AfDB, Others Launch De-risking Instrument
The African Development Bank alongside Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), African Trade Insurance Agency (ATI) and the GuarantCo, have entered into a memorandum of understanding (MoU) 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 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 mobilise 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, the President of the AfDB Group, Akinwunmi Adesina 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 maximise the use of their products in Africa.”
These four initial partners were 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.
According to the AfDB boss, the platform is open to more participants including official development institutions and the private sector.
The initiative was expected to have a global outreach and aimed 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.
Commenting on the initiative, 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), Dr. Bandar Hajjar, noted that the ICIEC, as a multilateral institution has a strong footprint in Africa with 23 member countries from within the continent and has been actively mobilising insurance and reinsurance capacity from the international market for Africa for the last 25 years.