First deal closed under Liberty’s new partnership with the world bank group’s IFC
Liberty Specialty Markets (LSM) has closed its first deal as part of its new relationship with International Finance Corporation (IFC), a member of the World Bank Group focused on the private sector...
The deal sees LSM insure a loan of US$185m from the IFC to Vietnam Commercial Joint Stock Bank (VIB). The loan will support VIB’s leading to small-to-medium enterprises (SMEs), micro-SMES and affordable housing projects in Vietnam.
Last September, IFC announced that LSM is one of two global insurers to provide unfunded credit insurance for its Managed Co-Lending Portfolio Program (MCPP) – a syndicated loans platform that allows emerging market borrowers to access additional funding from third party investors (direct funding) or insurers (indirect funding). For an insured loan, IFC provides financing for the entire loan while transferring the credit risk on a portion of the loan to the. The two insurers will be insuring IFC loans to financial institutions which will increase their provision of debt financing to small and medium-sized enterprises in their countries.
According to Peter Sprent, LSM’s Head of Global Financial Risks, the VIB loan and the IFC relationship are the results of a new strategic priority for the insurer’s global financial risks team. Last autumn’s agreement to support IFC’s Managed Co-Lending Portfolio Program will be the first in a series of new partnerships with major international development institutions.
Peter Sprent said: “Economic development is a priority for Liberty Specialty Markets. Creating prosperity in the communities in which we do business around the world is one of our core values. Managed effectively, it can also generate positive returns for us.
“Providing capacity to insure up to US$500m of loans made by IFC’s newest platform is a positive way of generating economic growth in some of the poorest countries of the world, but it’s just a first step for us. We’ve been talking to other development organisations in Europe and right across the international community with the aim of establishing similar partnership arrangements. These could see LSM providing insurance capacity to a significant volume of development activity.
“Our guiding principle is to work with the best partners we can find, who can also offer us exposure to a range of high quality alternative risks. Cooperating with this type of body offers us access to a broader range of emerging market risks that we might not otherwise see, plus the chance to develop new markets.
“There is no doubt that this partnership represents a significant milestone in our strategy to provide innovative insurance solutions for global development institutions whose goals align with our own. Our hope is that our partnership with IFC will grow and that by facilitating more lending, a halo effect will be created that will in turn attract more capital to meet development goals.”
Under the terms of the deal, LSM and IFC agreed in advance the eligibility criteria for loans to be insured under the facility. IFC will originate, structure and administer the loans. With LSM’s support, IFC can now lend up to US$2bn to commercial banks in developing countries under MCPP Financial Institutions.
IFC, a sister organisation of the World Bank and member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. It works with more than 2,000 businesses worldwide, to create markets and opportunities in the toughest areas of the world.