Impact Fund Denmark has extended its state guarantee to the Rwandan bank BPR to USD 15 million following a successful trial scheme. This guarantee, provided directly by the Danish State, enables the bank to issue loans to companies and entrepreneurs who would otherwise be excluded due to lack of collateral.
Across Africa, many well-capitalized banks hesitate to lend because of high perceived risks and strict credit requirements. This particularly affects women, young entrepreneurs, and small and medium-sized enterprises, who often cannot provide the security traditionally demanded by banks. The Danish state guarantee addresses this gap by sharing part of the lending risk, allowing banks to expand credit while maintaining financial responsibility. The bank pays Denmark for the guarantee but gains the capacity to significantly increase lending.
Under the initial portfolio guarantee with BPR, part of the KCB Group, 93% of the guarantee framework was utilized within ten months. This resulted in 180 loans, totaling USD 12.4 million, with only seven loans in arrears and no claims made on the guarantee. The loans primarily benefited groups traditionally underserved by financial institutions, with 41% of borrowers being women and 19% young entrepreneurs.
Given the positive outcomes, Denmark increased the guarantee from USD 5.6 million to USD 15 million. The Rwandan experience demonstrates that state guarantees can be a powerful development tool, enabling banks to reach new customer segments, stimulate job creation, and foster local economic growth, while responsibly leveraging Denmark’s strong public finances in international development.
