World Bank Group Launches $20 Billion Annual Guarantee Initiative

The World Bank Group announced Monday that it has launched a new loan and investment guarantee platform that it hopes will triple the provision of guarantees and risk insurance around the world to $20 billion a year.

The goal, which it wants to achieve by 2030 and which aims to increase investment in higher-risk regions from Africa to Ukraine, will bring together key units of the World Bank, the International Finance Corporation (IFC) and the Multilateral Organization Investment Guarantee Agency (MIGA).

Hiroshi Matano, Executive Vice President of MIGA, told Reuters that the combination will begin to support new innovative financing, including carbon credits, debt-to-nature swaps and off-grid energy solutions in remote areas of Africa.

The guarantees could also be used to attract private sector investors to provide “take-out” financing to replace standard World Bank or IFC loans, freeing up overall lending capacity.

He said that as guarantee products become more mainstream at the World Bank Group, new uses for them will develop, adding: “How you use them, I think that’s where we can be really innovative and creative.”

For context, the World Bank Group gave almost $6.5 billion in guarantees last year and expects to provide about $10 billion this year, so the goal will see a huge expansion and swell MIGA’s balance sheet, which currently stands at about 30 billion dollars.

Asked if the annual amounts could even exceed the $20 billion target, the World Bank president added “Ajay (Banga) wants us to be ambitious, so if there is demand, of course, we will look at it.”

The changes are the first tangible results from a group of private sector investment executives brought together by Banga last year, called the Private Sector Investment Lab, to develop ideas to draw more private capital into clean energy and other investments in developing countries.

The plan aims to simplify warranty products into a single comprehensive menu that will allow customers to easily locate and select the instrument that best suits their needs.

A new common approach should standardize warranty reviews, replacing a patchwork of disparate procedures, rules and standards.