MIGA Increases Guarantee to Enhance Economic Activity in Ukraine
WASHINGTON, June 21, 2023 – The Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group has increased a guarantee to ProCredit Holding AG & Co. KGaA of Germany (ProCredit) originally issued in 2020. The guarantee covers ProCredit’s equity investments in its subsidiary, ProCredit Bank JSC, Ukraine (ProCredit Ukraine), against the risk of expropriation of mandatory reserves held at the country’s central bank. The existing guarantee has been increased from €17.10 million to €40.85 million, maintaining the length of the guarantee to December 2025.
The increased guarantee is the first project to tap into the Support for Ukraine’s Reconstruction and Economy (SURE) Trust Fund. The fund was started with a $23 million donation from Japan to allow MIGA to provide trade finance guarantees, insurance on bank reserves during the conflict, and political risk insurance to support reconstruction after the war.
The war between Russia and Ukraine has resulted in a severe humanitarian and economic toll in Ukraine. The country is experiencing fiscal financing pressures, disruptions to trade, displacement of millions of people, and heavy infrastructure damage with potentially long-lasting macroeconomic and social effects. The situation remains highly uncertain. At this point, estimates for the recovery and reconstruction efforts in Ukraine exceed $411 billion.
“MIGA’s ability to provide a capital optimization guarantee during a war will help ProCredit address some immediate constraints under challenging circumstances,” said Hiroshi Matano, Executive Vice President of MIGA. “Small and medium-size businesses will obtain access to urgently needed working capital. The agricultural sector will benefit from financing so it can continue exporting grains to the world. In addition, Ukrainians will be able to rely on essential banking services.”
Local regulations mandate that ProCredit Ukraine maintain a minimum amount of mandatory reserves with the National Bank of Ukraine. Risk weights are applied to these mandatory reserves when consolidated at the group level, resulting in capital consumption for ProCredit. MIGA’s capital optimization guarantee reduces the risk weight applicable to the mandatory reserves to zero, thereby enabling ProCredit to use the freed-up capital to support its operations in Ukraine.
The MIGA guarantee increase of up to €23.75 million will allow ProCredit Ukraine to optimize its existing equity, continue offering much needed banking services during the war, and potentially generate new loans to its existing clients.
“The MIGA guarantee increase is another example of the excellent collaboration between MIGA and the ProCredit group based on shared principles and values,” said Hubert Spechtenhauser, Chair of the Management Board of ProCredit General Partner AG. “The guarantee increase will support our operations in Ukraine, and we see ourselves very well positioned to continue working with our clients now as well as during the reconstruction of the country.”
The increased MIGA guarantee aligns with the World Bank Group’s response to the crisis in Ukraine. As part of the guarantee, ProCredit has committed to complete gender training for the staff in Ukraine, making this the first MIGA gender-flagged project in an active conflict area.
About ProCredit Holding AG & Co. KGaA
ProCredit Holding AG & Co. KGaA, based in Frankfurt am Main, Germany, is the parent company of the development-oriented ProCredit group, which consists of commercial banks for small and medium enterprises (SMEs). In addition to its operational focus on South Eastern and Eastern Europe, the ProCredit group is also active in South America and Germany. The company’s shares are traded on the Prime Standard segment of the Frankfurt Stock Exchange. The core shareholders of ProCredit Holding AG & Co. KGaA include the strategic investors Zeitinger Invest and ProCredit Staff Invest (the investment vehicle for ProCredit staff), KfW, the Dutch DOEN Participaties BV and, since very recently, the European Bank for Reconstruction and Development. As the superordinated company in accordance with the German Banking Act and as parent financial holding company of the ProCredit financial holding group, ProCredit Holding AG & Co. KGaA is supervised on a consolidated level by the German Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank. For additional information, visit: www.procredit-holding.com.
ABOUT MIGA
MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment in emerging economies by helping to mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war and civil disturbance; and offering credit enhancement to private investors and lenders.
Since its creation, MIGA has issued over $70 billion in guarantees across 123 developing countries in support of more than 1,000 projects.
Contacts:
In Washington:
Elizabeth Howton, (202) 458-5922, ehowton@worldbankgroup.org
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