BOAD NH-RDB

Project description 

On November 21, 2024, The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, signed a contract of guarantee for EUR 506 million (US$ 535  million), providing a 15-year Non-Honoring of Financial Obligation by a Regional Development Bank (NH-RDB) guarantee to Société Générale of France, HSBC Bank Plc of the United Kingdom, for their non-shareholder loan to the West African Development Bank (Banque Ouest Africaine de Développement or BOAD), the Togo-based development finance institution of the West African Economic and Monetary Union (WAEMU). 

Created in 1973, BOAD’s mandate is to promote the economic integration and the development of its member states namely, Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Togo, and Senegal, all IDA/FCS countries. The MIGA-guaranteed financing will support BOAD’s lending operations towards sustainable and climate public and private projects in its member countries (Project). The proceeds of the guaranteed loan will benefit priority sectors in BOAD’s member countries, including agriculture, renewable energy, general and digital infrastructure, green housing and real estate healthcare, and education.  

The Project is strongly aligned with MIGA’s Strategy and Business Outlook FY 24-26, as it will promote and encourage the flow of foreign investments to develop projects in IDA and FCS countries and contribute to addressing the global challenge of climate change in BOAD’s member countries. The Project is highly complementary to the World Bank’s and IDA’s recent interventions in BOAD focusing on the development of affordable housing within WAEMU and a regional off-grid electrification project. MIGA’s participation in the Project therefore contribute to reinforcing the World Bank Group’s approach to development challenges in WAEMU and to strengthening the relationship with BOAD.  

Environmental Categorization 

The MIGA project will support direct lending for projects in priority sectors including renewable energy, agriculture, infrastructure housing/real estate, healthcare and education. These projects could have significant E&S risks impacts that are unprecedented and irreversible; as such, the MIGA project has been categorized as FI-1 in accordance with MIGA’s Policy on Environmental and Social Sustainability (2013). 

The main E&S aspects of this project relate to BOAD’s ability to identify, assess, and manage the E&S risks and impacts associated with its lending activities and the management of labor matters at BOAD. MIGA analyzed BOAD’s portfolio for types of transactions, tenors, industry sectors, and exposure to MIGA’s Exclusion List. MIGA also analyzed BOAD’s E&S risk management procedures for lending activities in line with the requirements of Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts (PS1), and BOAD’s labor practices in line with the requirements of Performance Standard 2: Labor and Working Conditions (PS2). 

For the purposes of the MIGA guarantee, BOAD will be required to assess transactions against: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in the respective countries where projects are located; and (iii) MIGA Performance Standards. 

As of December 2023, BOAD’s portfolio included the two main segments – sovereign loans, 75% and non-sovereign loans, 25% – across the eight member states. The main sectors supported include transportation and digital infrastructure (41%), energy and natural resources (20%), agriculture and food security (12%), financial services (12%), health and education (10%), and housing and real estate (5%). Coal-related projects and oil and gas projects will not be covered by the MIGA guarantee^[1]. BOAD has no exposure to activities on the MIGA Exclusion List.

In relation to E&S risk management, BOAD has an E&S team responsible for E&S risk management, climate finance and gender.  BOAD implements an E&S risk management framework for identifying, assessing, and managing E&S risk and impacts associated with its lending activities.  The framework includes nine environmental and social safeguards that are similar to the MIGA Performance Standards (PS). The safeguards cover: (i) E&S management systems; (ii) labor; (iii) resource efficiency and pollution management; (iv) community health, safety, and security; (v) land acquisition: (vi) biodiversity; (vii) vulnerable and disadvantaged people; (viii) cultural heritage and (ix) stakeholder engagement.  For the MIGA project, BOAD will be required to apply the PSs.

BOAD’s framework also includes a detailed procedure for assessing E&S issues from transaction origination to monitoring.  E&S risks and impacts are assessed during due diligence, and where applicable E&S action plans are developed to address identified gaps and E&S conditions of lending are also incorporated into facility agreements.  The implementation of action plans as well as compliance with E&S conditions is monitored after facility disbursement. 

BOAD has emergency response procedures which are in line with the requirements of PS1. BOAD also has labor policies and procedures that address terms of employment, recruitment, renumeration, benefits, grievance management and non-discrimination. 

For the proposed guarantee, BOAD will be required to report annually to MIGA regarding the project portfolio, the implementation of the E&S procedures as well as labor practices.

Development Impact 

The Project will support the objectives set in the country strategies of regional member countries, particularly the priorities on infrastructure development, regional integration, and private sector development. The Project will also bring climate benefits since 50 percent of the guaranteed loan towards climate finance projects, with 30 percent of this target specifically allocated to adaptation finance. In addition, the availability of affordable financing through the MIGA supported facility has potential positive demonstration effects, such as encouraging project finance lending (including for climate projects) in countries where there are still significant investment barriers for private and foreign investors. 

^[1] BOAD’s Climate Policy (February 2023) details the bank’s commitment to climate mainstreaming, including climate risk management, climate finance and decarbonization.