Mozambique Mutual Guarantee Fund Eyes New Capital for MSMEs
Mozambique’s Credit Guarantee Society is moving to bolster its financial reserves as it seeks to expand support for micro, small, and medium-sized enterprises (MSMEs) across the nation. Beatriz Freitas, the institution’s leader, revealed that a new round of funding or the creation of a second fund is expected within the next year.
Currently backed by a $120 million (approx. €105 million) allocation from the World Bank, the Mutual Guarantee Fund acts as a safety net for local businesses. By providing guarantees to commercial lenders, the fund encourages banks to provide credit to entrepreneurs who might otherwise be deemed too risky.
Rapid Growth and Zero Defaults
Since its launch last year, the fund has already supported approximately 630 companies through partnerships with Banco Comercial de Investimentos (BCI), Standard Bank, and Absa Bank. Despite the inherent risks of small business lending, Freitas noted a remarkable milestone: to date, not a single beneficiary has defaulted on their guaranteed financing.
“We are working with other partners,” Freitas told Lusa in an interview in Maputo. “While this project is funded by the World Bank, we have already received expressions of interest from donors and other financiers who want to collaborate on guarantees here in Mozambique.”
Driving Employment and Stability
The fund’s ultimate goal is ambitious: securing financing for 15,000 Mozambican companies and fueling the creation of over 20,000 jobs. However, Freitas acknowledged that geographical reach remains a challenge. While most operations are currently concentrated in the capital, Maputo, the institution is working to expand its footprint into every province.
Addressing common misconceptions, Freitas clarified that the fund is not a subsidy program. “The entrepreneur goes to the bank, and the bank provides the credit. We simply stand alongside the entrepreneur to take on the risk. We provide the guarantee, not the cash,” she explained.
Climate Resilience and Cheaper Credit
Looking ahead, the Credit Guarantee Society is exploring a specialized line of credit to protect businesses from Mozambique’s increasing vulnerability to extreme weather events. The goal is to provide a lifeline to companies struggling to recover from floods and other climate-related crises.
Freitas also highlighted the long-term potential for the fund to lower the cost of borrowing. As the mutual guarantee system matures and banks gain confidence in the mechanism, interest rates for guaranteed loans are expected to drop.
“Having cheaper money is vital when a company is starting out or looking to grow,” Freitas said. She expressed particular optimism for the agricultural sector, identifying it as the backbone of Mozambique’s future economic expansion. “Mozambique has everything it needs to grow, and agriculture is one of the sectors with the most potential here.”
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