Project Description
This summary is for a potential trade finance guarantee partnership MIGA and the International Finance Corporation (IFC) under IFC’s Global Trade Liquidity Program (GTLP). The partnership aims to support trade finance access in emerging markets by providing guarantees covering non-payment risks of state-owned banks (SOBs) and sovereigns in Emerging Markets and Developing Economies (EMDEs). MIGA would issue Trade Finance Guarantees (TFG) for up to US$ 500 million over a period of up to 3 years, against the risk of non-payment by Obligors to IFC.
Environmental Categorization
The facilities under the MIGA-IFC GTLP partnership will support short-term trade transactions in EMDEs. These transactions pose minimal environmental and social (E&S) risks and impacts and as such the project has been categorized as ‘FI-3’ under MIGA’s Policy on Environmental and Social Sustainability (2013).
MIGA will rely on IFC’s E&S screening based on the MIGA Policy on Environmental and Social Sustainability (2013), and in accordance with IFC's Global Trade Liquidity Program (GTLP) E&S requirements. The trade finance activities supported by the Project must comply with the IFC Exclusion List and additional exclusions, including activities related to coal and palm oil (unless RSPO certified), among others. The Project will not support any activities with significant E&S concerns such as (a) involuntary resettlement, (b) risk of adverse impacts on Indigenous Peoples, (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, (d) risk of significant retrenchment or (e) significant occupational health and safety risks. The SOBs are existing IFC clients whose labor and working conditions are in line with PS2.
IFC will have the ability to exclude or suspend from participating in the Project any EMIBs based on their E&S performance and ability to implement IFC E&S requirements. Each trade pool will be supported by underlying documentation with the designated bank, and the agreement with the obligors will specify the IFC's requirements with respect to the underlying traded goods and will require the obligors to report on implementation. IFC will also review each underlying transaction to confirm it meets the exclusion criteria.
Development Impact
The MIGA-IFC GTLP partnership will contribute to positive development impact through the facilitation of trade in developing countries, where acute trade finance gaps persist. It has been widely acknowledged that trade is a driver of economic productivity, wage growth, and resilience. Trade supports economic activity and employment directly through the generation of income and liquidity on the back of exports, as well as indirectly by facilitating investment (importation of capital goods and technology), importation of critical goods and goods required for basic economic function, as well as importation of intermediate and consumer goods. Through partnering with IFC, MIGA will support resilience in the host countries and facilitate needed trade finance amid challenging global and national macroeconomic conditions.
