Credit guarantees cover a borrower`s borrowing obligations through guaranteed capital and interest payable to lenders. Credit guarantees cover the risk of default, regardless of the cause of non-payment, whether political or commercial. The instrument can be designed to address specific debt payment structures and risks at different stages of the project. The guarantee can protect the entire amount borrowed, or only part of that amount – the so-called Partrisk guarantee. It may cover several types of debt securities, including bank loans, loans from shareholders, loans secured by shareholders or third parties, capital market debt instruments, bonds, leasing, debt securities, debt securities and foreign exchange. Coverage content: Up to 15 years. In exceptional cases, the tone may be longer, provided that the AfDB`s risk policy is followed and the tone is justified. The French Institute for Development Finance has signed a risk-participation agreement with the Asian Development Bank for a solar power plant valued at approximately $152 million in Western India B. Autonomous guarantees For countries in which ADB does not have an accredited PFI, it is proposed to include in the program a partial guarantee and/or risk participation for approved MFIs in order to obtain a loan. ADB would share up to 50% of the risk of pari passu default with the lending bank. In addition to the joint exposure with ADB, the ADB guarantee will be aimed at dealing with private sector banks that would otherwise not be able to consider lending to this asset class.
The ADB will apply specific eligibility criteria to these MFIs and adapt the due diligence process. Has. The microfinance portfolio of a partner financial institution (retail) ADB guarantees or participates in the risk of default of wholesale loans from a PFI to a given IFM and sets a credit limit for each participating MFI. However, in some countries (for example. B India), loans are grouped by microcredit borrowers (often MFIs that are used as agents). The current and potential new partners of the PFI program and MFIs have asked the ADB to guarantee or participate. The ADB will guarantee or risk a partial guarantee or risk for the participation of 50% of the microcredits pooled in the balance sheet of a PFI, thereby reducing the risk profile of these assets for the PFI and promoting the continuation of loans to the sector. This portfolio guarantee and/or risk participation are carried out on a pilot basis with existing accredited PFIs and should be applied initially in India.
The Asian Development Bank`s (ADB) Risk Policy Guarantee Instrument is available for sovereign and non-governmental operations because it has been involved in the project or sector.