Years of conflict can color investors’ perceptions of risks, particularly those of a noncommercial nature. A survey of foreign corporate investors conducted by the Multilateral Investment Guarantee Agency (MIGA) in 2013 found that political risk was by far their principal concern when investing in developing countries. MIGA was created in 1988 to encourage FDI in its developing member countries by providing political risk insurance for developmentally sound projects, including those in the most challenging environments.
Over the years, MIGA has played an important role in conflict-affected and fragile economies, providing coverage where other insurers are often not willing or unable to go. The World Development Report 2011 finds that investment and private sector engagement are important for creating economic opportunities and reducing the risk of relapse into conflict. But, because of perceived risks, these essential projects are often hindered by the inability of investors to secure financing including equity participation and long-term lending from commercial banks. The presence of a MIGA guarantee can help make an investment more attractive to potential investors and lenders by lowering its overall risk profile. Equally important, the projects supported by MIGA create confidence among the international and domestic business communities, helping to attract even more investment and encouraging the return of flight capital. Explore this brief in Arabic, and French.