Introduction of Special Loan for African SMEs of China Development Bank
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.
(I) 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.
(II) 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:
农业水利灌溉设施/Agricultural Water Conservancy and Irrigation
(II)Basic Industries:
商业流通/Commercial Circulation
服务业/Service Industry
(III)Tertiary Industry:
出口外向型工业/Export-oriented Industries
建材业/Building Materials
深加工/Deep Processing
医疗卫生/Medicine and Health
节能环保/Energy Conservation and Environmental Protection
文化教育/Culture and Education
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.
(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.

(I)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.

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