The African Development Bank alongside Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), African Trade Insurance Agency (ATI) and GuarantCo, on Wednesday entered into a Memorandum of Understanding 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 Co-Guarantee 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 mobilize 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, President of the African Development Bank 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 maximize the use of their products in Africa.”
These four initial partners are 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. The platform is open to more participants including official development institutions and the private sector.
This initiative will have a global outreach and aim 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.