OPIC and AGF Enter New Agreement to Expand Small Business Lending in Afghanistan
WASHINGTON, D.C. – Small businesses in Afghanistan, a vital engine of economic growth in the country but one that has lacked access to credit, received a boost today when the Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, and Afghan Growth Finance (AGF), a subsidiary of the Small Enterprise Assistance Funds (SEAF), signed an agreement to co-finance small business loans of up to $11.5 million.
Bert van der Vaart, Executive Chairman of Small Enterprise Assistance Funds, left, and James Polan, OPIC Vice President for Small and Medium-sized Enterprise Finance.
The OPIC-AGF participation facility expands the existing partnership between the two by raising its existing $4 million loan cap. Addressing the needs of a previously untapped market segment, the facility will provide small and medium-sized enterprises (SMEs) with access to capital in larger amounts and for long-term tenors – terms generally unavailable from other financial institutions in the Afghan market.
“Small businesses in Afghanistan can do much to accelerate the country’s economic growth – if they have access to the credit they need. A recent study by the Microfinance Investment Facility for Afghanistan found that Afghan banks have 23 depositors for every borrower, so that need is great,” said OPIC President and CEO Elizabeth Littlefield. “Expanding OPIC’s successful partnership with SEAF and AGF will help ensure that SMEs get adequate access to capital to unlock Afghanistan’s entrepreneurial potential, diversify its economic base, and improve the economic prospects of thousands of Afghans.
Bert van der Vaart, Executive Chairman of SEAF, said, “SEAF has seen firsthand that despite the unique challenges of the country, there are focused entrepreneurs who are able to expand their companies to reach broader domestic and export markets when they have the right type of capital and business relationships. Through AGF, SEAF is making a significant contribution to the growth and development of Afghanistan.
OPIC has committed $50 million to AGF through two direct loans – $20 million in 2008 and $30 million in 2010. OPIC’s participation in the facility is supported by a partnership with the U. S. Agency for International Development which will enable AGF to expand its footprint in the country to reach a broader array of SMEs.
AGF has lent more than $30 million to date, with a successful track record of repayment that has allowed the funding to be re-lent to other worthy firms. The partnership SEAF has developed with its SME clients keeps its portfolio strong and its loans current. SEAF is a mission-focused organization that uses a private sector commercial approach to provide growth capital and operational support to SMEs in emerging markets and businesses underserved by traditional sources of capital. SEAF estimates that every dollar it invests in a growing SME generates an additional $13 in economic and social benefits to the broader community, including employees, customers, suppliers and local governments.