Bank of Tanzania (BoT) governor, Prof Benno Ndulu has asked financial institutions in Africa to work hard and find serious investors in the mining and energy sector.
Wrapping-up annual meeting of the Association of African Development Financial Institutions (AADFI), which was part of the just-ended African Development Bank (AfDB) meetings, Prof Ndulu said Africa is in dire needs of serious investors for the two sectors.
He said AADFI and its members have a role in ensuring that the continent gets potential investors in the said sectors, which indeed need heavy and long-term investments.
Ndulu also commended efforts by AADFI in addressing challenges facing the finance sector across the continent.
“AADFI is in the forefront in finding practical solution in investment related to infrastructures,” he said, adding that infrastructure in Africa is an important sector that needs hefty and long-term investment.
AADFI chairman, and Director General of Tanzania Investment Bank (TIB), Peter Noni said the association was committed to closely work with African governments in improving infrastructures in the continent and Tanzania in particular.
He said bankers and financial experts who attended the AADFI meeting agreed on a number of issues, including putting up strategies that will help boost Small and Medium Enterprises (SMEs).
“The idea is to ensure that they grow and swiftly achieve socio-economic development,” he said.
AADFI participants also agreed to strengthen relationship with the private sector and that of development finance institutions (DFIs) so that they get opportunity to access to the African Development Bank (AfDB).
Noni also vowed to strengthen efforts towards making institutional reforms and making their institutions stronger.
Meanwhile a new organisation that will absorb the risk of SME funding in Africa has been launched.
The African Guarantee Fund (AGF) will provide guarantees for loans taken by SME’s in commercial banks, effectively providing the much needed breakthrough for the small entrepreneurs in the continent to grow at a faster pace.
Addressing the media during the launch in Arusha, Tanzania, Chief Executive Officer Felix Bikpo said AGF will work with commercial banks in nine countries in the continent in its first phase, before moving to cover the entire continent in subsequent phases of its rollout.
“We are already working with banks in Keny–a, Uganda, Tanzania, Ghana, Senegal, Cameroon, Mozambique, Zambia and Mali, with a view to accelerating economic development in the respective countries by making it easier for SME’s with strong credentials to access credit”, he explained.
Bikpo added that AGF has been established out of the global recognition that the SME’s have been identified as some of the key drivers for economic growth noting that there is currently a funding gap of between $80-$100 billion, affecting 40-59% of formal SMEs, and an even greater share of informal SMEs.
“According to the World Bank’s Enterprise Survey, SMEs make up approximately 81% of Africa’s private sector firms, with 51% being small-scale and 31% being medium-sized. SMEs contributed over 50% of new jobs in Sub Saharan Africa in 2009 however only approximately 20% to GDP (this is compared to 40-60% of GDP in the EU and the US and even higher rates in growing Asian economies). We can see that there is a huge unexploited capacity for growth”, he explained.
The fund will be headquartered in Nairobi, Kenya with regional offices covering each of the countries that it will operate in.