Partial/Full Credit Guarantee for Loans

A Partial or Full Credit Guarantee (PCG or FCG) for a loan is an irrevocable commitment by IFC to pay the lender of a specified loan after the borrower has defaulted on its payment obligations and the loan has been accelerated. The payment is typically a pre-agreed percentage (or, in the case of an FCG, 100%) of the outstanding principal of the guaranteed loan.   

IFC’s credit guarantees provide the highest possible comfort to the guarantee beneficiary. Subject to local regulations, IFC’s guarantees are often provided with a 0% risk weighting, which aligns with Basel guidelines.  

Therefore, a PCG or FCG can significantly reduce the expected losses to the lender of the guaranteed loan and help the lender increase its credit exposure to the borrower beyond its relevant exposure limit.  

PCGs and FCGs can be denominated in either hard currency or local currency. Local currency-denominated credit guarantees can be offered as a substitute for direct lending by IFC to the borrower. Rather than IFC providing a loan to the client, a local lender (typically a bank) provides the loan, and IFC absorbs (a portion of) the borrower's credit risk. This can be a useful way to provide local currency financing in a situation where a local lender has an advantage in sourcing local currency funding but is limited in its ability to absorb the credit exposure of the borrower.