• African Solidarity Fund signs $26 million counterguarantee with Cape Verde’s Pro Garante

• Facility backs bank loans to businesses, especially small enterprises

• MSMEs face $270 million financing gap in Cape Verde

The African Solidarity Fund (FSA) announced on Monday that it had signed a counterguarantee agreement with Pro Garante, Cape Verde's state-backed financial institution and national guarantee fund. The guarantee line is valued at 2.5 billion escudos, or about $26 million.

Under the agreement, the multilateral guarantee institution, which brings together 23 African states and is headquartered in Niamey, Niger, will cover part of the risks assumed by Pro Garante when it guarantees loans extended by local banks to businesses.

Pro Garante said the facility would expand its capacity and improve access to financing for Cape Verdean businesses, particularly micro, small and medium-sized enterprises (MSMEs). They form the backbone of the economy but continue to struggle to meet bank lending requirements.

MSMEs in Cape Verde face a financing gap estimated at $270 million, equivalent to about 14.7% of gross domestic product. The shortfall limits their growth and weighs on a sector critical to the country's economy. The country's financial system, however, has ample liquidity and is well capitalized, according to the International Monetary Fund.

"This partnership demonstrates the importance of cooperation between African institutions in developing innovative financial solutions to address development challenges. We are convinced that this initiative will strengthen the business financing ecosystem in Cape Verde, creating better conditions for entrepreneurs to invest, innovate and grow," said Antonia Maria Cardoso, chairwoman of Pro Garante's board of directors.

The FSA was established in September 1979 to facilitate access to financing for businesses so they can play a greater role as drivers of economic development across Africa.

Sandrine Gaingne