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Frequently Asked Questions (FAQ's)

Is AGF rated by any of the International Rating Agencies?

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

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

Thanks to its strong rating, AGF’s 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 Financial Institutions (PFIs) who own the SME relationships. The PFIs 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 PFIs 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 PFIs 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, in case the PFI doesn’t reach a minimum level of utilization

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.

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:

1. Forced labour or child labour
2. Activities or materials deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international phase-outs or bans, such as:
  • Ozone depleting substances, PCBs (Polychlorinated Biphenyls) and other specific, hazardous pharmaceuticals, pesticides/herbicides or chemicals
  • Wildlife or products regulated under the Convention on International Trade in Endangered Species or Wild Fauna and Flora (CITES)
  • Unsustainable fishing methods (e.g. blast fishing and drift net fishing in the marine environment using nets in excess of 2.5 km in length)
3. Cross-border trade in waste and waste products, unless compliant to the Basel Convention and the underlying regulations
4. Destruction of High Conservation Value areas
5. Radioactive materials and unbounded asbestos fibres
6. Pornography and/or prostitution.
7. Racist and/or anti-democratic media.
8. In the event that any of these following products form a substantial part of a project’s primary financed business activities:
  • Alcohol beverages (except beer and wine);
  • Tobacco;
  • Weapons and munitions; or
  • Gambling, casinos and equivalent enterprises

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 default, the Partner Financial Institution post a claim to AGF with supporting documents as agree as per the guarantee agreement. AGF has 14 days from the date all supporting documents are provided to approve the said claim and notify the PFI of this approval. AGF will pay 50% of the amount of the claim within 14 days from the date of approval. The balance will be paid after the Guaranteed Party has exhausted recovery procedures and declares the outstanding amount uncollectible and adversely classified. These recovery procedures are expected to take place within 90 days after the payment of the first tranche by AGF.

 

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2017 AGF Annual Report
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