The African Development Bank (AfDB) alongside Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), African Trade Insurance Agency (ATI) and GuarantCo, on Wednesday entered into a memorandum of understanding for a Co-Guarantee Platform (CGP).
The platform is intended to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers in a market-responsible manner, the AfDB said in a statement.
The objective is to mobilize greater amounts of investment that would otherwise not take place in the region in the absence of affordable risk mitigation products, said the development financial institution.
As part of its purpose, the platform is expected to enhance the relevance of the respective institutions’ instruments in the region by implementing joint risk mitigation transactions.
Speaking about the bank’s rationale for the platform, Akinwunmi Adesina, president of the AfDB said, “There are many guarantee providers that can offer various types of credit enhancement and risk mitigation instruments in Africa, but cooperation among them has been either non-existent or on an ad hoc basis. Hence the need for a more formal collaboration among guarantee providers to maximize the use of their products in Africa.”
The bank noted that the platform is open to more participants including official development institutions, adding that its initial partners are bringing on board strong experience from operating on the continent and are keen to participate in order to cooperate and create synergies with other development and commercial institutions in an effective and market-responsive manner.
It further pointed out that the bank promoted initiative was signed on the first day of the bank’s inaugural Africa Investment Forum (AIF) in Johannesburg and that it is the first of its kind.
Bandar M. H. Hajjar, president of Islamic Development Bank Group, who also doubles as chairman of the board of Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), noted that ICIEC as a multilateral institution has a strong footprint in Africa with 23 member countries from within the continent; and has been actively mobilizing insurance and reinsurance capacity from the international market for Africa for the last 25 years.
“ICIEC intends to avail its services, expertise and network to cooperate with the participants of the Co-Guarantee Platform, in order to structure collectively innovative risk mitigation solutions that will help to facilitate and mobilize funding capacity for medium and long tenor projects in Africa.
George Otieno, CEO of the African Trade Insurance Agency (ATI), welcoming the initiative noted that it was first suggested by the African Development Bank during the second meeting of the Abidjan Union held in 2017.
“As the membership of African states in ATI grows – in part thanks to the financial assistance of the African Development Bank – we believe that no single institution alone can provide the amount of risk mitigation required to catalyze Africa’s enormous infrastructure requirements,” Otieno said
“While ATI already works closely with the private insurance market, the recent insurance transaction concluded among the Bank, ATI and the private reinsurance market to insure a portfolio of the Bank’s non-sovereign financial sector loans in Africa, demonstrates the powerful impact cooperation among institutions can have on bettering the availability and terms and conditions of insurance in the region,“ he added.
On his part, Philippe Valahu, CEO, Private Infrastructure Development Group said: “GuarantCo is delighted to participate in the Co-Guarantee Platform, particularly as it draws on our extensive experience in delivering guarantee and credit enhancement solutions in Africa.”
Valahu said the initiative will enable his company collaborate with institutions that share a similar vision; not only by recognising the deployment of capital and investment on the continent but, most importantly, by enabling local capital markets through risk mitigation solutions.
“We hope that the joint capacity, as created through this initiative, will result in more efficient information sharing, a better overview of risk across the continent and mobilisation of greater guarantee capacity,” Valahu said.
