Guarantees Program

World Bank guarantees are powerful catalysts to attract private-sector investments and commercial financing for strong development outcomes that support economic growth and improve public services in developing countries. Our guarantees mobilize a wide array of commercial capital and private investments, including energy, transport solutions, sovereign and corporate financings for governments and state-owned enterprises—as well as innovative trade financing solutions and unique support to fragile countries.

Recent global discussions on financing for development have brought the potential impact of the guarantee instrument to the forefront, as the world looks to mobilize additional resources for development, especially from the private sector.

Our guarantees are often combined with other World Bank Group instruments, including from IFC and MIGA. They can also be combined with project bonds to finance transactions from construction to operation, providing a lift-up in the rating of these bonds.

There is an important cost-benefit analysis to be conducted before the deployment of sovereign guarantees implied in the use of World Bank guarantees. Nevertheless, used wisely, they can be powerful, well-targeted instruments.

The World Bank Guarantee Program aims to:

  • Mobilize private investment (equity and debt) for strategic projects or sector support
  • Mitigate key government-related risks to enable financial viability and bankability
  • Enhance the credit quality of sovereign and sub-sovereign obligors to achieve acceptable or affordable levels
  • Reduce costs and improve financing terms for projects and governments
  • Ensure long-term sustainability of projects

Main Features

  • Guarantees provide “AAA” risk mitigation with respect to obligations due from government, political sub-divisions, or government-owned entities to private investors (for example, equity, debt, contractors, etc.) and to foreign public entities on cross-border projects
  • Risk mitigation is of a partial nature and aims to promote balanced risk allocation between government and private investors, or between public entities in cross-border projects
  • Guarantees are flexible and adaptable to multiple contractual structures
  • Tenors may extend to up to 35 years
  • Pricing is concessional

World Bank Guarantees are suitable for:

  • Domestic or international investors
  • Foreign or local currency obligations
  • Domestic or international markets
  • Project financing, corporate financing, and project, corporate or sovereign bonds

Guarantees are suitable to cover a wide array of government-related risks, such as:

  • Contractual risk (payment risk, performance risk, etc.)
  • Regulatory risk (change in law, negotiation or cancellation of license, tariff adjustments, etc.)
  • Currency risk (convertibility, transferability, etc,)
  • Political risk (expropriation, war and civil disturbance, etc.)

In general, World Bank Guarantees are suitable to cover any government-related risks which is not of a purely commercial nature.

Benefits of World Bank Guarantees

Our guarantees offer multiple advantages to stakeholders involved in strategic government investments and programs.

For private investors

  • Improvement of the overall credit quality of the investment through the partial use of a “AAA” rated instrument to mitigate key risks
  • Reduction or elimination of key risk drivers beyond the control of private investors
  • Mitigation of counterparty risk with governments, political sub-divisions, or government-owned entities
  • Strong support to maintain or open new markets despite credit downturns
  • Project bankability, sustainability, and replicability

For governments

  • Facilitate Public Private Partnerships
  • Attract investors to strategic sectors that require large and long-term investments
  • Diversification of financing sources beyond development financing
  • Reduction of project costs and bringing cost of commercial financing to affordable levels
  • Reduction of government risk exposure through sharing with private sector investors
  • Reduction of fiscal burden by reducing the need for direct government guarantees
  • Project bankability, sustainability, and replicability

The World Bank Guarantee Program offers two main types of Guarantees:


Project-based Guarantees

Project-based Guarantees are applied in the context of specific investment projects where governments wish to attract private investment (equity and/or debt). They are designed to provide risk mitigation with respect to key risks which are essential for the viability of the investment.

These Guarantees may fall under one of the following sub-categories:

Loan Guarantees – intended to provide risk mitigation to commercial lenders with respect to debt service payment defaults caused directly or indirectly by government failure to meet specific payment and/or performance obligations arising from contract, law or regulation. Such as:

- Payment of debt service on commercial loans taken by private projects which rely on contracts with government for their cash flows e.g. tariff level agreed under an implementation agreement between government and a project.

- Payment of debt service on commercial loans taken directly by government

Payment Guarantees – intended to provide risk mitigation to private projects or to foreign public entities with respect to payment default on non-loan related obligations by government. Such as:

- Scheduled or unscheduled pre-determined payment obligations arising from contracts, law or regulation e.g. monthly payments under a Bulk Purchase Agreements (such as power or water purchase agreements), termination payment due under a Government Support Agreement or an airport concession contract as a result of a change in law, etc.

More information on Project-based Guarantees


Policy-based Guarantees

Policy-based Guarantees are applied in the context of development policy operations where the World Bank supports a member country with their program of policy and institutional actions that promote growth and sustainable poverty reduction.

This type of Guarantee is intended to provide risk mitigation to commercial lenders with respect to debt service payment defaults by government, when the proceeds of the financing are applied to budgetary support in the context of development policy operations.

More information on Policy-based Guarantees


The World Bank applies the following criteria to determine if a given project or policy is eligible for World Bank Guarantee support:

  • The relevant project or policy must be implemented in a member country suitable for IBRD or IDA support.
  • The project or policy must have a clear and defined development impact. It must promote broad-based economic growth, contribute to social and environmental sustainability, enhance the effectiveness of the public or private sector, or otherwise contribute to the development of member states.
  • There must be a need to mobilize private investment (equity or debt) or mitigate government payment risk.
  • The project, whether it is public or private, must be of strong interest to, and have the express commitment of, the host Government.
  • The project must be technically and financially viable and sustainable in the short, medium and long-term.
  • The project can be public or private. If it is a private project, it might be eligible for a World Bank Guarantee if it is the direct beneficiary of an obligation from the Government, a political sub-division of Government, or a Sovereign Owned Entity, which can be guaranteed by the World Bank.
  • In the case of Loan Guarantees, the debt must be extended by commercial entities. World Bank Guarantees are not available to support bilateral debt or debt extended by publicly owned entities that operate under public law for public policy purposes (e.g. DFIs, ECAs).
  • The project must be capable of meeting the World Bank Group environmental, social, and anti-corruption guidelines.
  • In the case of Policy-based Guarantees, the member country must have an adequate macroeconomic policy framework and must also commit to a specific reform program, including sector or macroeconomic policies and country systems. 

The implementation of a World Bank Guarantee requires the establishment of contractual relationships amongst the government as obligor, the private investors as beneficiaries, and the World Bank as Guarantor. It also requires a direct contractual relationship between the World Bank and the member country.

The following are the basic contracts that are required for a World Bank Guarantee. Exceptionally, depending on the specific structure of a project, other contracts may be required.

Guarantee Agreement
This is a contract between the World Bank (IDA/IBRD) and the beneficiaries of the Guarantee. This contract incorporates the terms and conditions of the Guarantee, such as tenor, covered events, conditions, termination and suspension events, etc. In the case of Loan Guarantees it is customary to have the Guarantee Agreement incorporated into the guaranteed loan agreement.

Project Agreement
These are agreements to be entered between the World Bank (IDA/IBRD) and the project company and/or the sovereign/sub-sovereign, depending on the specific structure. These contracts incorporate standard undertakings to IDA/IBRD such as use of proceeds from the underlying financing, proper operation of the project, compliance with World Bank environmental standards, etc.

Guarantee Support Agreement
This is a contract amongst the government, the project company and the World Bank, whereby the government undertakes to pay the project company the amounts that are past due, in the event that the government-owned entity or the sub-sovereign which is the direct obligor fails to make the payments as due. This contract allows governments to address the default situation without triggering the World Bank Guarantee unnecessarily.

Indemnity Agreement
This is a contract between a member country (the sovereign government) and the World Bank, whereby the government will indemnify IDA/IBRD in the event that IDA/IBRD make payments to the beneficiaries under the Guarantee.


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