Very often faced with the difficulties of obtaining different types of financing from financial institutions and other providers of funds due to the aggravation of the risk of business default, small and medium-sized enterprises (SMEs) and associations can now rejoice of the agreement signed between SFE and Africa Ratings for the recapitalization of SMEs in Central Africa.
Salam Financial & Exchange SA, a microfinance institution with 2e category, and the rating agency Africa Ratings initialed the 1er February 2023 in Libreville, an agreement on the methods of capitalization and recapitalization of small and medium-sized enterprises and associations. This partnership provides a solution to the difficulties faced by African SMEs in obtaining different types of financing from financial institutions and other fund providers.
For small businesses, equity and debt are central issues. In the event of low funds, they are particularly exposed to economic hazards, as is the case for example with the health and economic crisis caused by the coronavirus. For their activity to continue over time, recapitalization is sometimes necessary. It is an operation consisting, for a company, in reinforcing its own funds when they reach a very low level and have a major impact on the exercise of the activity and growth.
There are many solutions for recapitalizing small businesses: state-backed equity loans, fundraising, merging with another company, etc. As part of the SFE and Africa Ratings partnership, it is proposed to open a escrow account (a sub-account) for recapitalization mobilizing the own resources of willing companies. This account, exempt from management fees by SFE, is intended to provide guarantees for the financing of SMEs and associations, but more than that, it will help to lower the cost of risk for the establishment and increase the confidence of the whole. partners, by strengthening the company’s equity.
“The solution proposed by the SFE and Africa Ratings consists of the SME, the association or the project leader opening an escrow account with the SFE that it will fund at its own pace. Coupled with the effects of rating and classification, the SME through a matrix will know what level of credit it can access. Example, if the SME is classified as enterprising and it has a rating of B which is excellent because we rate from A to F, F being the lowest, it could have access to 150% of the amount it has in recapitalization , you see that automatically, the uncertainties are removed and the SME determines its capacity to have access to credits, because the better it manages, the more it will increase the capital in its recapitalization account, the more it increases the amount of its claims“, explained the CEO of Africa Rating, Wilfried Akendengue.
For the managers of the financial institution SFE, access to financing for SMEs and associations with their structure will henceforth be a certainty and no longer a hypothesis, because Africa Ratings will combine the reconstitution of equity, the provision of information related to their size and rating. “The signing of this partnership confirms, once again, our commitment to give access to financial services to as many people as possible and to work to reduce the perception of risk of SMEs and associations with a view to better positioning in their market“, they indicated.
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