Guarantee to FINCA/Equity

The contribution is a US $ 8.9 million / 5 years non-revolving partial credit guarantee with a focus on lending to SMEs in agriculture / renewable energy in North and South Kivu. The facility covers credit risk up to 50 percent of the loan amount for the loans placed under the guarantee. The guarantee facility is implemented together with USAID, which acts as agent for the facility and among other things is responsible for the provision of technical assistance and monitoring & evaluation. The guarantee facility is addressed to two different financial institutions. ProCredit Bank Congo SARL is a commercial bank with strong owners that specializes in lending to SMEs and plans to expand in the North and South Kivu and the agricultural sector. Finca RD Congo SARL is a commercial microfinance institution with expertise in agent banking and loans to actors in the agricultural value chain. The risk of the facility is divided equally between Sida (25 percent) and USAID (25 percent) while the residual risk (50 percent) is carried by the respective financial institution. ProCredit and Finca are assigned as USD 3 500 000 maximum authorized portfolio amount each. The remaining part is a reserve facility of US $ 1,936,870 that goes to the financial institution that first reaches its maximum portfolio amount. Sida's maximum guarantee amount is SEK 20 559 485 (USD 2 234 218 at 9.22 SEK/USD). Sida receives an origination fee from ProCredit and Finca. The origination fee is USD 89 369 (cirka 760 000 SEK) and will be transferred to Sida's SCR-account for administration costs. The expected loss is estimated at USD 186 843, which will be subsidized, since the utilization fee is paid to USAID. The contribution is subsidized by a maximum grant of SEK 1 588 166 (USD 186 843 at 8.50 SEK/USD) from the Swedish Embassy in Kinshasa that will be credited to Sida's guarantee reserve account at the Swedish National Debt Office. . The main goal of the initiative is to increase bank lending to the MSMEs sector. The loans are expected to lead to investments, business expansion and job creation in the North and South Kivu provinces. The long term goal of the guarantee is to contribute to a change in the Congolese banking sector, where more banks lend to MSMEs instead of large private and public clients and increasingly make their living on interest income from lending rather than fees and investments in government bonds. In the short term, the guarantee facility also expected to contribute to longer maturities, lower collateral requirements and larger loan amounts in ProCredit’s and Finca’s guaranteed loan portfolios.