Partnership To Support Entrepreneurs in AfricaHenrietta H. Fore, Administrator of USAID and Director of U.S. Foreign Assistance
Katherine Almquist, Assistant USAID Administrator for Africa; Donald Kaberuka, President of the African Development Bank
Remarks at Signing Ceremony
April 15, 2008
(Remarks as delivered)
ASSISTANT ADMINISTRATOR ALMQUIST: Good morning and welcome to the signing of a Memorandum of Understanding between USAID and the African Development Bank in support of the African [Entrepreneur] Facility.
As the Assistant Administrator for the Africa Bureau, I am especially pleased that Dr. Kaberuka, the President of the African Development Bank, is here to sign the MOU along with USAID Administrator and Director of U.S. Foreign Assistance Henrietta Fore.
A few months ago, Ms. Fore assumed leadership of United States' foreign assistance programs, and since then she has been our strongest champion for public-private partnerships in support of development objectives.
Dr. Kaberuka has served as Rwanda's Minister of Finance and Economic Planning, and has been widely acknowledged as the principal architect of the successful post-war reconstruction and economic reform program.
I would also like to welcome Ambassador Amina Ali of the African Union, Mr. Rob Mossbacher, President of the Overseas Private Investment Corporation, and several guests from the private sector, as well as USAID colleagues. We also have representatives here from important partners like Citibank, the Corporate Council on Africa, Deutsche Bank, the Japanese Bank for International Cooperation, State Department, and the International Finance Corporation.
As you will see and hear today, the MOU ushers in new and exciting partnerships in support of a critical component of Sub-Saharan African economic development: small and medium enterprises.
I would now like to invite Administrator Fore and Dr. Kaberuka to sign the MOU, and then we'll hear brief remarks. Thank you.
(The MOU is signed.)
ADMINISTRATOR FORE: Well thank you very much, Dr. Kaberuka. It is delightful to have you here with us today. We all look forward to working with you in this new partnership. Under your leadership, the African Development Bank is doing valuable work in poverty reduction and improving the living conditions in Africa. I am delighted that two great forces -- USAID and the African Development Bank -- are joining together to support entrepreneurs in Africa.
We are here today signing this Memorandum of Understanding that is between a number of our partners; it's a large public private partnership. It is launching this important partnership that will finance investments in African small and medium sized enterprises. Small and medium sized enterprises, as we know, create employment and are a critical component of economic growth.
The challenge facing small and medium sized enterprises, which are too small for commercial lenders, but too big for microfinance institutions, is that they remain underserved by the financial sector.
This collaboration between the African Development Bank and USAID will help such enterprises throughout Africa to gain access to needed credit, and will also provide them with technical assistance to improve their business development skills. Most importantly, we will work with a range of private banks using sound business practices to increase commercial lending to African entrepreneurs.
A key component of this collaboration is the issuance of joint credit guarantees by both USAID and the African Development Bank. There are two benefits to having joint guarantees.
The first is that joint guarantees will enable private local and multinational banks to lend to borrowers otherwise perceived as risky or lacking the collateral that banks expect in order to have access to commercial credit. By demonstrating to the market that small and medium enterprises are viable and profitable borrowers, private financial institutions will gain the experience necessary to continue lending without additional USAID-African Development Bank support.
The second benefit to joint guarantees is that USAID and African Development Bank will leverage each others' comparative advantage and enhance donor effectiveness on-the-ground. We believe that this activity is a good example of our efforts at a regional level to fulfill the Paris Declaration.
The USAID and African Development Bank partnership is an integral component of the African Entrepreneur Facility, which is a groundbreaking public-private sector initiative to support the growth of African small and medium sized enterprises.
The Africa Entrepreneurs Facility will assist African entrepreneurs in accessing capital necessary to invest in their businesses, allowing them to expand. And in turn, this expansion will spur job creation and will lead to sustainable economic growth. Access to this capital will be through joint loan guarantees. USAID will also contribute technical assistance to help African entrepreneurs develop bankable projects and obtain financing. Additional capital and finance will be mobilized through equity funds managed by the Overseas Private Investment Corporation.
The African Entrepreneur Facility is an important means for the United States Government and our partners, including the African Development Bank, to develop a vibrant private sector in Africa.
In preparation for the signing of this Memorandum of Understanding, USAID and the African Development Bank have almost completed the design of the West Africa regional guarantee.
USAID and the African Development Bank will partner with Ecobank, a large African-owned regional bank, to launch the West Africa regional credit guarantee to increase lending to African entrepreneurs. This will be the first concrete part of the new African Entrepreneur Facility.
The West African regional guarantee will mobilize $60 million dollars in small and medium sized enterprise investment in Nigeria, in Mali, in Cameroon, and in Ivory Coast. The regional guarantee is expected to increase the availability of financing for approximately 12,600 businesses, with women-owned businesses receiving at least 25% of these funds. The regional guarantee will support African entrepreneurs, working in the manufacturing, hospitality, and telecommunications sectors, as well as those that are export-ready.
This collaboration with the African Development Bank and the broader Africa Entrepreneur Facility answers the call of the Paris Declaration for donors to work more effectively with one another. This partnership is a prime example of how development organizations can build upon and reinforce one another's strengths. The result is a much-needed expansion of financial services for African entrepreneurs. And I am honored to have been one half of signing this Memorandum of Understanding which formalized a mutually rewarding relationship between USAID and African Development Bank. As many of you know, Dr. Kaberuka took the helm of the African Development Bank in September of 2005 and has guided the bank with steadfast leadership and grace. His extensive experience, as Kate has enumerated, in both the private sector, and as a leader in the banking industry, in trade and finance, and in international commodity business, as well as his dedication to service in government have proved an important asset to the African Development Bank and its beneficiaries. So thank you to Dr. Kaberuka for your service, for coming here today, and for being our partner. May I invite you to say a few words. Thank you.
DR. KABERUKA: Thank you very much, Henrietta. Good morning. I am delighted to be here today to officiate at this event in partnership with USAID and the American people in supporting the reduction of poverty in Africa through empowering the private sector. A vibrant African private sector is a key condition for economic growth on the continent that creates jobs, reduces poverty, and creates wealth. Over the last 6 years, we have been witnessing unprecedented economic growth on the continent. In spite of the turmoil in the global economy, I still expect our continent to grow by 6% and above next year. We have also witnessed the phenomenon that inequalities have been growing, and sometimes the perception has increased that the growth has not been shared. Now, part of the response to this is precisely what we are doing today. Support to small and medium businesses which represent 90% of private sector activity, and many of them owned by women, employ a large part of the region's workforce.
At the beginning of my term as the President of the Bank, I constituted a High Level Panel to advise us on how to tackle the emerging landscape of development challenges in Africa. In their report, the Panel calls on the Bank to concentrate its resources and efforts on four interlocking flagship areas, all essential for growth and economic integration: i) investing in infrastructure; ii) building capable states; iii) promoting the private sector, and iv) developing skills and knowledge. The report concludes that Africa can realize its potential only by reducing the enormous cost penalties which are borne by the private sector, particularly for transport and energy, which often wipes out the comparative advantages Africa might have in, say, lower labor costs. This is further compounded by shallow financial markets and lack of inclusive finance.
Our partial credit guarantee scheme which Henrietta just elaborated, will help us to reach small businesses, which are too large for microfinance and too small for the normal banks. What we are witnessing today is a start of a strategic partnership between the Bank and USAID which I expect to grow in the future. I look forward to collaborating with you in ensuring the success of this program. Thanks very much to you and your staff which have worked very hard on this program, and I look forward to its execution. Thank you very much indeed.
ASSISTANT ADMINISTRATOR ALMQUIST: Thank you all for coming this morning. May I invite you to enjoy some coffee. Thank you.