Giving Compass’ Take:
• The author discusses the agency called MIGA, the Multilateral Investment Guarantee Agency, which is a small part of the World Bank Group responsible for providing political risk insurance to private investors for development projects.
• How can MIGA grow into the role and direction that the World Bank is heading toward– that being the ‘de-risking machine’?
• Read the major takeaways from the World Bank’s spring meetings.
Tucked away in a corner of the World Bank’s headquarters in Washington, D.C., sits the Multilateral Investment Guarantee Agency, the bank’s youngest, smallest, and least known agency.
But with the bank repositioning itself as a “de-risking machine” capable of crowding-in trillions of private finance to development projects, this long-overlooked agency may finally be coming of age. Celebrating its 30th birthday this year, the agency offers political risk insurance and guarantees to foreign private investors looking to enter emerging markets but worried about the risks.
As the need to find ways to “maximize” finance for development breathes new life into some of the bank’s historically controversial operating arms — notably the International Finance Corporation, which received its first major capital increase in 26 years last month — MIGA, too, looks set for a renaissance.
Honda, who is the former director of McKinsey & Company’s Japan office, attributes this to MIGA’s “exceptional operating model,” which has enabled the agency to turn $366 million in capital from 182 countries into a portfolio worth $20 billion — all with a staff of only 135, and an operating budget of $50 million a year.
MIGA’s mandate is to drive foreign direct investment toward projects aimed at alleviating poverty and boosting shared prosperity in emerging economies, in accordance with the bank’s twin goals. It does this by offering political risk insurance to investors, covering equity, loans, and loan guarantees against a host of government-related risks including expropriation and breach of contract, as well as war and civil disturbance.
It is geared toward investments in riskier markets. Currently, a third of MIGA guarantees are for projects in the world’s poorest countries; those which qualify for the bank’s concessional lending fund, the International Development Association.
Read the full article about MIGA by Sophie Edwards at Devex International Development
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