Mozambique gears up for $120M Mutual Guarantee Fund for SMEs

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Mozambique gears up for $120M Mutual Guarantee Fund for SMEs

2:04 CAT | 28 Feb 2024

File photo: Lusa

The Government of Mozambique is finalising the launch of a US$120 million Mutual Guarantee Fund, to provide credit lines for small and medium-sized companies.

In the document accompanying the balance of the Economic and Social Plan and State Budget for 2023 in the fourth quarter of the year, prepared by the Ministry of Economy and Finance and to which Lusa had access on Wednesday, the executive announces “the finalisation of the draft decree creating the fund”, for “subsequent submission to the Council of Ministers, for its approval”.

“The preparation of the business plan for the operationalization of the fund is also being concluded,” the document also reveals, recalling that the intention to create the Mutual Guarantee Fund was approved in April, 2023, after being proposed by the World Bank, which is to finance it with US$120 million (€110.5 million), under its US$300 million “More Opportunities” project.

“This amount will be channelled to small and medium-sized companies in selected sectors, in order to enable them to access credit lines which will allow them to leverage their businesses,” the government explains in the document.

Meanwhile, a feasibility study on the creation of the Mutual Guarantee Fund – which was “presented to the country’s main banks” – has already been completed.

The authorities add that “an exercise was also carried out on reference markets in Brazil, Cape Verde and Portugal, aiming to improve operational aspects of the fund” and viability based on specific cases.

The objective of the fund, as previously explained by Minister of Economy and Finance, Max Tonela, is to allow national banks to make financial resources available to strengthen investment capacity at interest rates “more accessible to micro, small and medium-sized companies operating in the sectors of agriculture, fish farming, agricultural marketing and processing, tourism and housing”.

“Access to credit results in the growth of the private sector. This growth benefits the economy, benefits the country and, automatically, benefits the banks,” Minister Tonela said at the time.

Source: Lusa