FREQUENTLY ASKED QUESTIONS

AGF has been assigned an Insurer Financial Strength rating of “AA-” (Very Strong) by Fitch Ratings.

AGF is a Multi-Lateral Development Finance institution owned by two OECD member states as well as a multi-lateral development finance institution, and as such its guarantees are risk-weighted 20% by Central Banks..

AGF is open for business in all African countries with an exception of those currently challenged by internal strife.

The difference between AGF and the Funds referred to is that AGF is modeled on a commercial footing with a very robust credit risk processes encompassing, target market selection and credit initiation procedures, appraisal, structuring, approval and portfolio management. The robustness of the credit process is such that AGF is at all times equipped with the ability to originate and maintain a very good quality portfolio. AGF’s business model is also such that it does not deal directly with SMEs but rather supports them through Partner Financial Institutions (PFIs) who own the SME relationships. The PFIs are also subjected to detailed due diligence which among others, include credit risk rating. A combination of the chosen mode of intervention and the extensive due diligence which PFIs are subjected to, enables AGF to mitigate risks such as moral hazard and adverse selection which afflicted most of the previous Funds.

AGF is a guarantee fund and as such does not provide any form of direct financing. Its interventions in the SME space are limited to the provision of partial financial guarantees and capacity development assistance to PFIs in support of their SME financing activities.

AGF supports SMEs through financial institutions who as guaranteed parties, originate and own the SME relationships. It is the financial institutions and not SMEs, who request AGF for guarantee support.

AGF is open to work with any financial institution active in the African SME financing space, provided such institutions meet set Facility Acceptance Criteria as part of the overall due diligence. In this regard, AGF engages banks, non-bank financial institutions and private equity funds who are active in the African SME financing space.

The cost of the guarantee comprises the following:
• One time facility fee;
• A quarterly utilization fee; and
• A commitment fee charged on the unutilized portion of the guarantee line.
The actual quantum of these fees is arrived at after evaluating the salient aspects of the proposed transaction in a Price-to-Risk model. The cost of the guarantee is always for the account of the guaranteed party, the PFI.

AGF covers all SME sectors driving the growth of an economy with an exception of transactions in the following activities:
• Tobacco or tobacco products;
• Armament productions or where 25% or more of the total production output or turnover of the portfolio company is derived from military-related activities;
• Beverages with an alcoholic content exceeding 15%;
• Casino or companies where the principal source of income is gambling;
• Speculative investments in real estate or commodities;
• Immoral and illegal activities;
• Production or activities involving harmful or exploitative forms of forced labor and/or child labor;
• Trade in wildlife or wildlife products;
• Production or trade in radioactive materials, unbounded asbestos fibers, and hazardous chemicals; and
• Investments harmful to the environment.
 AGF is generally guided by the following normative standards:

• UN Global Compact (Human Rights, Labor, Environment and Anti-Corruption for corporations, inclusive of banks): www.unglobalcompact.org
• UN Principles for Responsible Investment: www.unpri.org ;
• Doing Business (Business Regulation and Enforcement): www.doingbusiness.org

Start-ups are covered provided there is a proven business case. 

AGF guarantees are intended to create additionalities associated with enhanced SME financing and in this regard, existing loans do not qualify as there will be no incremental loans to be derived from the cover.