Press release

USAID signs guaranteed loan agreement with three commercial banks to support small businesses

USAID/Senegal Director Kevin J. Mullally,center, signs the loan guarantee agreement for small businesses with directors of three commercial banks in Dakar. Photo: R. Nyberg, USAID

DAKAR, September 26, 2007 – The U.S. Agency for International Development (USAID) today signed a $10 million loan guarantee agreement with three commercial banks in Senegal that will increase access to loans for small- and medium-sized enterprises. It is seen as an important activity to help speed up economic growth in the West African country.

The agreement was signed by USAID/Senegal’s new Mission Director, Kevin J. Mullally, and the directors of the three banks: Pape Abdoul Mbaye, Attijari Bank; Patrick Mestrallet, Compagnie Bancaire de l’Afrique Occidentale (CBAO), and Kassi Ehouman, Ecobank.

The USAID/Senegal loan portfolio guarantee (LPG) encourages commercial banks to lend more to small- and medium-sized enterprises engaged in sectors identified in Senegal’s accelerated growth strategy: agriculture, textile and garment, tourism, handicraft and cultural industries, fisheries and sea food, and information and communication technology.

The seven-year guarantee will enable SMEs to leverage $10 million in loans and will provide guarantee coverage of a maximum of 50 % of the credit to SMEs in the targeted sectors. The maximum amount of each loan is 300 million FCFA (approximately $600,000) over five years. The minimum duration of the loan covered by the guarantee is 12 months.

“The U.S. government has accepted to assume part of the risk because we believe in private initiative,” said the chargé affaires at the U.S. Embassy, Jay T. Smith, “especially those of small- and medium-sized enterprises that represent 80 of enterprises and generate more than 90% of private sector jobs, but nevertheless benefit from an extremely small amount of bank financing.”

“We hope this guaranteed loan mechanism will enable small businesses without adequate access to loans to take advantage of credit that will bring growth and profitability to their ventures,” he added.

Ultimately, he said, the goal of this financial agreement is to help “create jobs, generate income, and promote a safe, sustainable economic growth capable of reducing poverty and assuring a better future for the Senegalese people.”

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