MIGA has already issued guarantees for two of ADC’s investments in Rwanda. These guarantees are supporting a capital increase in Banque Rwandaise de Development S.A. and an investment in SIMTEL, an electronic payment transactions provider.
WASHINGTON - The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group, has announced that it would help facilitate up to $150 million of investments to small businesses in sub-Saharan Africa as part of its ongoing response to the global financial crisis.
According to a statement from the World Bank offices in Kigali, the agency has entered into an innovative contract with the African Development Corporation (ADC), a business development company largely capitalized by German investors.
The contract, the first of its kind, will allow MIGA to provide political risk coverage for up to 20 of ADC’s planned small-scale investments in the banking, real estate, information technology, telecommunications, agriculture, and service sectors in countries throughout sub-Saharan Africa.
Rogers Kayihura, the Communications and External Affairs Officer World Bank Group, Rwanda said that, MIGA has already issued guarantees for two of ADC’s investments in Rwanda.
These guarantees are supporting a capital increase in Banque Rwandaise de Development S.A. and an investment in SIMTEL:, an electronic payment transactions provider.
In a signing ceremony held in Washington, Izumi Kobayashi, MIGA’s Executive Vice President, noted the new fund is particularly important in an environment where investor confidence is lacking. This blanket commitment of MIGA’s guarantee capacity will help ADC raise risk capital at a critical juncture.
The precipitous decline in foreign direct investment (FDI) is threatening to erode the significant gains in growth that the African subcontinent has seen in the last several years. These investments will benefit small and medium-sized enterprises which generate the vast majority of jobs.
MIGA’s contract governs the issuance of future guarantees for a maximum aggregate liability of $150 million. The risks covered include transfer restriction, expropriation, and war and civil disturbance. Hal Bosher, MIGA’s underwriter for the contract says the master contract will facilitate the rapid issuance of MIGA’s coverage.
Dirk Harbecke, ADC’s Chief Executive Officer explained that ADC is actively involved in the management and operations of the projects it supports. We believe there is significant high-growth potential in sub-Saharan Africa, and we are in this for the long term.
Transferring technical expertise and best practices in management and corporate governance to our investee projects is a fundamental aspect of our mission. Bosher says that MIGA was particularly interested in working with ADC because of their commitment to Africa’s sustained development. ADC’s value- added is that they invest substantial know-how together with capital.
These are the types of investments that will help drive innovation and growth.Kobayashi said the contract is one of several initiatives to address the financial crisis and help ensure liquidity in the financial sector.
MIGA expects that this guarantee structure will be replicated for other similar funds or investors seeking to attract capital in today’s difficult financial environment.
She pointed to MIGA’s recent support for investments into Russian and Ukrainian banks. “This is a global crisis and we need to do our part to help ensure there is financing available to spur innovation and help countries continue on a path of growth,” she said.
MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment into emerging economies to support economic growth, reduce poverty, and improve people’s lives.
MIGA fulfills this mandate by offering political risk insurance (guarantees) to investors and lenders, covering risks including expropriation, breach of contract, currency transfer restriction, and war and civil disturbance.
MIGA works actively with investors and host ountries, helping to resolve disputes before they reach a claims situation.