The Board of Directors of the African Development Bank Group (AfDB) through its private sector window approved on March 2, 2015 a US $3 million line of credit (LoC) equivalent in the local currency (Zambian Kwacha) to Madison Finance Company Ltd.
Madison Finance Company (MFC) is a rapidly growing financial institution targeting local small and medium enterprises (SMEs) in Zambia by offering various financial products and services such as term loans, leasing, invoice discounting and insurance. MFC is gradually increasing its SME portfolio share targeting 30% by end 2015, with plans to reach 40% by 2016 and aims to serve 6,000 Zambian SMEs by 2017.
The AfDB LoC will enable MFC to reach SMEs across a wide range of sectors including trade, agriculture, construction, manufacturing and hospitality and services. The facility is expected to support at least 1,000 SMEs, including 500 female-owned businesses, over the project period. Leveraging the medium tenor of the AfDB facility, it is expected to increase the average loan size and tenor for SME clients who can consequently invest towards enhancing their productive capacity and undertake capital investment, rather than using loans solely for working capital financing purposes. In addition to the LoC, MFC will benefit from technical assistance supported by the Fund for African Private Sector Assistance (FAPA) and governments of Japan and Austria.
This project falls under the AfDB's Africa SME Program. Approved by the AfDB's Board of Directors in July 2013, the Africa SME Program is a four-year, US $125-million funding program combined with a US $3.98-million technical assistance package granted by FAPA. The goal of the Africa SME Program is to provide medium to long-term finance and technical assistance in order to address constraints faced by financial institutions and their SME clients across Africa. The Africa SME Program will avail further longer-term resources to thousands of SMEs, including businesses owned by women and youth, thus contributing to job creation, poverty reduction and inclusive growth on the continent.
About the Fund for African Private Sector Assistance
The Fund for African Private Sector Assistance (FAPA) is a multi-donor thematic trust fund that provides grant funding for technical assistance and capacity building to support implementation of the Bank's Private Sector Development Strategy. The Government of Japan, African Development Bank, the Austrian Development Bank and the Government of Austria are the contributors to the fund, which to date has provided US $42 million to 47 projects across the African continent. The FAPA portfolio includes regional and national projects in sectors such as business enabling environment, financial intermediation, infrastructure, trade and micro, small and medium enterprises.
