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Liberia: New World Bank Reform key to Achieving $20 Billion Guarantee Target

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The World Bank Group Thursday announced a major overhaul to its guarantee business that will deliver simplicity, improved access, and faster execution through a new, convenient marketplace.  The new reforms are critical to achieving the goal of tripling annual guarantee issuance to $20 billion by 2030.

The Private Sector Investment Lab, launched by the World Bank Group in June 2023, was created to identify barriers and potential solutions to renewable energy investment. Political risk insurance emerged as a key area of interest among the group, which also raised issues with accessibility.

The recent G20 Independent Expert Group report on Strengthening Multilateral Development Banks also called for an expanded use of guarantees to mitigate risk and catalyze private finance.

Currently, the World Bank Group offers 20 guarantee solutions spread across the institution. Each comes with different processes, rules, and standards. Ultimately, this holds back their potential and impedes client access.

The overhauled approach, the first significant change in 15 years, will consist of six concrete updates:

*  Condensed Structure: Moving all of guarantee experts from across the World Bank Group under one roof, providing a seamless experience for clients and easier access to the full suite of guarantees.

*  Simplified and Comprehensive Product Menu: Compiling all World Bank Group guarantees in a single menu, allowing clients to easily identify and select the guarantee instrument that best suits their individual needs.

*  Streamlined Process: Launching a common approach for all guarantee reviews and removing redundant processes, giving transparency and certainty to our clients across our guarantee process, delivering an improved client experience.

*  Greater Accessibility: Investing in a more accessible client experience by growing our guarantee teams and training staff worldwide, providing private sector and country clients with easy access to guarantees from anywhere in the world.

*  Scale: Applying a risk-weighted approach that focuses resources on high-impact projects and portfolios of projects, reducing duplicative risk analysis and freeing up capacity to tackle more complex challenges.

*  Innovative New Tools: Offering new and innovative guarantee products that will enable the private sector to get more involved in solving the development challenges of today.

The overhaul and one-stop-shop will be available to all World Bank Group clients on July 1, 2024.

Lab Leadership & Co-Chairs

Ajay Banga, World Bank President: “We need the private sector’s resources and ingenuity to tackle major global challenges. By consolidating our offerings, simplifying processes, and boosting accessibility we are delivering faster, easier access to guarantees for businesses.

Our new guarantee marketplace is a crucial step forward toward tripling our guarantees business at the World Bank Group, but more importantly helping investors do more in developing economies and accelerate positive change.”

Mark Carney, UN Special Envoy on Climate Action and Finance and Co-Chair of GFANZ: “Multilateral development banks must use all their capacities to maximise total financing from all sources to address the dual crises of climate and development.

To that end, the Lab has convened private sector and World Bank leaders to develop and rapidly scale solutions to address the barriers to private investment in emerging markets and developing economies.

Working together, we have prioritised the need for a simplified and consistent suite of guarantees that responds to the constraints and challenges faced by the private sector.

This new platform will enable much greater scale and more rapid delivery of guarantees and therefore finance to help solve the world’s most pressing problems.”

Shriti Vadera, Chair of Prudential Plc: “Guarantees are one of the most established and effective ways to mobilise private finance for climate and development.

The platform will simplify access to the World Bank Group’s suite of guarantees and help to ensure that lenders and borrowers better understand what is available in order to plan investments with greater certainty.

I am delighted the Lab has been able to work with the World Bank Group to develop the platform and focus on the instruments and expertise that will sit within it.  It demonstrates the value of engagement between the public and private sector to help deliver finance at the scale and pace where it is needed.”

Lab Members

Noel Quinn, Group CEO, HSBC Holdings Plc: “The establishment of this new, simpler platform for World Bank guarantees is critical to scaling up sustainable investment.

It will encourage reforms such as standardised contractual structures and provide more clarity about the roles that public and private sector organisations need to play to make projects viable. I am very pleased that this landmark change to guarantees is the first tangible outcome of the World Bank’s Private Sector Investment Lab.”

Shemara Wikramanayake, CEO and Managing Director, Macquarie Group: “The World Bank’s guarantee programs can be instrumental in mobilising investments for critical infrastructure across emerging markets and developing economies.

This ambitious overhaul will help the World Bank move more quickly and unlock the efficiencies in delivering these key guarantees to help mobilise greater volumes of private capital and deliver an even greater impact.”

Hironori Kamezawa, Group CEO, Mitsubishi UFJ Financial Group: “MUFG is privileged to be part of the Private Investment Lab since its inception, and we welcome the announcement by the World Bank Group to consolidate and streamline the guarantee business.

MUFG is one of the leading project finance banks globally, and we see huge opportunities in working with the World Bank Group to scale up blended finance.

We look forward to working with the new guarantee platform on a number of financing opportunities in emerging countries including Asia, where we are headquartered.”

Hendrik du Toit, CEO, Ninety One: “We know that China is the only emerging market that can self-finance its energy transition.  We also know that most Developed Market institutional investors remain wary of investing in emerging market transition. This revamp in the World Bank Guarantee Platform offers the opportunity to finally unlock that capital for emerging markets.”

Feike Sijbesma, Chairman, Royal Philips and Co-Chair, Global Climate Adaptation Centers: “With this guarantee business upgrade the World Bank is taking an important step in further catalysing private finance for renewable energy investments.

They take away many barriers by consolidating  and streamlining their guarantees offerings, creating transparency, improved access and faster execution.”

Sim Tshabalala, CEO, Standard Bank: “The Standard Bank Group warmly welcomes the establishment of the World Bank’s one-stop shop for guarantees, simplifying and streamlining processes, and creating

more room for flexibility and innovation.  This is an important reform – World Bank guarantees are some of the most efficient ways to attract more private sector investment into Africa’s infrastructure.”

Bill Winters, Group Chief Executive of Standard Chartered: “Collaboration with the WBG on this cross-organisational reform, and creation of a credible platform, demonstrates the innovation that’s possible and critical in bringing simplicity, access, and speed of execution to the guarantee product suite – an instrument with transformational potential in catalysing the flow of capital to the developing world.”

Damilola Ogunbiyi, CEO, Sustainable Energy for All: “I welcome the World Bank Group’s timely announcement of the overhaul of its guarantee business to attract even more private-sector investment.

The new one-stop-shop platform that has been announced today will not only ensure access to the World Bank Group’s guarantee instruments is undertaken in a streamlined manner but will go a long way in enabling local currency lending and supporting decentralized renewable energy projects.

I look forward to continuing to support the World Bank in developing innovative solutions to catalyze renewable energy investments in emerging and developing economies.”

Dilhan Pillay Sandrasegara, Executive Director and CEO, Temasek: “Today’s announcement is testament to the World Bank Group’s commitment to act with speed and determination to bridge the gap in climate finance many EMDEs face.

We commend the World Bank Group for taking transformational action, and look forward to the outcomes the overhauled approach can unlock in mobilising much needed capital and resources to drive sustainable green growth here in Asia and beyond.”

Mark Gallogly, Co-founder and Managing Principal, Three Cairns Group: “Reforms to the way the World Bank offers guarantees and, in particular, the ambition to triple guarantee issuances to $20 billion by 2030, are a welcome step forward for the World Bank Group.

We look forward to continuing to work with World Bank Group leadership and Private Sector Investment Lab CEOs to identify how to maximise finance mobilised to address the urgency of the climate crisis.”

G20 Independent Expert Group

N K Singh, Chairman, 15th Finance Commission of India and Co-Convener of the Independent Expert Group on MDB Reforms: “The decision of the World Bank Group for a fundamental restructuring of the guarantee business is an important milestone.

To restructure the international financial architecture, apart from simplicity, improved access and faster execution, the tripling agenda of the annual guarantee would greatly contribute toward the implementation of the Independent Expert Group’s recommendations on strengthening the multilateral development banks.

Undoubtedly, strengthening the framework for guarantees will enable significant catalyzation of private investment and augers well to fill this important gap in credible financing arrangements. Looking forward to further progress on other issues.

The President of the World Bank, the senior management and the members of the private sector lab deserve applause and our warmest congratulations.”

 

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