Project Description
On April 24, 2024, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, issued a guarantee totaling US$317.5 million to cover for the non-sharehoder loan by Citi, Crédit Agricole Corporate and Investment Bank (Crédit Agricole CIB), and Standard Chartered Bank to the State Bank of India (SBI). The MIGA guarantee will be extended up to 10 years against the risk of Non-Honoring of Financial Obligations by a State-Owned Enterprise. The project is to refinance part of the existing US$500 million IBRD loan to SBI for already operational Grid-connected Rooftop Solar Photovoltaic (GRPV) systems. The IBRD’s GRPV Program (P155007) was approved in 2016 and extended to the SBI. The objective of the IBRD loan was to provide funding for on-lending by SBI as part of a national program to deliver GRPV systems to commercial and industrial customers across India.
The project responds to the original report of the G20 Eminent Persons Group on Global Financial Governance issued in 2018 and the G20 Capital Adequacy Framework review, which calls multilateral development banks and MIGA to collaborate on transferring portfolio risk from MDB balance sheets with MIGA’s insurance products, and the more prominent role in which MIGA could play in supporting financial capacity within the World Bank Group. The same is further articulated in the WBG’s Statement in the Evolution Roadmap. The Project would present as the first example which embodies such concept where MIGA and IBRD are working in concert to free up lending capacity for IBRD, since IBRD is soon to reach its lending limits for India, thereby enabling IBRD to undertake new initiatives in the country.
Environmental Categorization
The MIGA guarantee will support the refinancing of operating rooftop solar projects in India. During the operations phase, rooftop solar projects are considered to have low to moderate E&S risk impacts related to occupational health and safety, waste management, and community safety. These risks and impacts can be addressed through mitigation measures, and as such, the MIGA project has been categorized as FI-2 in accordance with MIGA’s Policy on Environmental and Social Sustainability (2013).
Under the IBRD program for the initial financing, E&S requirements related to the management of risks and impacts such as occupational safety, fire safety, water consumption, regulatory compliance, and grievance management were specified for SBI by the IBRD. The implementation of these requirements has been monitored over the years by the IBRD. In line with MIGA’s Policy, for this transaction, MIGA will rely on the E&S requirements specified by the IBRD; no additional requirements will be specified and MIGA will continue to monitor the project in line with the existing requirements.
Development Impact
The MIGA guarantee will help to mobilize private sector capital for SBI. The proposed climate finance project will enable the recycling of the sovereign guarantee for other IBRD projects in India, and lead to potential savings for SBI. As a first-time transaction replacing an IBRD loan with international private capital mobilized with MIGA’s guarantee, a positive demonstration effect for international commercial banks to participate in similar transactions in India (or other countries) is expected. The proposed project is consistent with India’s Country Partnership Framework FY18-22, extended by the 2023 Performance and Learning Review to end-December 2024, in which MIGA’s credit enhancement guarantees for mobilizing private capital and meeting the borrowing requirements of state-owned enterprises for infrastructure projects are explicitly mentioned.
