Proparco and Standard Bank increase access to finance for SMMEs

As part of development finance agency Proparco’s deputy CEO Djalal Khimdjee’s visit to SA, Proparco and Standard Bank signed two new guarantees, strengthening their relationship in SA. The guarantees are in line with the Choose Africa initiative to accelerate the growth of micro, small and medium enterprisesand entrepreneurship in Africa. 

The ARIZ (a risk-sharing mechanism) ZAR-denominated loan portfolio guarantee (€19.5m) will allow the bank to sustain its SMME-lending activities in a challenging post-Covid environment in SA. 

The EURIZ (a guarantee mechanism) ZAR-denominated loan portfolio guarantee (€9m) will focus on EURIZ-eligible sectors such as the fintech, agriculture, green economy, education and healthcare sectors, as well as women- and youth-owned enterprises, allowing the bank to expand its SME lending activities into high impact sectors. The grant has benefited from support from the EU and the Organisation of African, Caribbean and Pacific States.

The two guarantees, which amount to €28.5m (R332m), will help finance hundreds of  SMMEs and contribute to Choose Africa, the French initiative dedicated specifically to African entrepreneurs, start-ups and micro, small and medium enterprises.

Standard Bank looks to achieve its purpose, and drive Africa’s growth, while making a substantial impact on society; these elements being embedded in its social, economic and environmental (SEE) framework. 

Standard Bank’s thinking has been informed by the priority issues and targets contained in the UN Sustainable Development Goals, the AU's Agenda 2063, as well as the various national development plans and policies of the countries in Africa in which it operates. The relationship with Proparco embodies this and facilitates another way for Standard Bank to deliver on its SEE purpose, targeting developmental sectors, including financial inclusion, health, education and the green economy.

In 2020, the Covid-19 pandemic affected the SA economy. In this context, financial support to SMMEs is a priority. Standard Bank has committed to supporting its existing SMME clients, as well as the SA SMME sector. It was one of the first banks to proactively offer client relief initiatives (payment holidays, instalment reductions, short-term financing) during the Covid-19 crisis, and additional salary support to staff of more than 3,500 small- and medium-sized businesses through partnering with the SA Future Trust.

Standard Bank is an existing partner of Proparco, having benefited from Proparco’s Unlock Guarantee in 2018, in the context of Standard Bank’s R618m ($44m) senior debt facility to the Alten Solar Power (Hardap) photovoltaic plant in Namibia. 

Proparco and Standard Bank see significant potential to replicate this transaction in the context of the group’s multiple African subsidiaries.

Says Khimdjee: “We are glad to expand our partnership with Standard Bank through this transaction fully dedicated to SMMEs who play a critical role in the economic recovery of the region. And thanks to the involvement of the European Commission, we will be able to accompany Standard Bank in its willingness to provide additional financial solutions to specific sectors and profiles of SME (start-ups, youth and women-led businesses). This is 100% in line with the objectives of the Choose Africa initiative launched by the French government.”

Standard Bank CEO Lungisa Fuzile says: “Standard Bank is committed to being more than a provider of financial products and services — we are a catalyst for economic change in our countries of operation. Our vision is to drive Africa’s growth and our SEE strategy aims to embed social, economic and environmental considerations into our lending decisions and business practices in a way that helps us to continue supporting our clients, while producing value for society at large. 

“We are excited about signing two new guarantee agreements with Proparco as it provides us the capacity to expand access to finance to SA SMMEs operating in sectors that hold the potential to address the socioeconomic impact of the pandemic and grow the SA economy. This development shows our group’s commitment to our SEE strategy and support of SA small enterprises as well as economic growth,” he says.

This article was paid for by Standard Bank.