World Bank guarantees are powerful catalysts in attracting private-sector investment and commercial financing that can lead to strong development outcomes. Project-Based Guarantees and Policy-Based guarantees have helped clients mobilize private financing to support economic growth and improve public services.
World Bank guarantees:
- Provide access to international capital markets on more favorable terms
- Offer longer maturities and lower costs than achievable by the client on its own
- Mobilize larger volumes of development capital than the Bank can provide by itself
- Can help build a track record of credible policy performance for emerging market clients
Why do clients need guarantees?
Governments in developing countries are often limited in their ability to mobilize market capital or private investment. Debt financing through international capital markets is often a preferred option. Depending on the risk perception of the lender for a specific client (credit rating, market standing, etc.) guarantee can provide risk mitigation in in transactions that involve sovereigns and sub-sovereigns.
How does the World Bank support clients?
The World Bank provides guarantees to mitigate key government-related risks to enable financial viability and bankability, thus enhancing the credit quality of the client, to achieve acceptable or affordable terms.
Bank teams assists clients in designing, structuring, and arranging comprehensive credit enhancement solutions:
- Assessing client’s liabilities and financing needs
- Evaluating international capital and insurance markets and gauging investor appetite
- Structuring the transaction with market counterparts
- Supporting dialogue and negotiation with lenders and investors, including bidding
- Finalizing and executing the required documentation.
What are World Bank Guarantee products?
Project-based Guarantees support projects with defined development objectives, activities, and results in accordance with World Bank Investment Project Financing Policy.
World Bank credit guarantees (also called loan guarantees) cover the public sector borrower’s debt obligations to private sector investors. The Bank also offers payment guarantees to cover defaults on non-loan related government payment obligations to private entities and foreign public entities arising from contract, law or regulation. More information on Project-based Guarantees
Policy-based Guarantees are applied in the context of development policy operations where the World Bank supports a member country with their program of policy and institutional actions that promote growth and sustainable poverty reduction. More information on Policy-based Guarantees
What is the cost of World Bank Guarantees?
The pricing of IBRD and IDA guarantees includes several fees, and is determined based on the concept of loan equivalency with IBRD loans and IDA Credits, respectively. These fees are generally paid by the implementing entity in the case of project-based guarantees, and by the Government in the case of policy-based guarantees.
For more information about the IBRD Guarantees Program, click here.