Scheme will provide up to $5bn for enterprises in hard hit emerging economies
The World Bank is preparing to channel billions of dollars of lending through financial systems in developing countries under a new initiative supported by six of the world’s biggest insurance companies. The scheme, to be launched by the bank’s International Finance Corporation, will provide funding to small businesses struggling to recover from the economic impact of the pandemic.
The scheme is an extension of the IFC’s Managed Co-lending Portfolio Program launched in 2013, which assembles portfolios of loans to private sector borrowers and shares the exposure with third parties. Insurers involved in this latest initiative say it would help to reduce default risk in poor countries by encouraging productive investment.
Under the scheme, the risk of each individual loan in a portfolio assembled by the IFC will be shared equally between the IFC and the consortium of insurers, up to a maximum insured value of $75m. For loans of up to $150m, the risk will be split 50/50; for any loans above that value, the IFC will take a larger share of the risk. The insurers will provide cover for $2bn, allowing the IFC to lend up to $5bn under the scheme.
The scheme comes as the World Bank revealed that school closures due to Covid-19 have left most students on the planet out of school – 1.6 billion students at the peak in April 2020. This global shock to all education systems is being followed by a deep recession, the World Bank says. Without remedial action when students start returning to school, a new World Bank report estimates a loss of $10 trillion dollars in earnings over time for this generation of students, and countries will be driven off-track to achieving their Learning Poverty goals.
More details can be found at The World Bank