MIGA Partners with U.S., U.K. Development Agencies to Support Ukraine, Increases Guarantee to Boost Banking Sector
- U.K. contribution to MIGA’s SURE Trust Fund will assist in trade and reconstruction efforts.
- MIGA’s expanded guarantee will help small and medium enterprises and the agricultural sector.
- MIGA and the International Finance Corp.’s expanded trade finance agreement will include Ukraine.
- MIGA and U.S. International Development Finance Corp. will increase collaboration on Ukraine projects.
LONDON, June 21, 2023 – The Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group announced new actions to aid Ukraine, agreed today on the sidelines of the Ukraine Reconstruction Conference in London:
- The Foreign, Commonwealth & Development Office (FCDO) of the United Kingdom has contributed up to £20 million to the Support for Ukraine’s Reconstruction and Economy (SURE) Trust Fund established by MIGA.
- MIGA has increased a guarantee to ProCredit Holding AG & Co. KGaA of Germany (ProCredit) originally issued in 2020 to support the bank’s financing activities for small and medium-sized businesses and the agricultural sector in the country.
- With the International Finance Corp., MIGA is providing $20 million in support for trade transactions with Ukrainian state-owned banks.
- The United States International Development Finance Corporation (DFC) and MIGA agreed to establish a consultative group to facilitate collaboration and coordination of their work in Ukraine.
The Russian invasion of Ukraine has taken a severe humanitarian and economic toll. 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. Estimates for recovery and reconstruction efforts in Ukraine exceed $411 billion. The developments announced today will benefit the Ukrainian economy as the country deals with the challenges of the ongoing war and plans future reconstruction efforts.
“Today’s announcements demonstrate our commitment to ensuring the best possible outcome as we support the people of Ukraine during these challenging times. We appreciate FCDO’s contribution to the SURE trust fund to support critical projects during the war and future reconstruction,” said Hiroshi Matano, Executive Vice President of MIGA. “With our most recent guarantee, MIGA is helping small and medium size businesses obtain access to urgently needed working capital, the agricultural sector with financing to continue to export grains to the world, and Ukrainians with reliable and essential banking services. And our collaborations with IFC and DFC will lead to a more efficient use of our resources.”
The availability of political risk insurance and other risk-mitigation products can play a critical role in promoting private sector investment in Ukraine to aid its economic recovery and reconstruction.
FCDO promotes the interest of the United Kingdom as it seeks to reduce poverty and tackle global challenges with international partners. The U.K. government has provided substantial economic and humanitarian support to Ukraine to date. The contribution to the SURE Trust Fund demonstrates its commitment to continue helping Ukrainians deal with the devastating impact of the war and meet the extraordinary needs to rebuild the country once the war ends.
The fund was created in February 2023 with an initial $23 million contribution from Japan to allow MIGA to provide trade finance guarantees, insurance on bank reserves during the war, and political risk insurance to support reconstruction. With this contribution, FCDO acknowledges that meeting demand for insurance by the private sector to support reconstruction will be a major factor in helping the country rebuild its infrastructure. MIGA’s expertise in supporting investments in fragile and conflict situations will ensure that the trust funds are leveraged to amplify the benefit for Ukraine.
“The private sector is fundamental to Ukraine’s recovery and reconstruction, and accessible insurance against conflict-related risks is vital to unlock that investment,” said U.K. Foreign Secretary James Cleverly. “Through the UK’s funding for MIGA, we will help insure reconstruction projects in Ukraine, to open the floodgates for investment in Ukraine and to kickstart its efforts to rebuild as a sustainable, resilient, and modern economy. The solutions set out by the international community at the Ukraine Recovery Conference will ensure today is just the start of the reconstruction effort.”
MIGA’s 2020 guarantee to ProCredit for €17.10 million covered an equity investment 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 to €40.85 million, maintaining the length of the guarantee to December 2025.
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. This is the first project to tap into the SURE Trust Fund.
“This MIGA guarantee increase is an important and encouraging signal to our clients in Ukraine and to our local ProCredit Bank staff, who never stopped providing banking services to their small and medium-sized business clients,” said Hubert Spechtenhauser, Chair of the Management Board of ProCredit General Partner AG.
On trade finance, MIGA is supporting access to essential goods in Ukraine and is working to extend the reach of partners like IFC that have established trade finance programs. With IFC, MIGA is providing $20 million in support for trade transactions with Ukrainian state-owned banks, covering 99% of IFC’s risk in order to increase its ability to issue more guarantees.
“Trade is vital for any country, but for Ukraine it is a lifeline,” said Makhtar Diop, IFC's Managing Director. “With the support from BII, DFC and MIGA, IFC will able to provide access to financing for as much as $1 billion of imports and exports over the next three years. By working together, we can accomplish so much more for the businesses and people of Ukraine.”
DFC, the U.S. government’s development finance institution, has supported projects in Ukraine since 1993. MIGA and DFC have agreed to establish a consultative group to collaborate and coordinate their respective work in Ukraine to leverage their collective expertise with risk mitigation products and experience in Ukraine. The two agencies will meet regularly to exchange information on their efforts, identify potential opportunities for collaboration on projects, and coordinate efforts consistent with the expertise, products, and resources that each institution provides.
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.
Elizabeth Howton, (202) 458-5922, firstname.lastname@example.org
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