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MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more.

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Learn about the progress MIGA is making in its mission to support economic growth, reduce poverty and improve people’s lives.

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Explore global projects that support economic growth, reduce poverty and improves people’s lives.


Agencia Financiera de Desarrollo

$110.7 million
Financial Services
Project Brief

Project Description 

On June 30, 2022, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, issued a guarantee covering a non-shareholder loan from Citibank N.A. of the United States and Commerzbank A.G. of Germany to Agencia Financiera de Desarollo (AFD) of Paraguay. MIGA’s guarantee is for an estimated amount of up to US$110.7 million for a period of 7 years covering the risk of Non-Honoring of Financial Obligations by a State-Owned Enterprise (NH-SOE).  

The COVID-19 crisis led to an economic slowdown in Paraguay, which has resulted in a decrease in overall investment and reduced foreign trade. Weather-related shocks (droughts and floods), swings in agricultural commodity prices, and spillovers from economic and financial crises in the region have all played a role in the country’s volatile growth over the past two years. Small and medium sized businesses, which form the backbone of Paraguay’s economy, have been particularly impacted by a squeeze on available liquidity and higher oil commodity prices due the war in Ukraine. As Paraguay’s only second-floor public bank, AFD played a countercyclical role and was identified by the Government of Paraguay (GoP) as a tool to reach its objectives of poverty reduction and social development under its National Development Plan, as well as support the GoP’s Economic Recovery Plan.  

The MIGA-covered loan facility will fund AFD’s programs aimed at supporting Micro, Small and Medium Enterprises (MSMEs) and the housing sector. In addition, the Project will promote financing to women-owned MSMEs through a gender action plan, thereby helping address the gender financing gap in the country. 

Environmental Categorization 

This Project is categorized as FI-2 under MIGA’s Policy on Environmental and Social Sustainability (2013). For this project, the MIGA guarantee will target lending across AFD programs covering MSME and housing loans through financial intermediaries (FIs). The Environmental & Social (E&S) risks and impacts associated with housing loans are considered minimal and the risks and impacts associated with MSME loans are typically limited. High-risk transactions[1]will be excluded from the

MIGA-supported portfolio and loan amounts will be capped at US$2 million US$2 million[2]. The Project targeted portfolio is thus considered medium risk. 

The key E&S risks associated with the Project relate to AFD’s ability to identify, assess, and manage the E&S risks and impacts associated with its financing operations (through the FIs), as well as the labor and working conditions at AFD. MIGA’s E&S due diligence included an analysis of AFD’s portfolio, a review of relevant labor and E&S-related documents and virtual meetings with the AFD team in May 2022. MIGA also assessed AFD’s E&S risk management procedures in line with the requirements of MIGA’s Performance Standard 1: Assessment and Management of E&S Risks and Impacts (PS1), as well as the labor practices in line with MIGA’s Performance Standard 2: Labor and Working Conditions (PS2). The applicable E&S requirements for the lending portfolio for this Project are: (i) MIGA’s Exclusion List, (ii) applicable national environmental and social laws and regulations in Paraguay, and (iii) the applicable commodity and sector-specific risks established by the E&S management system (ESMS). 

AFD has an E&S management system (ESMS) and an E&S team responsible for the implementation of the E&S risk management procedures. AFD’s ESMS sets out AFD’s E&S requirements (including AFD’s exclusion list which incorporates MIGA’s Exclusion List) for its product lines and a detailed procedure for identifying and assessing the E&S risks and impacts associated with its lending activities through FIs. The procedure includes a screening process for FIs, including compliance with local labor laws and an assessment of each FI’s ability to assess E&S risks and impacts in line with AFD’s E&S requirements. AFD also has a monitoring process to assess the FIs’ compliance with its requirements. FIs are required to develop and implement E&S management systems suitable to the requirements of the AFD products they provide. To meet the requirements of the Project, AFD is required to amend its ESMS to formally incorporate MIGA’s E&S requirements for MSME lending for the programs supported under the Project. This action item is included in the E&S action plan (ESAP) of the Project. 

AFD’s emergency response procedures are in line with the requirements of PS1. In response to the COVID-19 pandemic, AFD implemented appropriate infection control and social-distancing measures to minimize the risk of exposure for its employees and clients.  

AFD’s labor policies and procedures are compliant with the requirements of PS2. Amongst other aspects, AFD has labor policies and procedures that address terms of employment, recruitment, renumeration and benefits, grievance management, occupational health and safety, training, sexual harassment, and discipline. The FIs through which AFD lends are required to comply with local labor laws; the required amendments to AFD’s program term sheets to reflect this is included in the ESAP of this project. 

AFD is required to report periodically to MIGA on the implementation of the E&S procedures. 

Development Impact  

The proceeds of the MIGA guaranteed loan will provide much-needed access to longer-term credit to MSMEs and individuals in Paraguay. The MIGA-covered loan supports AFD’s funding diversification strategy by allowing it to raise international long-term debt without an explicit government guarantee for the first time, and to secure favorable terms in a time of global monetary tightening. 

The entirety of the MIGA guaranteed loan will be used by AFD to lend its client financial intermediaries (which in turn will on lend to end beneficiaries) and will finance AFD’s Programs which support sectors like housing, agribusiness, industry, services, and construction.  

The Project will contribute to close Paraguay’s large overall financing gap, in particular for long-term financing. Domestic credit to private sector in the country stood at 41% of GDP in 2021 (Central Bank of Paraguay) which is lower than the LAC and upper-middle income countries average. According to the SME Finance Forum, Paraguay has an MSMEs financing gap estimated at US$3.9 billion, with this figure expected to have increased during the COVID-19 pandemic.

Improving access to credit of MSMEs is crucial for the development of Paraguay's economy as MSMEs are a key driver of economic growth and job creation representing 97% of businesses in the country and generating 62% of jobs in the economy.[3]

This Project will also help address the gender finance gap in the country through initiatives aimed at increasing access to finance for women and women-owned MSMEs. Despite MSMEs representing 97% of all companies, only 20% are women-owned. Moreover, access to finance is challenging for women entrepreneurs: only 4 percent of women have borrowed from a financial intermediary to start or expand a business, compared to 10 percent of men. The project will incorporate three actions as part of a Gender Action Plan; (i) conduct a Gender Diagnostic to identify and prioritize areas of strengths and weaknesses and support improved sex-disaggregated data collection by AFD; (ii) development of a new product or service targeted at women retail clients and/or women-owned MSMEs; and (iii) implement a Gender Intelligence Training Program, to enable gender capacity building, raise organizational gender awareness on financial inclusion for women, while supporting the transfer of gender knowledge to AFD client institutions. 

The Project is consistent with the WBG FY19-23 Country Partnership Framework for Paraguay under its first focus area of “Promoting Accountable Institutions and Improving the Business Climate” by providing access to finance to commercial banks with the purpose to on-lend across AFD programs to underserved segments. The Project is also aligned with MIGA’s Strategy and Business Outlook FY21-23 under its pillar of “Complementing Market Creation” and “Continuing to serve all clients” by supporting the growth of AFD’s lending portfolio to priority areas of development. 


[1] Projects with potential significant adverse environmental or social risks and/or impacts that are diverse, irreversible, or unprecedented and may include (i) involuntary resettlement; (ii) risk of adverse impacts on indigenous peoples; (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (iv) significant occupational health and safety risks. 

[2] As a middle-income country, loans to medium-sized enterprises in Paraguay can be up to US$2 million (per IFC Interpretation Note on Small and Medium Enterprises and Environmental and Social Risk Management).

[3]  Source: Paraguay Gender Lens Entrepreneurship and Investing Report (2020). Girls Who Venture.