AfDB, other financial institutions launch co-guarantee platform
The objective of the platform is to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers across the continent.
The African Development Bank (AfDB) together with other financial institutions, including African Trade Insurance (ATI) Agency, have launched a Co-Guarantee Platform (CGP) to address the perceived high risk of doing business across Africa and the lack of capacity of the traditional lenders to provide risk mitigation products.
Touted as the first-of-its-kind, a Memorandum of Understanding (MOU) for the CGP was signed yesterday on the first day of the AfDB’s inaugural Africa Investment Forum (AIF), taking place in Johannesburg, South Africa, on November 7-9. Apart from AfDB and ATI, other parties to the MOU are the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) and GuarantCo, a credit guarantee company sponsored by the governments of Australia, Netherlands, Switzerland, Sweden and the United Kingdom – and is part of the Private Infrastructure Development Group (PIDG).
“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,” said Akinwumi Adesina, AfDB’s President. “Hence the need for a more formal collaboration among guarantee providers to maximise the use of their products in Africa.”
According to the AfDB, the CGP – which is an innovative and collective de-risking instrument – is open to more participants including development institutions and the private sector. The objective of the CGP is to mobilize greater amounts of investment that would otherwise not take place in Africa in the absence of affordable risk mitigation products. The platform would also increase the volume of insurance and guarantee solutions available to project sponsors and their bankers across the continent.
CEO of ATI, George Otieno, said there is no institution that can single-handedly provide the amount of risk mitigation required to catalyse Africa’s enormous infrastructure requirements.
“ICIEC intends to avail its services, expertise and network to cooperate with the participants of the Co-Guarantee Platform to structure collectively innovative mitigation solutions that will help to facilitate and mobilize funding capacity for medium and long-term tenor projects in Africa,” said Bandar Hajjar, Chairman of ICIEC and President of the Islamic Development Group.
The platform is expected to have a global outreach and it is 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.
The Africa Investment Forum is Africa’s premier marketplace dedicated to advancing projects to bankable stages, raising capital and accelerating financial closure of deals.
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