Through its guarantee product, the Bank seeks to leverage its preferred creditor status to help eligible borrowers to obtain financing from third party lenders, including the capital markets. Guarantees also enable borrowers to obtain financing in their local currency where the Bank is not able to provide such financing directly from its own resources. The Bank’s guarantees are classified into two categories:
- Partial Credit Guarantees (PCGs); and
- Partial Risk Guarantees (PRGs).
PCGs cover a portion of scheduled repayments of private sector loans or bonds against the risk of default. The PCG can be utilized to support mobilization of private funds for project finance, financial intermediation and policy-based finance. PRGs on the other hand, cover private lenders against the risk of a government, or a government-owned agency, failing to perform its obligations vis-à-vis a private sector project. Such risks could include political force majeure, currency inconvertibility, regulatory risks (adverse changes in law), and various forms of breach of contract.