Fragile and Conflict-Affected Situations (FCS)
Foreign investors have become willing to commit capital beyond their borders in recent years, but investment remains scarce in countries affected by fragility, conflict and violence (FCV). These fragile and conflict-affected situations (FCS) struggle to attract foreign capital because investors fear the worst: civil war, expropriation of assets, breach of contract, currency restrictions, etc.
MIGA’s mission is to get investment capital flowing into fragile countries so they, too, can benefit from the local industries that spring up when investors look abroad. MIGA does that by providing insurance against risks that are unique to FCS. Like investors, many private sector insurers are unwilling to underwrite projects in unstable places. Guided by expert, experienced staff, MIGA can cover these risks at reasonable cost.
MIGA at Work
MIGA’s underwriters are at work all over the globe. In FY20, the Agency issued guarantees for $495 million in support of 4 projects (9% of total projects supported) in 3 FCS countries—Kosovo, Nigeria and the Solomon Islands. In addition, several fragile states in Sub-Saharan Africa (the Democratic Republic of the Congo, Eritrea, Mozambique, Somalia, South Sudan, Sudan and Zimbabwe) were indirectly supported through MIGA’s guarantees to the Eastern and Southern African Trade and Development Bank (TDB).
Leveraging a Unique Role Within the World Bank Group
MIGA is stepping up its focus on FCV countries, guided by the World Bank Group Strategy for Fragility, Conflict and Violence 2020-2025. This extensive strategy, created through an inclusive stakeholder process, systematically brings a full suite of financing and expertise to address challenges in both low- and middle-income fragile countries.
The Agency’s efforts have been further boosted by the introduction of the $2.5 billion International Development Association (IDA) IFC-MIGA Private Sector Window (PSW) in IDA18. The IDA PSW extends credit to private companies that want to invest in fragile and conflict-affected situations (FCS). MIGA provides insurance to investors through the PSW, bolstering IDA’s offering there.
The World Bank Group’s aim is to make the window a one-stop shop for investors in FCS, and it’s just one of the ways that MIGA is helping the Bank Group do more each year to eliminate extreme poverty across the globe. Together with IFC, MIGA plays an important role in the PSW facility.
Examples of MIGA-Supported Projects in Fragile Countries
In March 2020, MIGA issued guarantees that will support the development, financing, construction, operation, and maintenance of the Tina River Hydropower Development Project in the Solomon Islands. The US$240.8 million project consists of a 15-megawatt (MW) hydropower plant and an associated 72-meter-high dam located on the Tina River, about 30 kilometers south-east of Honiara, the capital of the country. This project is the first utility-scale hydropower project to be developed in the Solomon Islands.
In July 2018, MIGA issued a guarantee of $5.2 million covering war and civil disturbance risks for equity investments by Messrs Mase and Sulayman Rikweda into the construction and operations of a new raisin processing plant in Afghanistan. The plant has an expected production capacity of 15,000 tons per year, and working with some 3,000 smallholder farmers in remote parts of the country, it will contribute to the development of a robust raisin export market.
MIGA's exposure for the project will be covered in part by the International Development Association (IDA) 18 Private Sector Window (PSW) MIGA guarantee facility's first loss of $2.1 million.