The report offers a business and operational overview, expected development results, and financial highlights from the period July 1, 2015 to June 30, 2016.
MIGA Summary Results
In fiscal year 2016, we issued a total of $4.3 billion in guarantees. Projects spanned across all regions and sectors, with 59 percent of projects falling into at least one of MIGA's four priority areas. At the end of the year, MIGA's gross exposure was $14.2 billion, of which 45 percent was in IDA countries and 10 percent in FCS countries. Of this, $7.5 billion was ceded to our reinsurance partners.
See the Highlights section for more information.
MIGA’s aim is to support economic growth, reduce poverty, and improve people’s lives. In order to achieve this, the Agency needs a clear understanding of the development outcomes of the projects it supports. MIGA’s Development Effectiveness Indicator System (DEIS) collects a common set of indicators from clients to demonstrate results across all projects: volume of investment catalyzed, direct employment, taxes paid, and value of locally procured goods. It also measures sector-specific indicators.
MIGA's $4.3 billion issuance in fiscal year 2016 is expected to support total project financing of $27.3 billion in public and private co-investments.
See the Development Results section for more information.
A Bethlehem Story of a Different Nature
Pharmaceuticals, renewable energy, cheese production, bottling, plastic manufacturing, and a date farm are all businesses that MIGA's West Bank and Gaza Trust Fund has supported.
A Bethlehem Story of a Different Nature:
MIGA Supports Small and Medium Business in Palestine
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This time of year, Bethlehem figures heavily on many peoples' minds around the world.
But likely not for pharmaceuticals.
MIGA Executive Vice President and CEO Keiko Honda was recently in Bethlehem visiting the MIGA-insured Beit Jala Pharmaceutical Company. MIGA issued guarantees to Beit Jala Pharmaceutical Company in July of 2014 to support the plant's expansion and addition of two new production lines: ampoules and eye drops.
Previously, there were no companies in Palestine that could produce pharmaceutical products in accordance with international standards due to the lack of technological knowledge, quality standards, and high investment costs.
Now, Beit Jala Pharmaceutical Company exports to Yemen, Jordan, Mauritania, and Eastern Europe. Thirty percent of the company's staff are women, including its CEO, Angele Zaboura.
Beit Jala was one stop in Honda's trip to Palestine, where MIGA has been administering a trust fund that allows the agency to support investment projects in the region, one of the most challenging for investment in the world.
Renewable energy, cheese production, bottling, plastic manufacturing, a date farm—these are the businesses that the West Bank and Gaza Trust Fund has supported through its provision of political risk insurance. MIGA administers the fund on behalf of its sponsors—the Palestinian Authority and the Government of Japan.
The fund was designed to facilitate small and medium size investments, with a special emphasis on projects with high employment-generating capacity.
Indeed, many of the the enterprises supported by the trust fund are keenly aware of their job-creation role in a region with crippling unemployment—and intentionally factor this into their business decisions.
The impact of MIGA-supported projects in the region is huge—not only in terms of jobs—but also in terms of technology transferred, products manufactured that service both local and export markets, and revenue generated.
On her trip, Honda also visited Jericho, where MIGA guarantees are now supporting one of the largest date farms in the West Bank and Gaza. The Nakheel farm employs 300 staff (of which 40% are women) and business is booming with exports to several countries including Turkey and the United States.
"What struck and inspired me is the resilience of the private sector amid such a high level of uncertainty and risks," said Honda. "MIGA has played a tangible role in encouraging investment and economic activity under the very hard conditions in Palestine."
She added, "This truly speaks to the heart of our MIGA's mission."
Interview with Côte d'Ivoire Prime Minister
Prime Minister Daniel Kablan Duncan discusses MIGA’s role in country’s post-conflict recovery.
Zambian Tilapia Business Proceeds Swimmingly
MIGA-insured aquaculture business in Zambia brings sustainable investment and solution to overfishing.
Zambian Tilapia Business Proceeds Swimmingly
February 09, 2015 —Zambians love their fish. Dried in cassava leaves or peanut sauce, boiled small fish, or fried tilapia—this staple of Zambians’ diet is an affordable source of protein. It also has been found in abundance in the country’s many lakes and rivers—until recently.
Now the country suffers from severe overfishing and Zambians can no longer get sufficient nutrition from the country’s bodies of freshwater that once teemed with life. This, coupled with an increase in demand for fish brought along by a surging population and higher incomes, has created excess demand that can no longer be met domestically. In fact, the situation is so dire that Zambia now imports 60 percent of its fish. Today, a walk through any of the country’s urban markets will find that most fish on display for sale is frozen and imported from Asia.
The Zambian government and civil society organizations have promoted small-scale aquaculture as a way to increase food security and better rural livelihoods. But this model has not gained traction due to lack of inputs and expertise, as well as the difficult cold-chain logistics involved.
Now, with the efforts of a company called Yalelo, the landscape is quickly changing.
After just two years since breaking ground, the company has employed more than 175 people, begun to farm an annual 7,000 tons of fish, and set new standards for sustainable fisheries in Zambia.
From here, Yalelo Chairman Adam Taylor has much higher aspirations. With 40 percent of all surface-fresh water in sub-Saharan Africa, “Zambia should be the fish-basket of Africa,” he notes. “We don’t want to just get to 100 percent domestic production; Zambia should be a net exporter.”
Taylor is also the Chief Investment Officer of Liongate Venture Partners, an investment firm that specializes in longer-term investment opportunities in Africa. MIGA issued a guarantee of $2.9 million covering Liongate’s equity investment into Yalelo. The coverage is for a period of up to 10 years against the risks of transfer restriction, expropriation, and war and civil disturbance.
Taylor underlines the importance of MIGA’s guarantees for their fundraising efforts: “MIGA’s insurance has played a big role in overcoming hesitations among many investors that we approach.” He continues, “These investors may be less familiar with Africa, but are certainly aware of the risks and are looking for ways to mitigate them.”
Doing Well by Doing Good
The philosophy underpinning Yalelo’s business is very much in line with the principles of impact investment. Tilapia is a native fish species that thrives on a diet of soybeans and maize—both plentiful in Zambia. The fishery on Lake Kariba is in a remote rural area, which means the company brings work to a population desperately in need of jobs. Yalelo has a strong commitment to environmental and social sustainability that includes a comprehensive environmental management plan and adherence to MIGA’s performance standards.
In a context where most workers have no education beyond primary school, Yalelo’s junior staff participate in vocational training on topics such as fish health and nutrition, mechanics, and computers. In addition, the company’s benefits accrue beyond their immediate staff: Yalelo leverages its purchasing power, logistics, and technical expertise to enable community participation in the sector’s growth through an extensive network of fish vendors and planned out-grower partnerships.
The City Ladies
It is four o’clock in the morning and approximately 50 women charge into Yalelo’s warehouse in Lusaka. They’re running at a brisk pace, overturning bins of fish to look for the best to sell to their customers.
These are the “city ladies” and they represent half of Yalelo’s business. Carrying heavy bags of fish—often 20 kilos each—they bring them to the market and to their individual customers who await them on a weekly schedule.
The rest of Yalelo’s supply goes to small and large stores through an efficient system of cold-chain transport. While the company supports its vendors through training and payment extensions, it also sells refrigerators with Yalelo’s branding at a third of the market price—or leases them for free.
Growth and Recognition
After just two years with the operation fully running, the company has already received an award from the Zambian government and the World Bank. Yalelo was voted the best company in Zambia for job creation, competing among 30 selected companies.
And as business booms in Zambia, Yalelo already has an eye to expansion in Kenya and Ghana. The company hopes to bring its technology, systems, and skills—as well as its impact investment model—to other countries where overfishing has become a broad concern.
About Political Risk Insurance
What is political risk insurance and how can it help investors mitigate risks when investing across borders?
What is political risk insurance?
Multinational enterprises and banks face a number of risks when conducting business overseas. Some of these risks can be removed or mitigated by conducting due diligence on the parties involved and on the economic viability of the proposed business. Other risks are harder for investors or lenders to predict. These include some commercial risks and, non-commercial—or political—risks. Political risk insurance (PRI) is a tool for businesses to mitigate and manage risks arising from the adverse actions—or inactions—of governments. As a risk-mitigation tool, PRI helps provide a more stable environment for investments into developing countries, and to unlock better access to finance.
Whether planning to establish a direct investment abroad or as exporters, multinational enterprises use PRI to enhance their confidence in markets perceived to be riskier than home markets. PRI allows investors to concentrate on the commercial aspects of investments, with the comfort that someone else—PRI providers—will help them avoid potential losses, or reimburse them in case of a covered loss related to political causes.
Even when investors are comfortable investing in emerging markets or frontier economies, they frequently face constraints from lenders. Lenders often must provision for country risk, and PRI may, in certain cases, reduce the provisioning requirement, and generally gives comfort to lenders. This can improve access to financing, including the amounts, interest, and tenor of loans.
Who provides PRI?
The political risk insurance industry helps multinational enterprises and lenders mitigate risk through insurance against adverse government actions or war, civil strife, and terrorism. Private PRI providers, which are profit-oriented, offer coverage for developing and developed countries and for varying tenors. Most public providers are national export credit agencies (ECAs), which may cover both export credit/trade transactions, as well as longer-term investments. ECAs usually support investors and lenders from their home country going into developing countries, and may also have mandates to support development and be self-sustaining. Finally, several multilateral agencies, such as MIGA, also provide PRI, these providers often have special programs for small and medium investors, companies, and banks from developing countries.
Coverages, pricing, tenor, and eligibility vary widely by PRI provider, host country (destination of the investment), and sector or type of investment. Investors and lenders are strongly encouraged to contact various providers to find the coverage most suited to them.
The Berne Union
The Berne Union, or officially, the International Union of Credit & Investment Insurers, is the leading international organization and community for the export credit and investment insurance industry. The Berne Union has more than 50 member companies spanning the globe. They share a Secretariat based in London.
The Berne Union actively facilitates cross-border trade by supporting international acceptance of sound principles in export credits and foreign investments and by providing a forum for professional exchanges among its members.
Since 2009, MIGA has published its
World Investment and Political Risk report, which examines general trends in the global economy and foreign direct investment, corporate perceptions of political risk and risk-mitigation strategies, as well as the latest developments in the political risk insurance industry.