World Bank Group launches $6bn insurance-backed facility to expand SME lending in emerging markets

The World Bank Group has launched a $6 billion insurance-backed facility to increase lending to small and medium-sized enterprises (SMEs) in emerging markets.

The facility is arranged by the International Finance Corporation (IFC) and includes 19 global insurers to take on part of the credit risk from IFC’s loan portfolio. This allows IFC to use its capital more efficiently and provide more funding to banks and financial institutions, which then lend to micro, small, and medium-sized enterprises (MSMEs).

The structure is expected to support up to $10 billion in new lending. MSMEs make up more than 90% of businesses worldwide and account for around 70% of jobs, but many still struggle to access finance.

The facility uses a portfolio approach. Insurers take exposure to a group of loans, rather than reviewing each loan individually, relying on IFC’s credit assessment and monitoring. This makes the process faster and easier for insurers to participate.

This is IFC’s largest mobilisation under a single agreement and one of the largest credit insurance facilities arranged by a multilateral development institution.

The transaction is the fifth under IFC’s Managed Co-Lending Portfolio Program (MCPP) for credit insurers. Total mobilisation under this part of the programme has now reached $15.5 billion. Since 2017, the programme has grown from a $1 billion facility with two insurers to a multi-partner platform.

Across the full MCPP platform, total funds and credit risk capacity now stand at $25.5 billion. The programme is used to bring private capital into emerging markets, including lower-income and higher-risk countries.

The facility includes insurers such as AIG, Allianz Trade, Arch Insurance International, AXA XL, AXIS Capital, Chubb, Convex Group, Everest, HDI Global, Liberty Mutual, Markel, MSIG, Munich Re, RenaissanceRe, SCOR, Sompo International, Swiss Re, The Hartford, and Tokio Marine.

The aim of the facility is to increase the flow of finance to SMEs by supporting lending through financial institutions. IFC said the structure is part of its wider effort to mobilise private capital to support business growth in emerging markets.