DAR ES SALAAM – Absa Bank Tanzania Limited has partnered with the African Guarantee Fund (AGF) to stimulate growth among Micro, Small and Medium-sized Enterprises (MSMEs) in Tanzania, facilitated by a Sh20 billion Loan Portfolio Guarantee Agreement. The arrangement aims to overcome financing obstacles that currently hamper local MSMEs.
The funds will be disbursed to Absa's MSME clients, which includes existing businesses and startups. Priority will be given to ventures owned by women, the youth, and micro-SMEs, specifically those in agriculture and the related value chain.
Melvin Saprapasen, Absa Bank's Head of Business Banking, announced that the guarantee would also be directed towards climate-oriented businesses, including those specializing in energy efficiency, renewable energy, natural resource management, and climate insurance.
"Through this agreement, we aim to bridge the financing gap hindering the growth of MSMEs, particularly those owned by women and the youth. We're committed to fostering the expansion of these enterprises and fueling the launch of innovative startups," Saprapasen said.
The agreement stipulates that the AGF will assume up to 75% of every transaction, leaving the bank to bear the remainder of the risk. Beneficiaries under AGF coverage must be licensed MSMEs based in Tanzania, focusing solely on new or incremental businesses seeking investment or working capital credit facilities to spur growth.
Obedi Laiser, CEO of Absa Bank Tanzania, stated that full utilization of the facility could catalyze approximately Sh100 billion in loans to MSMEs over the next five years.
"We are aligning our efforts with the government's commitment to foster economic diversification by positioning MSMEs as the primary engine for growth and employment in our economy," Laiser expressed.
Jules Ngankam, the AGF's Group CEO, emphasized the importance of a robust SME sector in improving living standards and alleviating poverty. He highlighted the significant contribution of Tanzania's SME sector to the nation's GDP, adding that access to finance remains a central obstacle.
"This partnership with Absa Bank will address this hurdle through the guarantee agreement. AGF has also initiated discussions with Absa to provide Capacity Development to support the bank’s SME business through technical assistance," Ngankam explained.