MIGA Supports Climate Finance and Small Businesses in Emerging Europe
WASHINGTON DC, February 25, 2021 — MIGA, a member of the World Bank Group, has issued guarantees for €218.5 million (US$267.5 million) to ProCredit Holding, the Germany-based parent company of an SME banking group, covering ProCredit’s investments in its subsidiaries in Albania, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, North Macedonia, Serbia and Ukraine. The guarantees cover the mandatory cash reserves of the subsidiaries held at their respective central banks and allow ProCredit’s subsidiaries to consolidate their ongoing lending operations in Eastern and Southeastern Europe (ESEE) at a time of economic stress and uncertainties due to the COVID-19 pandemic. Lending supported by MIGA’s guarantees will be directed at small and medium-sized enterprises (SMEs), key drivers of growth and jobs in ESEE countries. 100% of the freed-up capital will be allocated by the subsidiaries towards climate finance lending, a core competence of ProCredit.
The guarantees will provide capital relief to the ProCredit Group, a key SME-focused lending institution in the ESEE region. The subsidiaries are required by their local regulatory authorities to maintain a minimum amount of mandatory cash reserves with their respective central banks. MIGA’s guarantees will reduce the regulatory risk-weighting applied to ProCredit’s mandatory reserves, freeing up capital for lending business of the respective banks, helping their clients to navigate the COVID-19 crisis.
“MIGA is focused on helping small and medium enterprises that have been severely impacted by the COVID-19 pandemic to get back on their feet,” said MIGA Executive Vice President Hiroshi Matano. “With 100 percent of this capital going toward climate finance lending, MIGA is helping ESEE countries build back better than before the pandemic and supporting their ‘green’ recovery.”
SMEs are key to the economic sustainability of ESEE countries and have been under stress since the outbreak of the pandemic. SMEs represented 94 percent of ProCredit Group's loan portfolio as of September 2020. MIGA guarantees will support the overall lending activities of ProCredit’s subsidiaries. The subsidiaries’ portfolios cover two business lines—SME loans and retail loans. The main sectors financed include wholesale and retail trade, agriculture, manufacturing (food and beverage, plastics, metals, etc.), construction, and real estate. MIGA’s guarantees are expected to lay the foundation for credit growth to sustain economic activity and secure jobs in sectors that are vital to post-pandemic macroeconomic recovery in ESEE countries. Of this support, 15.2% of MIGA’s coverage will be provided to Kosovo, an IDA-eligible country and Fragile and Conflict-Affected Situation (FCS) as classified by the World Bank Group (WBG).
In addition, MIGA’s guaranteed capital will be allocated to the green/climate loan portfolio comprising business activities in support of energy efficiency and renewable energy high impact transactions that lead to measurable energy savings and/or significant greenhouse gas (GHG) emissions reductions across industry sectors.
“So far, our clients have shown a high resilience to the crisis, among other things relying on a strong banking relationship with ProCredit, as our responsible banking approach makes us a reliable partner for SMEs, especially in difficult times. MIGA’s continued support strengthens the ProCredit Group’s capital base at a time of unprecedented challenges; it contributes to our ability to maintain and further build our SME loan book in the medium to long term,” said the Management of ProCredit Holding.
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MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment in emerging economies by helping mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war & civil disturbance; and offering credit enhancement to private investors and lenders.
Since its creation, MIGA has issued over US$59 billion in guarantees across 118 developing countries.
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. The World Bank Group is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.
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