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Guarantees
Guarantees
a person with a purple scarf Financing - Inter-American Development Bank - IDB
Investment Lending Policy Based Lending Special Development Lending Guarantees

In addition to the three lending categories, the IDB offers guarantee loans made by private financial sources to public sector projects. Guarantees seek to improve financing conditions for projects in Latin America and the Caribbean and help attract investment in borrowing countries. They tend to target risks that the private sector is normally not well suited to assess or manage.  These guarantees are mostly partial so that the risks are shared between the Bank and private lenders. The Bank is in a unique position to do so, given its experience in the region and its relationship with governments. 

The IDB offers two types of guarantees in investment lending:

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Partial credit guarantees

Cover part (or exceptionally all) the funds provided by financiers, effectively covering risks that might affect their repayment. These are designed to assist governments and their entities in accessing new sources of debt financing with longer maturities than would otherwise be available.

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Political risk guarantees

Cover the risk that a sovereign or public entity will not comply with contractual conditions agreed with a private entity such as a bank or investment partner, thus affecting the repayment of the debt to creditors. It may be used, for example, where a government has moved from owner or operator to regulator or purchaser of a service. By protecting lenders against debt service defaults that result from nonperformance of government obligations agreed to under a concession or similar arrangement, these guarantees promote greater competition and private sector participation.

Uses

Enhancement of bond issues, project finance, asset-backed securities, securities backed by future flows, structured trade transactions.

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Amounts

Calibrated to optimize impact on the underlying instrument’s rating.

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Tenor

Maximum guarantee tenor of up to 20-years for policy-based interventions with a maximum weighted average life (WAL) of 12.25 years, and up to 25 years for investment operations with a maximum WAL of 15.25 years.

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Fees

Pricing neutrality applies between guarantees and loans.

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The Flexible Guarantee Instrument (FGI) is the IDB’s guarantee policy for sovereign guaranteed operations. The FGI is a single platform that allows borrowing member countries, subnationals, and local governments to structure partial credit guarantees and partial risk guarantees, both for investment projects and policy based interventions.

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Proposed policy for Flexible Guarantee Instrument (PFGI) for Sovereign-Guaranteed (SG) operations

Flexible Guarantee Instrument for Sovereign Guaranteed Operations

Flexible Guarantee Instrument for Concessional Sovereign Guaranteed Operations

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Guarantees required from the borrower
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Eligibility for Public Sector Financing
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Financing Solutions
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Development Effectiveness
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Integrity and Accountability
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