The World Bank Group’s Multilateral Investment Guarantee Agency (Miga) has issued two guarantees to Standard Chartered to boost trade loans and corporate finance in Ghana and Zambia.
The guarantee for Ghana totals US$70mn, which Miga said will free up to US$307.6mn in new loans. An additional US$38mn guarantee in Zambia is set to unlock up to US$109.6mn in additional lending.
Both three-year guarantees cover the risk that reserves held by Standard Chartered subsidiaries at the countries’ central banks could be expropriated to address either nation’s financial concerns.
This will “reduce the risk-weights of the central bank reserves” and “generate headroom for additional lending, principally for trade finance and corporate finance”, according to Miga.
The new deals were inked at a ceremony in London on February 24.
Standard Chartered’s global head for development and agency finance, Faruq Muhammad, said the use of credit insurance structures allows the bank to “redeploy capital efficiently into high-impact projects, supporting local business growth without the need for additional capital outlay”.
“This helps us drive long-term value creation for the communities we serve.”
Both Ghana and Zambia are continuing to recover from macroeconomic troubles and sovereign debt restructurings. The former is also currently facing a deep crisis in its cocoa sector, one of its largest commodity exports alongside gold and oil.
Ariane Di Lorio, global head of Miga’s financial institutions group, said the agency’s guarantees to Standard Chartered “will significantly expand access to finance in Ghana and Zambia”.
“The additional lending they create will support bank resilience during a time of still-challenging market conditions in the two countries and enable greater private sector participation in growth.”
The deal announcement came on the same day as the World Bank’s private sector arm, the International Finance Corporation (IFC), signed a major US$6bn deal for insurers to share credit risk on its loans in a bid to stretch capital lending in emerging markets.
The new credit insurance facility, signed by IFC and a consortium of 19 global insurance companies – including Swiss Re, Allianz Trade, Liberty Group, Tokio Marine and AIG – will free up capital so IFC can “lend more to commercial banks and other financial institutions”, the World Bank said in a statement.
Under the programme, insurers can benefit from IFC’s due diligence when assessing projects, reducing the costs and delays associated with individual reviews in emerging markets, as well as a more efficient deal origination process.
The facility will support up to US$10bn in new loans and allow the IFC to “mobilise private credit insurance and expand access to finance for micro, small and medium-sized enterprises”, the institution said.
The policy comes amid a drop in aid donations from richer nations, including the US, the UK and Germany, to developing economies in recent years.
The transaction is one of the largest credit insurance facilities arranged to date by a multilateral development institution. It will also take the pool of credit insurance the IFC can draw on to a total of US$25bn under its Managed Co‑Lending Portfolio Program initiative, a key platform for injecting private capital into emerging markets.
“Small and medium-sized businesses are the engine of job creation, yet many in emerging markets still struggle to access the financing they need to grow,” said Makhtar Diop, IFC’s managing director.
“This facility shows how the World Bank Group is partnering with global insurers to expand lending to businesses in emerging markets, while giving insurers the opportunity to support economic growth and diversify their portfolios.”
