Introduction of the special loan for the development of African SMEs
At the Fourth Ministerial Conference of Forum on China-Africa Cooperation,
H.E.Mr. Wen Jiabao, Premier of the State Council of the People’s Republic of China,
announced Eight New Measures to strengthen China-Africa cooperation, among
which the third measure is to help Africa build up financing capacity, and “support
Chinese financial institutions in setting up a US$1 billion special loan for small
and medium-sized African businesses”
As a member of Chinese Follow-up Committee of Forum on China-Africa
Cooperation, CDB actively prepares and sets up the special loan of US$1 billion for
the development of African SMEs. (Hereafter referred to as “the Loan”)
By the end of Jan. 2012, CDB had signed special loan contracts of
US$ 633million, cumulatively extended US$278 million, and committed
US$ 774million to various projects. It is also following up projects worth over
US$ 1454 million. The Special Loan business covers 29 countries including Kenya,
Angola, Morocco, South Africa, Nigeria, Ghana, Mozambique and Ethiopia, etc. The
projects supported by the loans have directly and indirectly created 10,200 and over
390,000 local job opportunities respectively, promoted China-Africa trade volume
over US$ 311 million. To speed up the implementation of the Loan, we introduce the
relevant content as follows:
I. Principles for the Operation and Main characteristics of the Loan
(I) Principles for the Operation of the Loan
Focus on providing financing support to African SMEs. Strengthen traditional
friendship between China and Africa. Cooperate to yield a mutual beneficial result
and establish a win-win relationship. Benefit the African continent through market
operations.
(II) Main characteristics
Government Background: Chinese government. CDB intends to help African
SMEs ease the financing difficulties, and then to deepen the cooperation between
China and African countries.
Commerciality: The Loan is not governmental aid funds. CDB will follow
commercial principles, and set the price according to the importance of the project,
the credit rating of the borrower and the result of project risk assessment, etc.
Universality: CDB would carry out the Loan according to the realities of each
country and complying with the principle of “One Country, One Policy”, to seek to
benefit every African country.
Flexibility: The Loan aims to meet various financing needs of SMEs. The loans
could be fixed assets loans or liquidity loans with tenor of no more than 5 years;
currency of the loans can be U.S. dollar, Euro or RMB; floating or fixed interest rate
can be adopted; drawdown and repayment schedule could depend on negotiation.
II. Acceptable Standard of African SMEs
The Loan is provided by CDB under the framework of the Forum on
China-Africa Cooperation with the purpose of broadening the financing channels of
SMEs, vitalizing local economy, creating employment opportunities, enlarging trade
volume and increasing people’s living standard. The Loan is available to all qualified
African SMEs.
Acceptable Standard of African SMEs:
The standard of SMEs set by related department of local government
The standard of SMEs set by local market
Being recognized as local SMEs by related department of local government
The standard in countries of similar economic development level in the same
region
The standard set by relevant regional financial institutions
III. The Two Basic Operational Models of the Loan
Platform-lending and Direct Lending are two models of the Loan.
(1)Platform-lending
Government-approved financial institutions or other eligible institutions of
the host country will be chosen as platform-lenders shouldering the
responsibility of final repayment. CDB would extend proper credit lines to
platform-lender, to whom local SMEs could apply for credit line. Once approved,
the application should be reported to CDB by the platform-lender for ratification,
after which the loan could be disbursed.
(2)Direct Lending
The locally incorporated enterprises or their holding entities can be
borrowers shouldering the responsibility of final repayment, to whom CDB
directly issues loans.
IV. The target sectors the Loan supports
(I) Infrastructure：
Power
Agricultural Water Conservancy and Irrigation
Transportation
(II) Basic Industries：
Commercial Circulation
Service Industry
(III) Tertiary Industry：
Export-oriented Industries
Agriculture
Building Materials
Deep Processing
Medicine and Health
Telecommunications
（IV） OTHERS：
Energy Conservation and Environmental Protection
Culture and Education
V．Recommendations
To fully reflect the Loan’s policy background, relationships between CDB and
the relevant government department in charge of SMEs or the department of
commerce can be established in the assistance of the Economic and Commercial
Counsellor’s Office of Chinese Embassies, winning local government’s attention and
recognition of the Loan. African governments can recommend financial institutions as
candidates for platform-lenders or projects with decent government attention, political
significance and social benefits, the ultimate borrowers will be determined by CDB’s
assessment results.
You can get information about the Loan applications by contacting CDB mission
group in your country.
VI. CASE
（I）Cases for Platform-lending
The Equity Bank $50 million platform-lending project
The Equity Bank of Kenya (EBK) is the leading micro-finance lender of the
country and even of the whole Africa. CDB has chosen EBK as platform-lender in
Kenya. Tea is Kenya’s second largest export product, supporting tea processing
industry is significant to revitalizing local economy, creating jobs and stimulating
exportation. By now, CDB has issued US$50 million in loans to EBK. The loan
supported Mataara Tea Factory Expansion Project, Kapkoros Tea Factory Project,
Jetlink Logistics Project and etc. This platform-lending project has great significance
of vitalizing local economy, creating employment opportunities, enlarging trade
volume.
The West African Development Bank $60 million platform-lending project
West African Development Bank is UEMOA’s sub-regional development
financing institution, covering eight western African countries. CDB provided €60
million of the Loan to support SMEs in the region of UEMOA.
（II）Cases for Direct Lending
Wonder Lighting Egypt Co. Direct Lending Project
Wonder Lighting Egypt Co. is a private company invested by Shanghai Wonder
Lighting & Machine Co.,Ltd. Its investment in Africa is approved by the Ministry of
Commerce of China and ShangHai Municipal Commission of Commerce. The
Wonder Lighting Egypt Co. is mainly involved in manufacturing, producing and
marketing of a variety of light bulbs, fluorescent lights and energy-saving lamps. Two
factories have been built and put into operation in Egypt, with an annual production of
7.5 million light bulbs, 1.5 million fluorescent lights and 1.5 million energy-saving
lamp electronic board, which effectively alleviated Egypt’s dependence of electric
light products’ importation and created 200 jobs. In October 2010, CDB disbursed
US$1 million of the Loan to Wonder Lighting Egypt Co. for the procurement of raw
materials and day-to-day production and operation. Up to now, the project is operating
well and enters the repayment period.