Currency risk hedging instruments are designed to provide investors protection against currency rate fluctuations. /T 161162 In case of a borrower´s default, subordinated debt is paid back after all other forms of debt are serviced. https://www.miga.org/investment-guarantees/overview. /Info 136 0 R 0 /Linearized 1 /Size 146 The instrument can be designed to address specific debt payment structures and risks in different project phases. Credit guarantees mitigate payment default risks for lenders and investors, enhance the creditworthiness of projects/issuances, and hence help to improve access to capital markets and to attract private capital. /ID [] 0000001169 00000 n New investments as well as investments associated with the expansion, modernization, improvement or enhancement of existing projects and privatization of state-owned enterprises. /Prev 161149 The Multilateral Investment Guarantee Agency (MIGA) provides a Political Risk Insurance instrument to protect investors and lenders of eligible projects and transactions against losses caused by political risks such as currency inconvertibility, transfer restriction, expropriation, war, terrorism, civil disturbance, breach of contract and non-honouring of financial obligations. This instrument is especially suited for financing infrastructure projects in developing countries where local currencies are non-convertible and are prone to depreciation. Explore different types of political risk insurance guarantees provided to investors and lenders. Expropriation of the asset: nationalization, confiscation, cancellation of operating license or contract, Political violence: war, terrorism, sabotage and civil disturbance. The World Bank's Multilateral Investment Guarantee Agency (MIGA): a. offers various forms of export insurance. >> e. offers various forms of political risk insurance. The guarantee can protect the entire amount borrowed or just part of it—called partial risk guarantee. Proudly created with Wix.com. /L 164027 %PDF-1.1 Political risk guarantees protect investors and lenders against political incidents that lead to interruptions or termination of the construction, operation and business activities, ownership and/or contractual relations of an infrastructure project. xref /H [ 710 336 ] For loans and loan guaranties, coverage of up to 95 per cent of the principal plus up to an additional 150 per cent of the principal to cover interest that accrues over the term of the loan. A liquidity facility provides back-up liquidity during the construction and operational phases of an infrastructure project that may face funding or revenue shortages. d. provides loans to developing countries. MIGA can cover equity investments, shareholder loans, shareholder loan guaranties, technical assistance and management contracts, asset securitizations, capital market bond issues, leasing, services, franchising and licensing agreements. 137 0 obj If a grant is used to partially fund a project or certain project phases, it can improve the credit profile of a project because future cash flows are freed up and do not have to be used to pay back the granted amount. 0000000017 00000 n It can be designed to cover various forms of debt, including bank loans, loans made by shareholders, loans guaranteed by shareholders or third parties, capital market debt instruments, bonds, financial leases, letters of credit, promissory notes and bills of exchange. << 144 0 obj The Multilateral Investment Guarantee Agency (MIGA) is an international financial institution which offers political risk insurance and credit enhancement guarantees. Local currency lending or financing addresses repayment risks resulting from foreign exchange volatility. Construction risk guarantees secure investors and lenders against risks that jeopardize the completion of construction works and commencement of operations of greenfield infrastructure projects. /Type /Catalog The Multilateral Investment Guarantee Agency (MIGA), established in 1988, is part of the World Bank Group. Multilateral Investment Guarantee Agency - MIGA: An organization established in 1988 by the World Bank and based in Washington, D.C. The Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) was submitted to the Board of Governors of the International Bank for Reconstruction and Development on October 11, 1985, and went into effect on April 12, 1988. MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more. The scope of political risks includes: Credit guarantees cover debt service obligations by a borrower on the guaranteed principal and interest to be paid to lenders. /E 4304 endobj 145 0 obj Its mandate is to promote and encourage foreign investment into its developing member countries by providing political risk insurance and by providing technical assistance for investment promotion.1 As of January 1997 MIGA These guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries. In FY20, MIGA issued nearly US$4 billion in new guarantees, helping … /Root 137 0 R /Filter /FlateDecode << MIGA’s mandate is to promote cross-border private investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders. MIGA’s status as a member of the World Bank Group and its relationship with shareholder governments provides additional leverage in protecting investments. Grants are not termed as credit enhancement instruments traditionally but can function as an “internal” credit enhancement instrument. x�c```f``:��������� Fragile and Conflict-Affected Settings (FCS), Currency Inconvertibility and Transfer Restriction. /O 138 0000000651 00000 n << 0000002956 00000 n 0000000710 00000 n The Convention was amended by the Council of Governors of MIGA effective November 14, 2010. %���� By disbursing the debt in local currency instead of a globally tradable currency, the value of assets and liabilities can be aligned in an optimum manner. >> %%EOF The project then becomes more attractive to private investors and can seek to borrow on cheaper financing terms. MIGA also insures cross-border investments. MIGA can currently issue up to USD 250 million of coverage on its own account for a single project and can cover significantly higher amounts through reinsurance arrangements. Learn about the progress MIGA is making in its mission to support economic growth, reduce poverty and improve people’s lives. MIGA insures investments into a developing member country made by investors located in any MIGA member country. 0000001046 00000 n startxref /S 376 Almost every nation is a member of MIGA (181 countries). /N 43 b. offers various forms of import insurance. Currency fluctuations constitute a material risk if loan payments must be issued in a currency that is different from the project’s revenues. Credit guarantees can be provided to different issuers, such as private and public sector projects (limited recourse financing), public–private partnerships, corporates and (sub-) sovereign entities. The Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) was submitted to the Board of Governors of the International Bank for Reconstruction and Development on October 11, 1985, and went into effect on April 12, 1988. Subordinated or junior debt, such as loans or contingent facilities, rank below other types of loans and securities concerning claims and liabilities on assets and revenues. Currency risk guarantees can also be designed as fixed cross-currency swaps or inflation-linked cross-currency swaps. Investing into the project becomes less risky for lenders and investors.