Box VIII.5: Examples of Risk Management Initiatives Supported by DFIs

Box VIII.5: Examples of Risk Management Initiatives Supported by DFIs

The African Guarantee Fund (AGF) was launched in 2012 and is a market-friendly guarantee scheme funded by the AfDB in partnership with the government of Denmark and Spain. The AGF aims to provide: (i) partial guarantees for financial institutions in African countries to incentivize them to increase debt and equity investments into SMEs; and (ii) capacity development of financial institutions (to help them to better appraise and manage SME portfolios) as well as of SMEs. The AGF aims to provide its products to the entire African continent by 2016.

The Currency Exchange Fund (TCX), which is a special purpose fund created jointly by several multilateral and bilateral DFIs (e.g., EBRD, IFC, AfDB, DEG, BIO) in 2007, provides long-term local currency hedging products to investors and clients. This fund has helped several institutions to support SMEs (and MFIs) in sub-Saharan Africa. For example, it allowed BIO to provide EUR 1 million in loans all together to the only commercial milk producer (Laiterie du Berger) in Senegal.

GuarantCo which is owned indirectly by the Private Infrastructure Development Group (PIDG) includes DFIs such as FMO as members. GuarantCo provides: (i) risk mitigation instruments to enhance local currency debt issuance by the private, municipal and parastatal infrastructure sectors in lower income countries throughout the world; and (ii) funds for technical assistance. In Africa, 45 countries are eligible to receive support from GuarantCo.

Source: AfDB (2011), TCX (2011) and GuarantCo (2013).

DFIs play a key role in promoting access to finance for women-owned SMEs. In particular, they provide both funding and capacity building support to the private sector or governments to increase access to finance for women-owned businesses, and to enhance the skills of women entrepreneurs to run their businesses. Table VIII.1 summarizes the results on DFIs’ activities to promote access to finance for women-owned enterprises in Africa obtained through a stocktaking exercise conducted by the IFC (2011b). The findings show that 11 out of the 37 projects covered are realized with the support of DFIs, and Africa accounts for roughly twothirds of DFIs’ projects. Moreover, it appears that in Africa DFIs provide support exclusively via financial intermediaries, by using debt or guarantees as instruments in contrast to other developing regions such as South Asia. Although it is difficult to assess the degree of success of DFIs’ interventions in supporting women-owned SMEs, outreach figures provide a glimpse of the scope of their impact (Table VIII.1).