IFC and Bank of Africa Partner to Boost SME Lending in Fragile Central African States
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Published April 2, 2025
Guarantee Mechanism Aims to Unlock $60 Million in SME credit
A new initiative spearheaded by the International Finance Corporation (IFC), a member of the World Bank Group, in collaboration wiht Bank of Africa (BOA), is poised to substantially increase access to finance for small and medium-sized enterprises (SMEs) in Central Africa. The core of this project is a guarantee mechanism designed to mitigate the risks associated with lending to SMEs in fragile economies.
According to the IFCS latest project update, published on March 28, 2025, the final step before implementation is the formal signing of the agreement between the IFC and BOA. While the exact date of this signing remains unspecified, the project itself received board approval on June 28, 2024, signaling a strong commitment from both institutions.
Targeting DRC and Burundi: Addressing Financial vulnerabilities
The initiative specifically targets BOA subsidiaries in the Democratic Republic of Congo (DRC) and Burundi, operating through Boa Democratic Republic of Congo (DRC) and Bujumbura Credit Bank (burundi). These countries were selected due to their classification as fragile states grappling with the lingering effects of conflict, making them eligible for support from the International Progress Association (IDA).
The World Bank defines fragile and conflict-affected situations (FCS) as those where state capacity and legitimacy are limited, increasing the risk of instability and violence. These conditions often create significant barriers to economic development, particularly for SMEs.
Risk Sharing and Technical Assistance: A Complete Approach
The risk-sharing mechanism will operate for six years, with the IFC committing up to $30 million. This commitment will provide a partial guarantee, covering 50% of loans issued to SMEs by the participating BOA subsidiaries. This is projected to enable BOA DRC and the Bujumbura Credit Bank to collectively disburse up to $60 million in SME loans during the project’s lifespan.
Beyond financial support, the initiative includes a technical assistance program designed to bolster the capabilities of the two BOA beneficiaries. A key focus of this program is to enhance support for women-led SMEs,recognizing their crucial role in economic development and the unique challenges they often face in accessing finance.
DRC’s SME Financing Gap: A significant Challenge
The DRC faces substantial challenges in SME financing. The World Bank estimates the financing deficit for Congolese smes at a staggering $6.8 billion, representing approximately 19% of the country’s GDP.This significant gap underscores the urgent need for initiatives like the IFC-BOA partnership.
BOA RDC, with $267 million in credits granted in 2023, holds a mid-tier position in the Congolese banking sector. While the bank has launched new products aimed at SME financing as part of its financial inclusion efforts, detailed data on the precise volume of credit allocated to this segment is not readily available in its annual reports.Improved transparency in reporting SME lending would be beneficial for tracking the impact of such initiatives.
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