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Frequently Asked Questions (FAQ's)

Is AGF rated by any of the International Rating Agencies?

AGF is not currently rated.It is worth mentioning that even though not currently rated, AGF enjoys overwhelming support from its shareholders, two of which are rated AAA. 

How is an AGF guarantee risk-weighted by Central Banks?

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.. 

Which countries is AGF working in?

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

What makes AGF different from the previous national and regional funds which became insolvent and failed to honor their guarantee obligations?

The difference between AGF and the Funds referred to is that AGF is modeled on a commercial footing with 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 Lending Institutions (PLIs) who own the SME relationships. The PLIs are also subjected to detailed due diligence which among others, includes credit risk rating. A combination of the chosen mode of intervention and the extensive due diligence which PLIs are subjected to, enables AGF to mitigate risks such as Moral Hazard and Adverse Selection which afflicted most the failed Funds.  

Does AGF provide direct financing to SMEs or lines of credit to SME focused banks?

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

What is AGF’s mode of intervention in support of SMEs?

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. 

Which financial institutions does AGF work with?

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

What is the cost of the guarantee and who meets this cost?

The cost of the guarantee comprises the following:

  • One time facility fee;
  • An annual 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 PLI.

What are the specific sectors covered under AGF’s facilities?

AGF covers all the growth SME sectors of an economy and include: agriculture, agro-industries, small and medium scale mining, oil and related services, manufacturing, building and construction, energy, telecommunication, transport, tourism, trade, etc.

AGF does not guarantee transactions involving 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:

Do AGF guarantees cover start-ups?

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

Do AGF guarantees cover existing loans??

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. 

In the event of a default, what is AGF’s procedure for payment and how long does it take to pay a claim?

In the event of a claim, AGF will pay 50% of the amount of the claim within 15 days of receiving such a claim from a Guaranteed Party. The balance will be paid after the Guaranteed Party has exhausted recovery procedures and declares the outstanding amount uncollectible and adversely classified.  AGF will take no more than 90 days to effect the balance of the payment from the date it receives a claim and status declaration for the remaining amount. Claim forms are available at AGF offices.

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