Guarantees | Asian Development Bank

Guarantees

To catalyze capital flows into and within its developing member countries for eligible projects, ADB extends guarantees for eligible projects which enable financing partners to transfer certain risks that they cannot easily absorb or manage on their own to ADB.

ADB’s guarantees support infrastructure projects, financial institutions, capital market investors and trade financiers, and cover a wide variety of debt instruments. Guarantees may provide either comprehensive (financial risk) or limited coverage, including political risk.

Guarantees can be provided when ADB has a direct or indirect participation in a project or related sector, through a loan, equity investment or technical assistance.

ADB offers two primary guarantee products—a political risk guarantee and a credit—both designed to mitigate risk exposure of financing partners.

Political risk guarantee

Guarantees covering political risk are designed to facilitate cofinancing by providing financing partners with coverage against specifically defined political (or sovereign) risks.

ADB’s political risk guarantee (PRG) is primarily designed to facilitate private sector development, either through public or private sector projects. PRGs are well suited where commercial lenders are prepared to accept commercial (or credit) risks of a project, but not the political risks.

Risks covered include transfer restriction, expropriation, political violence, contract disputes, and non-honoring of a sovereign obligation or guarantee.

Partial credit guarantee

ADB provides partial credit guarantees (PCGs) to lenders of most forms of debt. These include commercial bank loans, loans made by shareholders, loans guaranteed by shareholders or third parties, capital market debt instruments, bonds, financial leases, letters of credit, promissory notes, and bills of exchange.

PCG covers nonpayment by the borrower or issuer (for any reason) on the guaranteed portion of the principal and interest due. This guarantee product is principally applied to financial services and capital markets (e.g., banking, leasing, insurance, and funds); and infrastructure (e.g., power, transportation, water supply and waste treatment, and telecommunications). ADB may consider other sectors on a case-by-case basis.

Partial credit guarantees can be applied to loans or other debt instruments issued by private and public sector projects (limited recourse financings), public–private partnerships, corporates, as well as (sub) sovereign entities.