB) offers MaKwacha cards for tobacco farmers. These cards are credited when farmers sell tobacco on the auction floor, and can be used to purchase seeds, fertilizers, and other agricultural inputs at farmers’ markets. FMB has pursued a strategy to broaden its customer base through strategic partnerships with microfinance institutions, retailers, and farmers’ associations, which has led to cost-effective outreach to rural areas, resulting in higher profits and larger market share.

CURRENT USAID INITIATIVES TO PROMOTE SME DEVELOPMENT IN AFRICA USAID has a multi-faceted approach to promoting stability and economic development in Sub-Saharan Africa. As outlined in USAID’s “Strategic Framework for Africa31,” assistance is programmed to differentiate between “fragile states” that are in various degrees of crisis and “transformational development” countries that are at peace and moving forward with reforms. Supporting private sector development in transformational states supports USAID’s goals for SSA countries that are more democratic, and that are able to reduce poverty and become independent of foreign assistance. USAID goals for economic growth in Africa include encouraging private sector development, increasing African trade competitiveness and supporting the integration of African national in the global economy32. USAID seeks to achieve its goals through various mechanisms, including the African Global Competitiveness Initiative (AGCI), bilateral and regional mission programming, and the Development Credit Authority (DCA). USAID also coordinates its aid in Africa through multi-donor initiatives such as the Making Finance Work for Africa initiative. AGCI

The African Global Competitiveness Initiative33 is a $200 million U.S. Presidential Initiative that was established in 2006 to support export competitive businesses and help these businesses develop trading partners beyond Africa. Building on the success of the African Growth and Opportunity Act (AGOA), AGCI seeks to support the efforts of African governments to promote economic growth through appropriate trade policies and related infrastructure. Activities under this five year program can be linked to other projects, donors, or private investors. These activities include fostering an enabling business and regulatory environment, sharing best practices in trade, increasing access to finance, and facilitating infrastructure investments. Regional competitive trade hubs covering East, West, Central, and Southern Africa provide technical assistance to businesses in their respective coverage area. They also serve as a resource to multiple stakeholders on issues related to trade, investment, and training opportunities in the region. AGCI works with government agencies charged with promoting trade and investment, Economic Community Of West African States (ECOWAS), the Common Market for Eastern and Southern Africa (COMESA), the African Partnership Forum, business associations, other U.S. government partners.

Bilateral and Regional Missions

30 http://www.fmbmalawi.com/ 31 http://www.uneca.org/itca/youth/Documents/Strategic%20Framework%20for%20Africa_usaid_2006.pdf 32 http://www.usaid.gov/locations/sub-saharan_africa/ 33 http://www.usaid.gov/locations/sub-saharan_africa/initiatives/agci.html

13

USAID has 23 bilateral missions across Africa, and three regional offices that support programs where USAID has a limited presence. Regional missions manage programs that help build capacity in selected regional organizations and institutions. These include overseeing the activities of the four regional trade hubs funded by AGCI.

The focus of USAID’s financial sector work in Africa is to reduce key market risk factors

that impede financial intermediation and raise costs. Activities are underway in Angola, Kenya, Mozambique, Nigeria, Rwanda, South Africa, Zambia and the West Africa region. The activities are increasingly integrated into other donor activities in Africa and include:

• Credit Bureau Development in Angola, South Africa and Mozambique • Expansion of Access to Term Finance in Angola, South Africa, and Rwanda with

discussions underway in Tanzania • Leasing in Zambia • Capital Markets Development in partnership with the U.S. Securities and Exchange

Commission to support the regionalization of capital markets • Financial Transparency through support to the African Focus Group on Accounting

Reform to introduce International Accounting Standards • Strengthening the Capacity for Bank Supervision in Angola, Nigeria, Kenya and Rwanda

with regional training under development with the U.S. Department of Treasury

DCA34

The Development Credit Authority provides partial credit guarantees to mobilize private capital for sectors, such as SMEs, that are otherwise underserved by financial markets. Credit guarantees promote private sector investment, support increased lending capacity of banks, and promote sustainable lending. DCA’s programs are designed to reducing the lending risk to banks by sharing up to 50% of the default risk on participating loans. The DCA program also promotes training and technical assistance activities for bankers. A key goal of the DCA program is to support increased access to credit for select sectors that may be overlooked or avoided by banks due to a perception of high risk.

DCA is particularly active in Africa; as of January, 2008, 51 partial credit guarantees have leveraged over $448 million of lending. The DCA has agreements with [46] commercial banks representing all regions in Sub-Saharan Africa. Several banks on the top 100 African banks list have DCA guarantee schemes in place. Earlier this year, USAID and the African Development Bank signed a Memorandum of Understanding to support SME development and accelerated investment to the sector through their first joint guarantee scheme. The partners expect to mobilize up to $125 million of SME financing before year end. Women-owned SMEs will receive roughly $32 million to finance operations, replace obsolete or malfunctioning equipment, and make capital improvements. Lending to these previously underserved segments with the support of credit guarantees will give banks an opportunity to understand the needs of underserved sectors, monitor their progress, develop risk profiles for these customers, and gain

34 Information obtained from USAID’s Credit Guarantees: Promoting Private Investment in Development Year in Review 2006, as well as materials from DCA related to DCA activities in Africa, and press release information regarding USAID’s partnership with the African Development Bank.

14

greater confidence in lending to these borrowers who will have proven to be good credits. Eventually, the value proposition of extending credit to SMEs as good business will be sufficient to continue lending without the support of AfDB or USAID.

Examples of DCA programs in Africa include Banque de Kigali in Rwanda. The DCA

guarantee facility has enabled the bank to extend credit to agricultural businesses in export-oriented sectors around the country. Banque de Kigali is guaranteed up to $2 million in new loans to finance short-term working capital and medium-term capital investment activities. USAID’s coverage provides for a 40% guarantee on net loss of principal. In Uganda, USAID established a multi-bank loan guarantee facility that provides finance for MFIs and micro, small, and medium-sized businesses (MSMEs), particularly in rural areas. USAID’s Economic Growth Program in Angola views private enterprise as an engine for country’s future development, and promotes trade and investment. In 2004, a newly established commercial bank, NovoBanco, introduced a new savings account that required no minimum deposit with the help of USAID. This increased credit access through new loans offered to a market previously neglected. Within one month of opening, NovoBanco issued more than 100 loans to SMEs. Lastly, in Tanzania USAID and AfDB created the African Entrepreneur Facility, a public-private initiative to help entrepreneurs access capital to expand their businesses, resulting in additional jobs. AfDB and USAID are also providing a credit guarantee to CRDB Bank so it can provide debt financing to farmers and agribusinesses, giving them the necessary financing to promote a viable and thriving business. CONCLUSIONS

Access to finance for SMEs is a key challenge to supporting sustainable growth in Africa. Many policymakers agree that in order to increase SME access to finance, banks must address inherent structural weaknesses such as a mismatch of bank credit (i.e., most SMEs seek long-term funding, while most banks offer short-term loans) and a weak culture of lending. Banks can play a critical role in supporting SME development by providing SME-specific financial products and services designed to help small firms establish and expand operations. If banks can better understand the unique needs of SME borrowers, they can design more appropriate financial solutions, enhance profits, and expand lending to this critical sector.

Many leading SSA banks have been able to address the issue of inadequate collateral

through the use of credit guarantee schemes, and many banks have established dedicated SME units or business lines. However, many banks, including a number in the top 100 African banks, are still grappling with how best to provide credit to the underserved local SME market. These banks can seek to adopt best practices that have been proved effective, and tailored for the local environment. Donors, governments, banks, and business associations can also continue building collaborative relationships to support enhanced enabling environments and a deeper banking sector throughout SSA.

15

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The African Development Bank. <http://www.afdb.org/portal/page?_pageid=473,1&_dad=portal&_schema=PORTAL> The Central Bank of Nigeria (CNB). <http://www.cenbank.org/supervision/framework.asp> The Standard Bank of South Africa Limited. <http://www.standardbank.co.za/> The White House. “Fact Sheet: A Record of Commitment to Africa”. June 2007. <http://www.whitehouse.gov/news/releases/2007/06/20070608-14.html> USAID. “African Global Competitiveness Initiative (AGCI)”. <http://www.usaid.gov/locations/sub-saharan_africa/initiatives/agci.html> USAID. “Development Credit Authority”. <http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/index.html> USAID. “Strategic Framework for Africa”. 24 February. 2006. USAID. “US Assistance to Africa: Strengthening Africa’s Trade under AGOA”. African Growth and Opportunity Act Forum. ACCRA, Ghana. 18-19 July. 2007. <http://www.usaid.gov/locations/subsaharan_africa/initiatives/2007_agoa_usaid_booklet_.pdf> Wizzit Bank. <http://www.wizzit.co.za/get%20flash.html> World Bank. Doing Business: Comparing Regulation in 181 Economies, 2009. <http://www.doingbusiness.org/documents/DB09_Overview.pdf> World Bank. Making Finance Work for Africa. November 2006.

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Afrinvest. “Nigerian Banking Sector Overview”. January 2008. Albaladejo, Manuel. “Promoting SMEs in Africa: Key areas for Policy Intervention”. United Nations Industrial Development organization (UNIDO) Private sector development branch. May 2002. Asmelash, Beyene. “Enhancing the Competitiveness and Productivity of Small and Medium Scale Enterprises (SMEs) in Africa: An Analysis of Differential Roles of National Governments Thorough Improves Support Services”. Africa Development, VOL. XXVII, No.3. 2002. Berger, Allen. Udell, Gregory. “A More Complete Conceptual Framework for Financing of Small and Medium Enterprises”. World Bank Policy Research Working Paper 3795. December 2005. Commission on European Communities. “Access to Finance for SMEs of the Middle East-North Africa Region; Experts Group Report”. February 2006. Barclays Bank of Ghana <http://www.ghana.gov.gh/ghana/barclays_bank_plans_support_private_sector_reduce_poverty_ghana.jsp> Economic Commission for Africa. “Enhancing the Competitiveness of Small and Medium Enterprises in Africa; a Strategic Framework for Institutional Support”. February 2001. International Finance Corporation (IFC). “2004 Annual Review, Small Business Activities”. <http://www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/SME+AReport2004Full.pdf/$FILE/SME+AReport2004Full.pdf> International Monetary Fund. “World Economic and Financial Surveys”. World Economic Outlook Database. October 2007. <http://www.imf.org/external/pubs/ft/weo/2007/02/weodata/index.aspx> International Poverty Centre. “Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa”. January 2008. <http://www.undp-povertycentre.org/pub/IPCPolicyResearchBrief6.pdf> KPMG. “KPMG Africa Bank Survey Report; South African Banking Survey”. 2005.

Mambula, Charles. “Perceptions of SME Growth Constraints in Nigeria (Global Perspective)”. Journal of Small Business Management. January 2002. <http://www.allbusiness.com/journal-small-business-management/20020101/2988071-1.html>

Mwaniki, John. “Overcoming the Challenges of SME Financing in Africa”. Technonet Africa - a project of UNDP. August 2006. Nissanke, Machiko K. “Financing enterprise development in Sub-Saharan Africa”. Cambridge Journal of Economics. May 2001. Oyen, Leny Van. Levitsky, Jacob. “Financing of private enterprise development in Africa; the need for a wider range of financial instruments and interfaces with business development services for SMEs”. UNIDO.

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United Nations Economic Commission for Africa (UNECA). African Union. “Economic Report on Africa, 2008; Africa and the Monterrey Consensus: Tracking Performance and Progress.” ECA Publications and Conference Management Section (PCMS). 2008. UNEP Finance Initiative. “UNEP FI and WWF Workshop: Innovative financing for sustainable SMEs in Africa”. Geneva, Switzerland. September 2007.

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Annex A. Ease of Doing Business Doing Business 2009, World Bank

20

Annex B. Africa’s Top 100 Banks African Business, October 2007

Region Rank Banks Country Capital ($Mil)

Assets ($Mil)

Southern 1 Standard Bank Group (Stanbank) South Africa 6,516 139,023 Southern 2 ABSA Group South Africa 4,850 68,766 Southern 3 Nedbank Group South Africa 4,082 59,016 Southern 4 Investec South Africa 3,175 46,813 Southern 5 FirstRand Banking Group South Africa 2,928 61,700 North 6 Credit Populaire du Maroc Morocco 1,711 16,002 North 7 Attijariwafabank Morocco 1,538 19,573 West 8 Intercontinental Bank plc Nigeria 1,277 5,735 North 9 National Bank of Egypt Egypt 1,179 34,107 North 10 Libyan Arab Foreign Bank Libya 966 11,242 West 11 Union Bank of Nigeria plc Nigeria 783 5,248 North 12 Banque Marocaine du Commerce Exterieur Morocco 748 10,060 West 13 Zenith International Bank plc Nigeria 738 4,785 North 14 Banque Misr Egypt 584 18,490 North 15 Commercial International Bank Egypt 538 6,632 North 16 Banque du Caire Egypt 510 7,943 West 17 Ecobank Transnational Togo 482 3,504 North 18 Arab International Bank Egypt 474 3,833 West 19 First Bank of Nigeria plc Nigeria 465 6,574 West 20 Guaranty Trust Bank plc Nigeria 406 3,959 East 21 Mauritius Commercial Bank Mauritius 403 3,226 North 22 Credit Populaire d'Algerie Algeria 400 6,494 Southern 23 African Bank Ltd South Africa 374 1,134 North 24 Societe Tunisienne de Banque Tunisia 338 3,620 North 25 Bank of Alexandria Egypt 315 5,764 West 26 IBTC Chartered Bank plc Nigeria 308 895 West 27 Oceanic Bank plc Nigeria 297 2,926 West 28 United Bank for Africa plc Nigeria 296 6,962 East 29 State Bank of Mauritius Mauritius 284 1,634 West 30 First Inland Bank plc Nigeria 282 1,510 North 31 Banque Internationale Arabe de Tunisie Tunisia 276 3,186 West 32 Diamond Bank plc Nigeria 272 1,738 North 33 Societe Generale Marocaine de Banques Morocco 271 3,790 North 34 Banque Nationale Agricole Tunisia 269 3,463 West 35 Spring Bank plc Nigeria 267 1,052 North 36 Arab African International Bank Egypt 258 4,918 North 37 Credit Agricole Egypt Bank Egypt 247 2,763 West 38 Ecobank Nigeria Nigeria 238 1,070 North 39 Banque de Tunisie Tunisia 231 1,395 West 40 Platinum-Habib Bank plc Nigeria 224 1,249 North 41 National Societe Generale Bank Egypt 216 3,521 West 42 Access Bank plc Nigeria 215 2,502 West 43 Afribank Nigeria plc Nigeria 211 1,024 North 44 Banque de l'Habitat Tunisia 208 2,924 West 45 Standard Chartered Bank Nigeria Ltd Nigeria 207 531 West 46 Wema Bank plc Nigeria 206 1,050 West 47 Fidelity Bank plc Nigeria 200 934 West 48 Skye Bank plc Nigeria 198 1,346 West 49 First City Monument Bank plc Nigeria 196 831 Central 50 BGFI Bank Gabon 185 1,199

21

East 51 Barclays Bank of Kenya Kenya 178 1,689 East 52 Commercial Bank of Ethiopia Ethiopia 166 3,828 Southern 53 Banco de Fomento Angola Angola 155 1,579 East 54 Kenya Commercial Bank Kenya 132 1,333 North 55 Gumhouria Bank Libya 121 3,441 East 56 Standard Chartered Bank [Kenya] Kenya 120 1,167 West 57 Societe Generale Banques Cote d'Ivoire Cote d'Ivoire 104 903 Southern 58 Standard Bank Namibia Namibia 101 1,334 Southern 59 Capitec Bank South Africa 85 204 Southern 60 Bank Windhoek Ltd Namibia 83 1,052 Southern 61 Barclays Bank of Botswana Ltd Botswana 79 1,150 West 62 Standard Chartered Bank Ghana Ltd Ghana 78 758 West 63 Ghana Commercial Bank Ghana 78 645 Southern 64 Teba Bank South Africa 76 360 West 65 CBAO Senegal 73 860 West 66 Ban. Comm. et I'Industrie de la Cote d'Ivoire SA Cote d'Ivoire 69 574 Southern 67 Banco de Poupanca e Credito SARL Angola 66 649 Southern 68 Sasfin Holdings South Africa 65 343 West 69 Societe Generale de Banques au Senegal Senegal 64 858 East 70 Co-operative Bank of Kenya Kenya 63 831 Central 71 Banque Internationale pour l'Epargne et le Credit Cameroon 61 764 East 72 Development Bank of Mauritius Ltd Mauritius 60 247 West 73 Barclays Bank of Ghana Ltd Ghana 59 541 East 74 Omdurman National Bank Sudan 58 2,184 East 75 Development Bank of Mauritius Ltd Mauritius 58 245 East 76 Commercial Bank of Eritrea Eritrea 55 1,167 East 77 Bank of Khartoum Sudan 53 404 Southern 78 Banco Africanos de Investimentos SARL Angola 51 1,283 East 79 CFC Bank Kenya 49 581 East 80 National Bank of Kenya Kenya 48 520 Southern 81 Banco Internacional de Mozambique Mozambique 47 849 West 82 SG-SSB Bank Ltd Ghana 44 320 Southern 83 National Bank of Malawi Malawi 43 261 Central 84 BICIG Gabon 43 556 Southern 85 Barclays Bank Zambia plc Zambia 42 455 East 86 National Bank of Commerce (NBC) Ltd Tanzania 42 443 Central 87 Societe Generale de Banques au Cameroon SA Cameroon 40 514 Central 88 Afriland First Bank Cameroon 40 550 East 89 CRDB Tanzania 38 634 Southern 90 ABC Holdings Botswana 38 347 West 91 Bank of Africa-Benin Benin 36 507 Southern 92 Standard Chartered Bank Zambia Ltd Zambia 36 354 East 93 Investments and Mortgages Bank Kenya 35 322 East 94 CRDC Bank Ltd Tanzania 34 710 East 95 National Industrial Credit Bank (NIC Bank) Kenya 33 284 Southern 96 BCI Fomento Mozambique 32 455 East 97 Barclays Bank of Uganda Ltd Uganda 31 218 Central 98 Commercial Bank of Cameroon Cameroon 30 550 East 99 Bank of Abyssinia Ethiopia 29 237 North 100 Banque Mauritanienne Commerce International Uganda 29 276

45,092 647,992

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Annex C. Development Credit Authority Portfolio – Sub-Saharan Africa USAID, January 2008 Total Financing Made Available: $448,320,502 Total Cost to USAID: $12,716,044 Maximum Cumulative Cost to the Leverage of $1 Country Bank/Partner Sector Disbursements Mission USAID Funds Angola Banco de Fomento Agriculture $15,000,000 $330,000 45

For lending to the agriculture sector and related businesses in Angola. The guarantee will serve to create linkages between small and medium sized agricultural producers and large processors and other agriculturally related businesses.

East Africa Root Capital Agriculture $2,000,000 $94,600 21 EcoLogic Finance (EF) seeks a new loan portfolio guarantee of $2,000,000 with a 50% guarantee for an expansion to Africa of its loan program for coffee grower/producer cooperatives in Rwanda, Tanzania, Uganda, Kenya, and Ethiopia.

Ethiopia Awash Bank Agriculture $9,000,000 $762,300 11 Increase access to short-term marketing credit and medium-term investment capital in the coffee, food grains, horticulture, and livestock/livestock products sectors.

Ethiopia Bank of Abyssinia Agriculture $9,000,000 $762,300 11 Increase access to short-term marketing credit and medium-term investment capital in the coffee, food grains, horticulture, and livestock/livestock products sectors.

Ethiopia Dashen Bank Agriculture $10,000,000 $709,000 14 To promote increased access to short and medium term credit for SMEs engaged in manufacturing (with a focus on agro-processing, textile/textile products, leather/leather products) and services (with a focus on tourism).

Ghana Ecobank Ghana SME $5,000,000 $198,500 25 To finance investment and pre-export financing loans to SMEs involved in non-traditional export sectors such as manufactured apparel, shea butter, specialty foods, processed cashews, wood products, home décor and fashion accessories.

Ghana Ecobank Ghana SME $7,000,000 $466,900 14 To improve access to commercial finance and promote the development of competitive private enterprises in Ghana. To share risk with EcoBank on a portfolio of loans to sectors that will include MSMEs, Agriculture, Manufacturing, and Trade.

Ghana Ecobank Ghana SME $3,000,000 $101,100 29 To improve access to commercial finance and promote the development of competitive private enterprises in Ghana, the Mission proposes to share risk with EcoBank on a portfolio of loans to MFIs and MSMEs.

Kenya Co-op Bank of Kenya Microfinance $1,500,000 $106,200 14 Enable smallholder farmers to increase productivity and marketing of their products which will

result in increased agriculture-sourced incomes, and increased economic growth throughout the value chain which includes MSMEs plus access to financial services.

Kenya Co-op Bank of Kenya SME $1,000,000 $78,200 12 Enable smallholder farmers to increase productivity and marketing of their products which will

result in increased agriculture-sourced incomes, and increased economic growth throughout the value chain which includes MSMEs plus access to financial services.

Kenya Co-op Bank of Kenya Microfinance $1,500,000 $90,150 16 Enable smallholder farmers to increase productivity and marketing of their products which will

result in increased agriculture-sourced incomes, and increased economic growth throughout the value chain which includes MSMEs plus access to financial services.

Kenya Fina Bank SME $5,000,000 $229,000 21 Stimulate lending to in the SME sectors, agriculture, tourism, manufacturing, and commerce to

encourage expansion and the extension of financial services to underserved clientele, with special attention paid to women clientele.

23

Maximum Cumulative Cost to the Leverage of $1 Country Bank/Partner Sector Disbursements Mission USAID Funds Kenya Kenya Commercial Bank SME $7,900,000 $384,730 20 Stimulate lending to in the SME sectors, agriculture, tourism, manufacturing, and commerce and 2

tier MFIs to encourage expansion and the extension of financial services to underserved clientele, with special attention paid to women clientele.

Kenya K-Rep Bank Agriculture $3,200,000 $206,720 15 Stimulate lending to SMEs and encourage extension of credit to underserved clientele. K-Rep

Bank intends to place a strong emphasis on the extension of credit to women-owned and/or operated businesses.

Malawi Standard Bank Agriculture $13,000,000 $699,400 18 The guarantee will serve as a catalyst for the expansion of access to financing for agriculturally

linked MSME in Malawi where there is currently minimal lending. Mali BICIM Agriculture $3,000,000 $82,200 36 To strengthen the Guaranteed Party's ability to make Qualifying Loans to Qualifying Borrowers in

Mali and thereby demonstrate the financial viability of lending to the Malian agribusiness sector. Mozambique BCI Fomento Agriculture $4,000,000 $180,800 22 To enable agro-enterprises to invest in equipment and facilities, in addition to working capital, that

will facilitate the development of their businesses. Part of DCA Agro - Enterprise Commercialization Program.

Nigeria Fidelity Bank Nigeria SME $5,000,000 $266,000 18 To assist enterprises (agro and non-agro) that have been neglected for a variety of reasons by the

commercial banking sector in Nigeria and endeavor to facilitate SME access to financial services. Nigeria PlatinumHabib Bank Agriculture $5,500,000 $260,150 21 To assist SMEs along the agriculture commodity value chain to access credit. Nigeria Skye Bank Agriculture $5,500,000 $260,150 21 To assist SMEs along the agriculture commodity value chain to access credit. Nigeria Zenith Bank Nigeria Housing $10,000,000 $624,000 16 To support the purchase of homes by low and middle income households in four cities: Abuja,

Lagos, Port Harcourt and Kano. Provide confidence to financial institutions. To invest and support sectors that have been neglected.

Rwanda Banque Commerciale Agriculture $2,700,000 $130,410 20 Finance loans to Rwanda's export-oriented agribusiness sector through increased access to short-

term working capital and medium-term capital investment, thereby stimulating economic growth. Rwanda Banque de Kigali Agriculture $2,400,000 $102,240 23 Finance loans to Rwanda's export-oriented agribusiness sector through increased access to short-

term working capital and medium-term capital investment, thereby stimulating economic growth. Rwanda Banque de Kigali Agriculture $2,000,000 $144,200 13 Increase access to short-term working capital and medium-term capital investment financing for

strategic export-oriented agricultural sectors. Senegal Attijari Bank SME $3,333,334 $177,000 18 Raise bank financing for capital investment needs in sectors under the Government's Accelerated

Growth Strategy: agriculture, textile, handicraft, fisheries, ICT. Minimum one year loan term. Senegal Compagnie Bancaire de SME $3,333,333 $177,000 18 Raise bank financing for capital investment needs in sectors under the Government's Accelerated

Growth Strategy: agriculture, textile, handicraft, fisheries, ICT. Minimum one year loan term. Senegal Ecobank Senegal SME $3,333,333 $177,000 18 Raise bank financing for capital investment needs in sectors under the Government's Accelerated

Growth Strategy: agriculture, textile, handicraft, fisheries, ICT. Minimum one year loan term. South Africa FirstRand Bank Agriculture $43,000,000 $41,000 1000 The program will provide a partial loan guarantee on a R300 million ($43 million) loan from

FirstRand Bank Limited to emerging black farmers and agribusinesses in all provinces in South Africa.

24

Maximum Cumulative Cost to the Leverage of $1 Country Bank/Partner Sector Disbursements Mission USAID Funds South Africa Futuregrowth Asset Microfinance $8,333,334 $76,310 109 To support CAPITEC Bank (CAPITEC) in securing its first loan from Futuregrowth Asset

Management (Futuregrowth) to become a mass-market bank focusing on the “under-banked.” South Africa GJMC Infrastructure $25,000,000 $676,653 33 To finance the multi-year investment costs associated with a selected group of high priority

infrastructure projects that will provide basic urban services such as water, solid waste disposal, and electricity to areas currently not being/adequately served.

South Africa INCA/Newco Infrastructure $10,000,000 $1,116,290 8 INCA/NEWCO will make it possible for numerous poor municipalities to obtain new access to

local private capital markets to finance badly needed municipal services to their low income citizens.

South Africa Old Mutual Investment Housing $69,444,444 ($70,000) -100 A loan to Real People, a financial services company providing innovative financial products to

middle and lower income households in South Africa. Proceeds of the loan will support their housing portfolio of rental stock, a greenfield development company, mortgage.

South Africa Old Mutual Investment Housing $53,600,000 $100,000 86 To finance the development of a large mixed use residential development catering to affordable

housing market. Swaziland Nedbank/Standard SME $25,000,000 ($2,000) -10000 The overall objective of USAID’s economic development programs in Swaziland is to support

economic growth and job creation throughout the country. Uganda Allied Bank Microfinance $2,000,000 $51,200 39 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Barclays Bank of Microfinance $5,500,000 $155,650 35 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Centenary Rural Microfinance $3,000,000 $156,300 19 Increase access to finance by micro-, small-, and medium-sized business and micro-finance

institutions. Uganda Centenary Rural Microfinance $5,520,000 $206,450 26 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Citibank Uganda Microfinance $273,224 $7,732 35 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Nile Bank Microfinance $4,000,000 $219,600 18 Increase access to finance by micro-, small-, and medium-sized business and micro-finance

institutions. Uganda Nile Bank Microfinance $3,000,000 $116,100 25 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Stanbic Bank Uganda Microfinance $6,000,000 $208,800 28 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Stanbic Bank Uganda Agriculture $2,700,000 $156,060 17 Increase access to finance by micro-, small-, and medium-sized business and micro-finance

institutions. Uganda Stanbic Bank Uganda Microfinance $3,314,000 $145,173 22 Increase access to working capital finance by grain traders, exporters, millers, producer

organizations, and farmers through the short-term financing of commodities that are backed by warehouse receipts issued by 3rd party, int'l recognized, collateral managers.

25

Maximum Cumulative Cost to the Leverage of $1 Country Bank/Partner Sector Disbursements Mission USAID Funds Uganda Standard Chartered Microfinance $4,000,000 $123,600 32 To stimulate domestic lending and encourage greater financial intermediation. Part of SPEED

program - Support for the Private Enterprise Expansion and Development. Uganda Uganda Microfinance Microfinance $2,000,000 $121,200 16 Increase access to finance by micro-, small-, and medium-sized business and micro-finance

institutions. Zambia Barclays Bank Agriculture $535,500 $25,276 21 Increase access to working capital finance by farmers through the development of short-term

financing of commodities backed by warehouse receipts issued by locally certified warehouses. Zambia Barclays Bank SME $6,000,000 $277,200 21 To encourage lending to farmers and agri-processors, as well as to the tourism sector. This facility

would also be available to support businesses such as transportation, shipping, packaging businesses, equipment dealers, and tour operator agencies.

Zambia Finance Bank Agriculture $5,000,000 $245,000 20 Increase access to working capital finance by farmers through the development of short-term

financing of commodities backed by warehouse receipts issued by locally certified warehouses. Zambia Stanbic Bank SME $6,000,000 $277,200 21 To encourage lending to farmers and agri-processors, as well as to the tourism sector. This facility

would also be available to support businesses such as transportation, shipping, packaging businesses, equipment dealers, and tour operator agencies.

Zambia Stanbic Bank Housing $11,900,000 $485,000 24 Stimulating the availability of mortgage loans and asset ownership. Lilayi Housing Project is a

new low-cost housing and mortgage market development project bringing over 5,000 units of housing.