Date: Jan 01, 2010
SEAF-AGF has developed and implemented an effective means of financing companies in Afghanistan’s under-served, but vital, SME market segment. AGF provides loans with multi-year term to SMEs, often disbursed in tranches linked to the achievement of performance benchmarks. The interest rate or coupon is lower than bank lending rates. AGF secures adequate downside protection through advanced cash flow/credit quality assessment, asset appraisal and loan structuring, but is willing to be creative and obtain collateral or guaranties that banks could not accept.
SEAF-AGF has exceptional capability to perform pre and post-investment work with companies as a means of overcoming the challenges inherent in financing SMEs, including incomplete financial information, lack of strategic planning, informal corporate governance and asset ownership and needs for production and marketing know-how.
Overall, AGF financing has compelling advantages:
- AGF financing provides stability because the term of the loan is usually three to six years.
- AGF financing is based on expected cash flows and performance of the company so that collateral is a secondary parameter.
- The repayment schedule of the loan is adapted to the expected cash flows of the company, and the upside participation due to AGF at maturity will typically be paid as part of refinancing, without a change in control.
- AGF devotes specialized resources to building capacity in client companies pre-investment and after disbursement to increase company performance and to manage risk.
