Reducing Poverty Through Greater Involvement in Africa

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May 2010
Berlin - Frankfurt, Germany, May, 05 2010 - BMZ and KfW development bank to set up first regional investment fund for micro and small enterprises in Sub-Saharan Africa. Funding commitments of over USD 150 million to strengthen private sector through local currency loans and improve personal incomes across Sub-Saharan Africa.

Earlier today the first regional investment fund for micro, small and medium enterprises in Sub-Saharan Africa (short, Regmifa instead) was formally launched at a signature ceremony in Berlin. The ceremony was attended by Gudrun Kopp, Parliamentary Secretary of State at the Federal Ministry for Economic Cooperation and Development (BMZ); Dr. Norbert Kloppenburg, Member of the Board of KfW Banking Group and representatives of the Spanish Development Agency (AECID); IFC, a member of the World Bank Group; the European Investment Bank (EIB) and other development institutions participating in the fund. Investors participating in the fund committed more than more than USD 150 million. BMZ and KfW Development Bank will contribute approximately USD 33 million.

The fund will develop a credit portfolio of about USD 200 million by 2014. This will be the first time that a dedicated fund provides microfinance institutions in Sub-Saharan Africa with a range of key financing instruments, including long-term debt and quasi-equity financing such as subordinated local currency loans.

Gudrun Kopp said: "This innovative fund provides for the first time microfinance institutions across Sub-Saharan Africa with a broad range of financial instruments. This funding will enable microfinance institutions to finance approximately 300,000 companies over the next five years and to create and secure 500,000 jobs.“ The creation of these jobs will be a significant contribution to both poverty reduction and alleviating the effects of the economic crisis in Africa." 

Micro, small and medium-sized businesses have little chance to invest and finance growth using adequate debt instruments. Across the continent there is a clear shortage of long-term and local currency loans. Informal micro-enterprises which employ most people across Africa, are barely able to grow and to invest given the absence of adequate funding. They are therefore unable to make use of opportunities to grow and expand in new markets, and are prevented from hiring more workers. "More work in Africa means less poverty. Only those who earn money are able to access a doctor and get medicine, education and care when needed. REGMIFA will support economic growth in Africa and will provide more opportunities for small businesses and poor populations to benefit from economic development, "said Dr. Kloppenburg.

The Fund will provide direct funding for approximately 50 microfinance institutions. They, in turn, will lend to over 300,000 small businesses in local currency. The key benefit will be the removal of currency risk for borrowers and therefore a lower debt burden. Experience shows that the vast majority of borrowers will be women, whose social position and income earning role as entrepreneurs will be strengthened.

Prospective investors in the Fund, in addition to the Ministry for Economic Co-operation and Development (BMZ) and the KfW Development Bank are: the Spanish Ministry of Foreign Affairs (MAEC), the Spanish Agency for International Cooperation for Development (AECID), the Spanish Development Bank (ICO), the IFC, a member of the World Bank, the Belgian Investment Company for Developing Countries (BIO), die Development Bank of Austria (OeEB), the Development Bank of the Netherlands (FMO), the European Investment Bank (EIB), the European Commission/EuropeAid, the French Development Agency (AFD), the Investment and Promotions Company for Economic Cooperation (PROPARCO), the Norwegian Microfinance Initiative (NMI), and the African Development Bank (AfDB). The investment manager is Symbiotics Investment Management S.A.

KfW development bank is the world's largest financier of microfinance in developing and transitional countries. In 2009 the commitments accounted for one third of the total KfW portfolio (EUR 1.1 billion) in the financial sector.

 

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