AFRICA – The Dutch development banking group Entrepreneurial Development Bank (FMO) is poised to boost loan guarantees in Africa’s vulnerable countries through the Nasira program.
FMO plans to broaden the range of its pre-existing Nasira program, a financing tool dedicated to young women entrepreneurs in Sub-Saharan Africa and countries with border proximity to Europe.
By extending the program’s outreach, FMO hopes to enhance financial inclusion among Africa’s fragile population, according to the African Report.
First launched in 2018, Nasira represents a joint venture between the European Commission and FMO with the aim of boosting the lending capacity of banks and microfinance lenders, supporting them to lock sufficient capital to serve the underbanked and unbanked segments in Africa.
Through the program, the European Commission and FMO provide local African financial institutions with the means to tap into segments that are generally considered too risky, including migrant entrepreneurs such as refugees and internally displaced people.
Nasira’s basic premise is to pose as a guarantee for risky loan seekers when applying for bank loans or micro-loans.
Financial institutions are essential to tap into the “bottom of the pyramid” using microfinance, Hubb Cornelissen, Director at FMO told the African Report.
“An economy cannot develop without financial institutions. Access to financial services in Africa is far from what it should be,” he said.
Aiming to provide nearly US$527.45 million in collateral, Nasira guarantees close to 95% of loans issued in financial institutions benefiting from the program.
The European Commission provides US$79.12 million of the funding for the program while other international financial institutions provide US$421.96 million.
In addition to sharing the risks associated with issuing loans to subprime clients, FMO provides training and technical support for entrepreneurs and offers FinTech solutions.
It deploys the program in partnership with local banks such as Equity Bank and Sidian Bank in Kenya, and Sasfin bank in South Africa, according to the African Report.
The Dutch bank is eying sub-Saharan countries including the Democratic Republic of Congo (DCR) and Mozambique among others, Cornelissen told The Africa Report.
The program is currently valued at US$190 million and is set to reach the US$527.45 threshold by 2024.
The success of the program hinges on effective governance, Cornelissen underscored, noting that Asian and Latin American countries currently provide more enabling ecosystems than some African countries.
Approximately a third of FMO’s US$ 2.11 billion investments go to Africa, making the bank one of the continent’s largest Dutch investors. The figure is likely to grow in the coming years, Cornelissen told The African Report.
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