A key criterion is financial and commercial viability. Compliance with the local regulator is also essential, as are high standards of corporate governance and management, as well as adherence to best practices as regards social and environmental protection. The following specific criteria apply and will be evaluated as part of an application:
Qualifying Financial Institutions (FIs) include:
- Small to medium sized commercial banks with units/divisions focused on funding SMEs and using various products and mechanisms, and/or with demonstrable SME financing ambitions (pipeline, business plan and/or other evidence);
- SME-focused national Development Financial Institutions;
- Non-Bank Financial Institutions involved in SME related financial products including
- Leasing (capital equipment, vehicles, etc.) companies specializing in funding SMEs capital requirements;
- Invoice factoring/disc ounting companies focusing on offering invoice discounting/financing facilities to SMEs business invoices;
- Mortgage companies specializing in the SME sector; and
- MFIs with a SME loan book and/or clear intentions to upscale to the SME target market.
Selection criteria include the following:
- Qualifying FIs shall meet adequate standards as regards profitability, capital adequacy, asset concentration and quality, corporate governance, shareholder structure (KYC criteria), management experience and quality, earnings consistency and quality and liquidity management policies, and comply with local Central Bank / regulatory requirements, all of which will be assessed through Due Diligence by AfDB.
- Qualifying FIs should have an internal definition of SMEs distinguishing the target group from other client target groups, and may include SME turnover, asset or employee size in the definition, in addition to loan size. This should be aligned to local (or internationally acceptable) SME definitions.
- Qualifying FIs shall have adopted an Environmental and Social Management System (ESMS) and /or be willing and committed to adopt an ESMS through Technical Assistance from the AfDB, and the ESMS system shall be categorized satisfactorily by AfDB prior to AfDB approval of the Line of Credit presentation to the Board.
- Qualifying FIs will be willing to adopt AfDB reporting formats including development outcome related parameters at sub-borrower level.
- Qualifying FIs shall be willing to address potential shortcomings in any of the above areas as identified through Due Diligence, which shall be incorporated in the Legal Agreement as a Condition Precedent before second disbursement, whereby the AfDB may consider providing Technical Assistance.
- Qualifying FIs shall have minimum of 3 years existence with minimum of 2 certified annual accounts.
These various selection criteria will be assessed based on information to be provided by the applying Financial Institution.