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 (ICIEC), 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 (ATI) 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”.
About the African Development Bank Group
The African Development Bank (AfDB) Group is the premier development finance institution in Africa with a mandate to spur sustainable economic development and social progress in the continent, thereby contributing to poverty reduction. The Bank Group achieves this objective by mobilizing and allocating resources for investment in the continent; and providing policy advice and technical assistance to support development efforts. The African Development Bank's authorized capital of around US$100 billion is subscribed to by 80 member countries made up of 54 African countries and 26 non-African countries. www.afdb.org
About Islamic Corporation for the Insurance of Investment Export Credit (ICIEC).
ICIEC is a member of the Islamic Development Bank (IsDB) Group. ICIEC was established to provide investment and export credit insurance solutions compliant with Shariah principles and also to strengthen the economic relations between member countries of the Organization of the Islamic Cooperation. ICIEC´s Investment Insurance Solutions for banks and financial institutions provide protection against losses caused by non-commercial risks such as political risks and non-honouring of financial obligations by the sovereign or sub-sovereign www.iciec.com
About Africa Trade Insurance Agency (ATI)
ATI is a multilateral institution established in 2001 with its headquarters’ in Nairobi, Kenya. Its mandate is to promote and develop trade and investments for, and within, African countries by offering credit and political risk insurance solutions. ATI has 23 shareholders, including 14 African member countries and nine institutional shareholders, including the AfDB. ATI offers a range of insurance products, including Breach of Contract Insurance, Liquidity Support, Political Risk Insurance, Commercial Credit Insurance, and Surety Bonds and Counter-Guarantees. As of YE 2017, ATI had supported US$35 billion in trade and investments across Africa. Since 2008, ATI has maintained an ‘A’ stable rating from Standard & Poor’s. www.ati-aca.org
About GuarantCo (GuarantCo)
GuarantCo was established to mobilise local currency investment for infrastructure projects and support the development of financial markets in lower income countries. GuarantCo is part of the Private Infrastructure Development Group (PIDG). GuarantCo is supported by the governments of the UK, Switzerland, Sweden, the Netherlands and Australia and is rated AA- by Fitch and A1 by Moody’s. www.guarantco.com