MIGA: The Little Engine That Should

Effectively mobilizing private capital using official resources is among the priorities endorsed by shareholders and President Ajay Banga in the context of the World Bank’s evolution roadmap. The Multilateral Investment Guarantee Agency (MIGA), which offers investors and bankers political risk insurance and guarantees against non-payment by governments and state-owned enterprises, should feature heavily in the private sector reform agenda. MIGA’s record is exemplary: in 35 years of operations, it has issued $70 billion in guarantees and paid only 11 claims. This reflects MIGA’s risk management strategy of reinsuring most of its deals and success in managing disputes in the pre-claims process. However, this strategy and other policies limit MIGA’s coverage, especially in low-income countries. In this paper, we offer recommendations that would enable MIGA to grow significantly while expanding into riskier markets. These are to (1) create a special liquidity facility to increase the value and impact of MIGA’s political risk insurance; (2) expand risk sharing opportunities; (3) lower the credit threshold for country eligibility for MIGA’s credit enhancement products; (4) strengthen coordination across the World Bank Group; and (5) expand collaboration with other development banks, especially for transformational projects.