The global financial crisis has had a significant impact in ECA countries on the ability of the private sector to obtain financing. Unfavorable domestic financing conditions are accompanied by a slowdown in external corporate financing, as foreign creditors are holding back on-lending under the impact of uncertainty in global financial markets and pessimistic expectations. Reduced foreign investment and access to finance –particularly long-term funding- have made economic recovery and private sector-led growth more difficult. At a time of challenging market conditions, banks' ability to raise funds efficiently without credit enhancement was limited. Therefore, there was the need for an innovative product that would expand the funding base of financial institutions, catalyzing new interest among foreign financial institutions, and improving borrowing conditions, helping to reduce transactions risks in a volatile market environment.
Credit guarantees are highly valuable for lenders, especially in a crisis environment. Since the onset of the financial crisis, as lenders have deleveraged from perceived problem areas or riskier investments, guarantees have proven to be an ideal instrument to keep banks/investors engaged globally with various borrowers. Recent transactions in the ECA region, in particular, have also shown that the instrument can be used not only to leverage funding, obtain longer maturities than otherwise achievable, and reduce costs for issuers with established borrowing track record in the markets, but they can also facilitate market entry for new issuers.
This Master Class provided a brief overview of WBG approach to utilize a Partial Credit Guarantee program that would enable additional financing from the international market for on-lending to private sector companies using the examples of two similar projects implemented in Croatia and Turkey. The speakers discussed the projects' challenges (during design, internal processing. etc.), how to deal with these challenges and what was the impact at the institutional level. The interactive discussion focused of the key aspects of the projects where experts will ask learners to diagnose the situation and make judgment calls. The experts guided the participants on what to be aware of, what to pay attention to, and what to focus on, what to be concerned about, options to consider, and how to think through the consequences of each option.
FPD's Financial Inclusion and Infrastructure Practice has organized a series of BBLs and master classes on the "New Directions in WBG Support to Financial Inclusion". This Master Class was the second one in the series of these learning events.
Isfandyar Zaman is currently the Financial and Private Sector Development Sector Leader for Central Europe and the Baltic Countries, based in Brussels, coordinating the Bank's programs in banking, non-banking, capital markets, private sector development, business environment, and competitive industries and innovation. Prior to his current assignment he worked on issues related to crisis management and financial sector development in Turkey, Bosnia, Kosovo, Ukraine, Moldova, and Armenia. He has also worked in the South Asia region. Prior to the Bank, Mr. Zaman Khan worked for Salomon Smith Barney in New York. Mr Zaman Khan holds a degree in Economic Policy Making and International Finance from Columbia University in New York.
Ilias Skamnelos is currently the Senior Financial Sector Specialist at the World Bank Group, ECA region. Previously he was a Special Assistant to VP, Finance and Private Sector Development and Financial Sector Specialist a Latin America and Caribbean Region. Mr. Skamnelos specializes in Banking, Micro and SME Finance and holds a PhD of Economics from University of Nottingham.
Gianfranco Bertozzi is a Senior Financial Officer in the Financial Advisory and Banking unit, housed in the World Bank Treasury. As part of the Banking team, he has worked globally in the delivery of IBRD financial products and services and has lately specialized in arranging World Bank Credit Guarantees for middle-income countries. Prior to joining in 2009, he worked as Senior VP for the Emerging Markets Group at Lehman Brothers (1997-2008) and before as Finance Officer for Interamerican Development Bank (1995-1997). Mr Bertozzi holds a degree from Johns Hopkins School Advanced International Studies (SAIS).
Douglas Pearce is currently the Manager of the Financial Inclusion and Infrastructure Practice at the World Bank Group. Previously he was a Senior Private Sector Development Specialist in the Middle East & North Africa region, where he led and participated in the preparation of lending, technical assistance and analytical projects, including Financial Intermediary Loans, Development Policy Loans, an Enterprise Survey, and an FSAP Development module. Prior joining the World Bank he led the financial sector team of DFID, was Deputy Head of the Growth and Investment Group, and chaired the Steering Committee of the Financial Reform and Strengthening Initiative (FIRST). While at CGAP he designed and helped establish a microfinance facility (MISFA) in Afghanistan and led CGAP's work in the ECA region. Before joining CGAP he initiated and led a successful microfinance institution in Bosnia, and managed a country office (DFID West Bank/Gaza).