We have extensive experience supporting financial sector transactions. At the close of fiscal year 2013, financial sector projects accounted for 32 percent of MIGA’s gross exposure.
MIGA and the Financial Sector
Lack of long-term local funding has always been a major constraint on growth in developing countries. Local banks normally have access to short-term funding through local deposits, but long-term funds tend to be scarce and international banks are less inclined to take on longer-term risks due to the inherent instabilities in some emerging economies and the need to prudently manage their country limits.
MIGA’s investment guarantees are seen as an effective mitigant of country risk that allow banks to stretch their country limits to accommodate additional exposure. We can cover cross-border medium to long-term investments in the forms of equity to recapitalize subsidiaries, subordinated loans to boost Tier II capital, and senior shareholder loans to provide long-term liquidity for on lending to the real economy and to improve asset liability management.
MIGA can help banks by:
- optimizing country limits management
- reducing capital allocations for country risk
- easing access to financing and to more favorable rates
- safeguarding investments from effects of political turmoil in emerging markets
- improving credit ratings
MIGA is also recognized by the Basel Committee on Banking Supervision. The committee has agreed that supervisors may allow banks to apply a zero percent risk weight to claims on MIGA in accordance with the Basel II Framework.
We also support banks that are venturing for the first time into emerging markets, by providing investment guarantees for either greenfield operations or acquisitions that may accompany an expansion.
View MIGA-supported projects in the