The portfolio guarantee deal is meant to share the risks associated with lending to SMEs, thus unlocking more financing to them.
Speaking after the signing in Nairobi, Gulf African Bank Managing Director Asad Ahmed said the deal will also help in capacity building component that will go towards boosting financing and risk management capabilities.
“We are committed to addressing the unique banking needs of SME through continuous innovation and improvement of our product suite,” he said.
This deal comes only weeks after AGF signed portfolio guarantee agreements with I&M Bank for Sh50 million guarantee and Commercial Bank of Africa for Sh100 million.
The deal also follows the announcement last month of International Finance Corporation taking a 15 percent equity interest in Gulf African Bank and the Bank’s increase in capital by Sh854 million bring contributed by IFC and existing shareholders.
“AGF is the missing link to the scaling up of African SME financing; we reduce the risk taken by institutions financing SMEs by making it easy to extend loans to them,” said AGF CEO Felix Bikpo.
Inadequate access to capital has been cited as a key challenge to the development of SMEs in Africa with many lending institutions shy away from financing them because they are considered risky.