World Bank Group launches $20 billion annual guarantee initiative

World Bank Group aims to boost guarantees to $10B this year, significantly expanding MIGA's $30B balance sheet.

The World Bank Group said on Monday it had started operating a new one-stop-shop loan and investment guarantee platform which it hopes will triple the provision of guarantees and risk insurance provided around the world to $20 billion a year.

The target, which it wants to hit by 2030 and which aims to lift investment in riskier areas from Africa to Ukraine, will combine key units of World Bank, International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).

Hiroshi Matano, MIGA Executive Vice President, told Reuters that the combination would see it start to back new innovative financing including carbon credits, debt-for-nature swaps and off-grid energy solutions in remote parts of Africa.

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 with guarantee products becoming more mainstream across the World Bank Group, there would be new uses developed for them, adding: "How you use it, I think it's where we can be really innovative and creative."

For context, the World Bank Group gave almost $6.5 billion of guarantees last year and is expecting to provide roughly $10 billion this year, so the target will see a huge expansion and swell MIGA's balance sheet which currently sits at around $30 billion.

Asked whether the annual amounts could even top the $20 billion target he added World Bank president "Ajay (Banga) wants us to be ambitious, so if there is demand, of course, we'll consider that."

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

The plan aims to simplify guarantee products into a single comprehensive menu that would allow clients to easily identify and select the instrument best suiting their needs.

A new common approach should standardize guarantee reviews, replacing a patchwork of different processes, rules and standards.