When Olivier Rushemeza, CEO of Legend Cables Ltd, sought a loan from the Development Bank of Rwanda (BRD), the company’s financial partner, he found that the amount of credit available fell short of what the company needed to expand. It was through BRD that Rushemeza learned about the African Guarantee and Economic Cooperation Fund (FAGACE) and how its guarantee mechanism could help businesses access larger loans by reducing the collateral gap. “When you go to borrow money, you are required to have collateral that covers the loan. But the way FAGACE works is that when you need a loan that exceeds the value of your collateral, it provides 50 per cent of the guarantee while you provide the remaining part. This allows you to access more financing,” he said. “It helped us get the exact loan amount we needed. If the institution was not there, I would have received a smaller loan, and the scale of the business would have been limited.” ALSO READ: Continental fund partners with banks to boost financing in Rwanda Legend Cables has been working with the guarantee fund for the past one year. Like Rushemeza’s company, many businesses face challenges accessing financing, especially when banks require sufficient collateral or consider lending to certain sectors risky. To address this challenge, FAGACE has been using guarantees to help businesses and projects secure funding. According to Cyrille Hategekimana, Director General of Banking and Non-Banking Services at the Ministry of Finance and Economic Planning (MINECOFIN), in Rwanda, the fund has issued guarantees worth Rwf35 billion, helping mobilise approximately Rwf80 billion in financing for projects across different sectors, according to officials. Hategekimana, who is also a member of FAGACE Board, said more than 100 small and medium-sized enterprises (SMEs) have benefited from FAGACE-supported financing in Rwanda. He added that the supported projects cut across various sectors, from agriculture, agro-processing and value addition to agricultural and livestock products to manufacturing and other activities that support the country’s development. Reducing financing risks for businesses Hategekimana explained that the fund works closely with financial institutions, including banks operating in Rwanda such as BRD, Bank of Kigali Plc, Equity Bank, BPR, Bank of Africa, Access Bank, GT Bank, NCBA and others by providing guarantees that reduce risks associated with lending. “If businesses face difficulties accessing loans, the fund can provide guarantees that make it easier for them to obtain financing.” He added that although FAGACE has conducted awareness campaigns to promote its services, more efforts are needed to ensure businesses, especially SMEs, understand how they can benefit. “We encourage private sector businesses to make use of the financial guarantee services offered by the institution so that these resources can generate greater impact and benefit more people,” he said. ALSO READ: Hope for SMEs as banks moot affordable loan packages A Pan-African institution built to unlock financing Established on February 10, 1977, in Kigali, FAGACE was created to support Africa’s economic development by helping governments and businesses access financing through guarantee mechanisms and resource mobilisation. As the institution prepares to mark its 50th anniversary next year, President of FAGACE Ngueto Tiraïna Yambaye said returning to Kigali carries a historical significance because the organisation was founded in Rwanda. He said this on July 14 at the opening of a two-day institutional event in Kigali, running through July 15, which combined a high-level training session for FAGACE's Board of Directors with its 72nd ordinary Board session. According to Yambaye, African leaders created FAGACE after recognising the need for a continental institution that could help reduce financing barriers and encourage investment. “Africa is a very rich continent, but the continent needs a Pan-African guarantee fund to be able to support credit and commerce. “We work a lot with Rwandan banks and African banks that are installed here in terms of credit facilitation because we guarantee 50 per cent and even 70 per cent. This frees up capital for the banks,” he added. He said the institution supports investments across various sectors, including infrastructure, telecommunications, agriculture, media, and start-ups. The fund’s interventions, he indicated, have expanded significantly, with guarantees and financing support reaching billions of dollars across its member states. “Before, the total amount of guarantees was about $1 billion. Today, the total amount of guarantees has reached about $25 billion that we have injected into the economies,” he said. The Pan-African guarantee institution currently operates in 20 African countries, with regional representations including Rwanda, where it serves as a hub for East Africa. Towards more investments in Rwanda, wider continental reach Yambaye said the institution plans to increase its interventions in Rwanda and the wider region. “From now on, we will increase our investments and our interventions in Rwanda and East Africa,” he said. Dominique Ndzale Tsono, President of the institution’s Board of Directors and representative of Congo-Brazzaville, said the institution is open to welcoming more African countries, noting that several countries have already expressed interest in joining. He said the institution’s recent governance reforms were designed to accommodate future expansion by creating a representation model that allows more countries to participate. “FAGACE is an instrument in the service of Africa. There is no distinction between English-speaking, French-speaking or Lusophone countries. All these countries are called to cooperate and collaborate together to advance Africa,” he said.
