Banga plans to triple World Bank guarantee agency

World Bank President Ajay Banga told European Union officials last month that he intends to triple the size of the bank’s guarantee agency, according to a meeting summary seen by Devex. The Nov. 21 video call was Banga’s first with the biannual meeting of development ministers and senior officials from the European Union member states and the European Commission since his election to the post in May 2023. And it follows years of scrutiny of the bank’s climate credentials, as well as Group of 20 major economies-led efforts to make multilateral development banks, or MDBs, stretch their balance sheets further. Banga told EU officials that he wants to triple the size of the Multilateral Investment Guarantee Agency, or MIGA — which provides risk insurance for investors and lenders — in the next few years, and focus more on guarantees, including for renewable energy. The move comes after the second volume of a G20-commissioned expert report, published in September, called for MIGA to triple its annual guarantees and distribution activities by 2030. “President Banga’s interest in MIGA is significant because as the smallest arm of the World Bank it does not receive much attention,” Karen Mathiasen, a sustainable development finance expert at the Center for Global Development, a think tank, told Devex by email this week. Mathiasen, a former acting U.S. executive director at the World Bank, wrote that MIGA can facilitate investments that would otherwise be too risky by insuring against failure by governments or state-owned enterprises to honor financial obligations and political risks like expropriation or civil conflict. The agency is “growing on its own at a modest pace but if President Banga wants it to triple over the next few years, MIGA will need new capital,” she added. “Banga’s goal should not just be the growth of MIGA. He also needs to care about where that growth will be.” Most of MIGA’s operations are in middle- and upper-middle-income countries, helping to minimize risks and accounts for its very low claims record — only 11 in its 35-year history, she said. “The downside of MIGA’s conservative risk management strategy,” she noted, “is that it limits its ability to engage in low-income and fragile states where private investment is harder to attract.” And finally, Mathiasen wrote, “to increase its footprint and impact, any strategy to expand MIGA’s size should include measures to increase its risk appetite as well.” A MIGA spokeswoman told Devex by email that the agency is “working closely with the rest of the World Bank Group to expand our financial ambitions to drive climate action, build resilience, and end poverty.” “We have the capital to make more guarantees for development, and we encourage the private sector to bring us their bankable projects,” the spokesperson added.