(Ecofin Agency) - In Senegal, SMEs make up 98% of the economy, yet they only access 9% of available credit, largely due to the banking sector's reluctance to lend.

The African Guarantee Fund West Africa (AGF WA) has signed a CFA3 billion ($5 million) financing guarantee agreement with BGFIBank Senegal to support small and medium-sized enterprises (SMEs) in the country. The deal, finalized on October 21 in Lomé, Togo, will enable BGFIBank to offer over CFA6 billion in loans to Senegalese SMEs.

“With this guarantee, we are empowering BGFIBank to support more SMEs. Across Africa, SMEs are key drivers of job creation. Supporting them means preserving jobs, creating new ones, and helping reduce poverty,” said Sabine Lawson, Deputy Managing Director of AGF WA.

BGFIBank Senegal CEO Khady Boye Hanne explained that this partnership stems from a framework agreement established in 2022 with the BGFIBank Group in collaboration with the African Development Bank (AfDB). The agreement includes a total portfolio guarantee line of €50 million, expected to be channeled toward the group’s subsidiaries.

“SMEs make up 98% of our economy but only receive 9% of available credit. The AGF WA guarantee will help close this gap,” Hanne said.

SMEs in West Africa, including Senegal, face major hurdles such as lack of collateral, organizational challenges, and the financial sector's hesitancy to lend. In 2021, Senegal’s Ministry of Economy, Planning, and Cooperation estimated the country’s SME financing gap at over CFA800 billion.

Julie Oye, Head of Risk Management at BGFIBank Holding, noted that Senegal's growing oil industry has sparked the emergence of many new SMEs, further driving the need for financing.

AGF WA emphasized that this agreement marks just the beginning of a broader strategy to extend its guarantee solutions to other African countries.