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World Bank building

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

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Hands husking peas into a basket full of peas

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 different types of political risk insurance guarantees provided to investors and lenders.

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

Bahamas, The

The Bahamas COVID-19 Response

$128.16 million
Financial Services
Summary of Proposed Guarantee
Proposed
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Project Description

This summary covers an application made by Banco Santander S.A. (Santander) and additional lenders to be identified.  Santander S.A. and additional lenders to be identified have requested MIGA to provide a Non-Honoring of Sovereign Financial Obligations (NHSFO) guarantee approximately US$ 120.3 million of debt financing for a period of up to 8 years to be obtained by the Ministry of Finance (MoF) of the Commonwealth of The Bahamas.  Approximately US$ 20 million of the financing will be used to finance the Project (as described below).  Additionally, approximately US$ 88.6 million of the financing will be used to strengthen the public health system. For information on the public health financing, please click here

The COVID-19 pandemic is having a significant negative impact on the economy of The Bahamas, which came on top of the devastating effects of Hurricane Dorian in 2019.  In the context of MIGA’s COVID-19 response - https://www.miga.org/covid-19 - the proceeds of the MIGA-guaranteed loan will be used to support the response to the pandemic by the Government of The Bahamas (GoB), which includes providing liquidity (through micro-loans, loan guarantees, grants) to Micro, Small and Medium-sized Enterprises (MSMEs) (the Project).  The MoF will allocate the proceeds of the MIGA-guaranteed loan to the Small Business Development Centre (SBDC) to execute and oversee the Project.  The MIGA-guaranteed loan will also be used to finance a small portion of SBDC’s operational costs.  The SBDC is a non-profit organization wholly-owned by the GoB with the mandate to implement policies for supporting MSMEs in The Bahamas through a range of services, including business advisory, training, and access to capital. 

Environmental and Social Categorization

This component of the Project is categorized as FI-2 under MIGA’s Policy on Environmental and Social Sustainability (2013).  The SBDC provides micro-loans, grants and guarantees to MSMES in The Bahamas. The MIGA guarantee will support MSMEs as part the GoB’s COVID-19 recovery program.

MIGA analyzed SBDC’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of August 2020, 73% of SBDC’s exposure was to small and medium enterprises, and 27% to micro enterprises. The main sectors covered by SBDC include services, wholesale and retail trade, construction, food and beverage, manufacturing, tourism and transportation. SBDC does not have any exposure to activities on MIGA’s Exclusion List and does not finance coal-related activities. Overall, SBDC’s portfolio is considered medium risk as its lending activities cover sectors with low to medium environmental and social (E&S) risks and impacts. The main E&S risks of this Project are associated with SBDC’s capacity to identify, assess and manage the E&S risks of its financing activities. The applicable E&S requirements for SBDC’s portfolio will be: (i) MIGA’s Exclusion List and (ii) applicable national environmental and social laws and regulations in The Bahamas.

MIGA also assessed SBDC’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 SBDC’s labor practices in line with MIGA’s Performance Standard 2: Labor and Working Conditions (PS2). SBDC does not have a systematic approach to identifying and managing the E&S risks and impacts associated with the activities of the MSMEs supported by the SBDC.  In line with the requirements of PS1, SBDC will be required to develop and implement an E&S management system (ESMS) and appoint an E&S officer who will be responsible for the overall implementation of the ESMS. In relation to PS2, MIGA’s assessment revealed that SBDC’s labor policies are in line with the requirements of PS2 and national labor laws in The Bahamas. SBDC’s policies and procedures cover terms of employment, grievance management and discipline, safety, equal opportunities, harassment, training and development, and performance management.

Business continuity and emergency response procedures are in place; SBDC’s plans meet the requirements of the emergency preparedness and response plan under MIGA Performance Standard 1. In response to the COVID-19 pandemic, SBDC has implemented workplace hygiene and social-distancing measures. Office operations and in-person contacts with external parties have been suspended; remote working measures have been implemented and the offices are sanitized twice a week. Sanitizing stations are placed for the occasional visits to the offices by employees.

Based on MIGA’s review and applicable performance requirements, an environmental and social action plan (ESAP) will be agreed with SBDC; the ESAP would be expected to contain the following items:

  1. Appointment of an E&S Officer;
  2. Development and implementation of the E&S Management System; and
  3. E&S risk management training for SBDC’s officers

SDBC will report periodically to MIGA on the development and implementation of the ESMS.

Developmental Impact

The MIGA-guaranteed loan will be utilized by the SBDC to finance programs in connection with MSMEs, which account for 20-30% of the country’s Gross Domestic Product, helping to preserve jobs, improve productivity, stimulate economic activity and support resiliency. Specifically, the financing will be used by SBDC to provide guarantees for MSMEs, which will enable them to access loans from financial institutions. Additionally, SBDC will use the MIGA-guaranteed financing for microloans and grants to eligible MSMEs, as well as fund the operational expenses of programs geared to youth, public sector entrepreneurship and economic recovery. This component of the Project would be aligned with Pillar Two of MIGA’s COVID-19 fast-track facility.

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