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World Bank Group Guarantee Platform
Context:
The World Bank Group has launched a new guarantee platform to enhance private sector financing for development, aiming to raise its guarantee volume to $20 billion by 2030.
Boosting Private Investment:
- This initiative is critical as developing countries need about $2.4 trillion annually until 2030 to tackle climate change, conflict, and pandemics.
- Bilateral donors and multilateral development banks alone don’t have the resources to match this need.
- Low- and middle-income countries face significant challenges in attracting private investment due to an insufficient risk-return ratio.
- Private sector’s involvement is crucial, but it requires improved funding structures, better risk allocation & innovative partnerships to engage effectively.
- This initiative aims to boost the World Bank’s guarantee volume to $20 bn by 2030, shifting its role from primarily lending to leveraging private capital.
Successful Case Studies: The platform will build on successful examples, such as:
- Political risk guarantees that supported Africa’s largest mini-grid project in Democratic Republic of Congo, providing sustainable electricity to over 28,000 households.
- Another example includes MIGA’s support for Senegal’s first electric bus rapid transit system, which is expected to significantly reduce carbon emissions.
World Bank Group Guarantee Platform:
- The new platform will be housed at World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).
- It brings together products and experts from the World Bank, International Finance Corporation (IFC), and MIGA for simplicity, efficiency and speed.
- It will act as a comprehensive hub for all World Bank Group guarantee operations, offering optimal guarantee solutions to address project requirements and development goals.
- It will offer three main types of guarantees:
- Credit Guarantees: For loans to public or private sectors.
- Political Risk Insurance: For private sector projects or public-private partnerships.
- Trade Finance Guarantees: To cover public sector risks.
- The initiative emphasises innovation in financing and aims to simplify access to guarantees.
- In fiscal year 2024, the World Bank Group issued approximately $10.3 billion in new guarantees, demonstrating the efficiency of these instruments.
- For instance, MIGA can mobilise $15 of private capital for every dollar of operating capital deployed.
- Importance: Launched in 2024, it centralises all guarantee products and expertise at MIGA.
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- It offers a streamlined range of solutions, making it easier for clients to choose the right instrument and enhancing investment security in developing countries.
- The platform simplifies processes, eliminates redundancies, and enhances accessibility by de-risking investments in developing countries.
World Bank:
Multilateral Investment Guarantee Agency (MIGA):
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