MANILA, PHILIPPINES (22 July 2019) — The Asian Development Bank (ADB) has approved a $50 million additional capital contribution to support the guarantee operations of the Credit Guarantee Investment Facility (CGIF), a trust fund of ADB created to promote the development of deep and liquid local currency and regional bond markets in the ASEAN+3 region.
The CGIF was established in April 2010 with an initial capital of $700 million, including a $130 million capital contribution from ADB. It was formed as an integral part of policy actions agreed under the Asian Bond Market Initiative to promote the development of bond markets, mainly by providing credit guarantees to ASEAN+3 bond issuers. ASEAN+3 is composed of Brunei Darussalam, Cambodia, the People’s Republic of China (PRC), Indonesia, Japan, the Republic of Korea, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
“Having a developed and integrated bond market is integral for a country to unlock more investments geared towards economic growth and development,” said the Director General of ADB’s Private Sector Operations Department Mr. Michael Barrow. “But some bond markets in the Asia and Pacific region remain underdeveloped. CGIF, which utilizes guarantees and credit enhancements, can help as it provides greater confidence for local and foreign investors as well as encouraging more companies to tap bond markets, thereby spurring their development.”
ADB’s additional capital contribution will support regional cooperation within ASEAN+3 and promote financial resilience by allowing corporations and infrastructure projects to gain access to local currency and regional bond markets. It will encourage cross-border issuances, especially for corporations domiciled in those ASEAN countries still developing a fully functioning bond market. Additional benefits include a broadening of issuers’ investor base by providing increased credit protection and more harmonization of standards and practices for bond issuance within ASEAN+3, paving the way for greater regional financial market integration.
ADB will continue to support CGIF as its third largest contributor (after Japan and the PRC) and as trustee. CGIF Chief Executive Officer Mr. Kiyoshi Nishimura commented on the increase of ADB’s contribution: “ADB has been playing a crucial role in CGIF’s past development, not only as CGIF’s key contributor but also as its important partner in various joint works to support bond market development in the region. ADB’s extensive knowledge and involvement in the region are essential for the success of our joint efforts. This additional capital contribution from ADB will further enhance our collaboration.”
Since the start of its guarantee operations in May 2012, CGIF has issued 31 guarantees as of 31 March this year, with outstanding guarantees totaling $1.37 billion. None of the CGIF-guaranteed bonds have defaulted and no CGIF guarantee has been called upon to date.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, ADB is owned by 68 members—49 from the region.