African Development Bank, International Financial Institutions launch co-guarantee platform
The African Development Bank alongside Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), African Trade Insurance Agency (ATI) and GuarantCo, on Wednesday entered into a Memorandum of Understanding for a Co-Guarantee Platform (CGP). This initiative, the first of its kind and being promoted by the Bank, was signed on the first day of the Bank’s inaugural Africa Investment Forum in Johannesburg.
The Bank and its partners created the Co-Guarantee Platform for Africa, an innovative and collective de-risking instrument, to address the perceived high risk across the continent and the lack of capacity of traditional lenders to provide risk mitigation products for projects.
The platform is intended to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers in a market-responsible manner. The objective is to mobilize greater amounts of investment that would otherwise not take place in the region in the absence of affordable risk mitigation products. The Platform is expected to enhance the relevance of the respective institutions’ instruments in the Region by implementing joint risk mitigation transactions.
Speaking about the Bank’s rationale for the Platform, Akinwunmi Adesina, President of the African Development Bank Group said, “There are many guarantee providers that can offer various types of credit enhancement and risk mitigation instruments in Africa, but cooperation among them has been either non-existent or on an ad hoc basis. Hence the need for a more formal collaboration among guarantee providers to maximize the use of their products in Africa.”
These four initial partners are financial institutions with strong experience operating on the continent, keen to participate in order to cooperate and create synergies with other development and commercial institutions in an effective and market-responsive manner. The platform is open to more participants including official development institutions and the private sector.
This initiative will have a global outreach and aim at crowding in reluctant risk mitigation and credit enhancement providers across the world to make more projects happen in Africa- on more affordable terms for both African and foreign investors and lenders alike.
Dr. Bandar M. H. Hajjar, the President of the Islamic Development Bank Group, and Chairman of the Board of Directors of the Islamic Corporation for the Insurance of Investment & Export Credit, noted that ICIEC, as a multilateral institution has a strong footprint in Africa with 23 member countries from within the continent, and has been actively mobilizing insurance and reinsurance capacity from the international market for Africa for the last 25 years. ICIEC intends to avail its services, expertise and network to cooperate with the participants of the Co-Guarantee Platform, in order to structure collectively innovative risk mitigation solutions that will help to facilitate and mobilize funding capacity for medium and long tenor projects in Africa.
George Otieno, Chief Executive Officer of the African Trade Insurance Agency says “we welcome this initiative that was first suggested by the African Development Bank during the second meeting of the Abidjan Union held in 2017. As the membership of African states in ATI grows – in part thanks to the financial assistance of the African Development Bank - we believe that no single institution alone can provide the amount of risk mitigation required to catalyze Africa’s enormous infrastructure requirements. While ATI already works closely with the private insurance market, the recent insurance transaction concluded among the Bank, ATI and the private reinsurance market to insure a portfolio of the Bank’s non-sovereign financial sector loans in Africa, demonstrates the powerful impact cooperation among institutions can have on bettering the availability and terms and conditions of insurance in the region”.
Philippe Valahu, CEO, Private Infrastructure Development Group, said: “GuarantCo is delighted to participate in the Co-Guarantee Platform, particularly as it draws on our extensive experience in delivering guarantee and credit enhancement solutions in Africa. This initiative enables us to collaborate with institutions that share a similar vision as us; not only by recognising the deployment of capital and investment on the continent but, most importantly, by enabling local capital markets through risk mitigation solutions. We hope that the joint capacity, as created through this initiative, will result in more efficient information sharing, a better overview of risk across the continent and mobilisation of greater guarantee capacity”.