The Multilateral Investment Guarantee Agency (MIGA) is one of the five pillars of the World Bank Group, but its activities are slightly different compared to the World Bank and IFC. It provides political risk insurance to investors and lenders against losses caused by noncommercial risks. The noncommercial risks that can be insured under MIGA insurance are (1) currency inconvertibility and transfer restriction, (2) expropriation, (3) war and civil disturbance, including terrorism, (4) breach of contract and (5) the non-honoring of financial obligations. In this sense, the services provided by the MIGA can be compared to a part of the services provided on Dutch national level by Atradius Dutch State Business (however, MIGA does not provide export credit insurance).
The MIGA – Something for you?
Every Dutch company is able to request coverage by the MIGA as the Netherlands is a member state of the World Bank Group. The projects that can be covered have to take place in the 155 developing member states of the World Bank Group and typical political risk insurances from the MIGA comprise a minimum of 3 years and a maximum of 15 years or, occasionally, 20 years. The premiums for insurance are set based upon various elements such as country, sector, type of risk, etc. Note that as part of the World Bank Group, MIGA does have certain development criteria to which the investment project should adhere.
Besides its regular operations the MIGA has two special programs to induce investment. First, the MIGA has a special ‘Small Investment Program’ (SIP), that is designed to facilitate investment in small and medium-size enterprises (SMEs) involved in the finance, agribusiness, manufacturing, and service sectors. Investments are eligible if they are related to the establishment of an SME or made into an existing SME in a developing member country. The most important difference between the MIGA’s regular operations and its operations under the SIP is the process time. For regular operations the MIGA application period is usually between four and six months, while under the SIP this time period is between one and two years.
The MIGA also offers a ‘Private Equity Fund Insurance’ to help private equity funds attract scarce capital for investments into emerging and frontier markets. Private equity funds can agree upon a ‘master contract of guarantee’ with the MIGA, thereby setting up coverage for two to three years, and with the use of this contract might be able to raise funds from institutional investors.
How to apply?
You can request MIGA coverage by sending a two-page ‘Preliminary Application’, after which the MIGA will determine whether the proposed project is eligible for coverage. If the project is eligible the MIGA will provide the investor with a ‘Definite Application’ in which more detailed information is requested. Typically three to four months after the Definite Application is received the MIGA is able to issue the guarantee.
The MIGA conducts assessment of the project’s development impact, risk profile, social and environmental impacts, as well as economic and financial viability. The MIGA estimates that the application cycle usually takes between four and six months, although it could be more in case of complex or high-risk projects.
What can we do for you?
The Liaison officers can help you with questions concerning MIGA activities or by setting up contacts with MIGA staff.