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 FY23, MIGA’s support to FCS totaled $1.2 billion or 19% of the gross issuance, in respect of eight projects across five countries including Congo DRC, Ethiopia, Kosovo, Somalia and Ukraine. MIGA’s support in Ukraine includes the Agency’s first trade finance transaction, a $10 million first loss guarantee with EBRD, and two capital optimization guarantees that provided the necessary capital relief to financial institutions in their continued operations in the country.
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 January 2023, MIGA has issued a guarantee of $5.67 million to cover Kube Energy’s equity and debt investments in Kube Energy Somalia LLC for a period of up to 15 years against the risks of expropriation and war and civil disturbance. This is MIGA’s first project in Somalia, which became a MIGA member country in March 2020.
The project, developed by Kube Energy in collaboration with the government of the South West State of Somalia, and financed and further developed in partnership with CrossBoundary Energy, will establish the first hybrid solar power plant in Baidoa, Somalia.