Economy Middle East speaks to Junaid Kamal Ahmad, vice president of operations at the Multilateral Investment Guarantee Agency (MIGA), the World Bank, about the pivotal role of MIGA in addressing climate concerns.
Operating as a crucial part of the World Bank Group, MIGA’s primary responsibility involves mitigating financial risks in markets and providing assurances to attract private investment for developmental purposes.
Ahmad emphasizes MIGA’s unparalleled leveraging capability among multilateral development finance organizations and sheds light on MIGA’s contributions within the GCC region.
Economy Middle East: What role does MIGA play in advancing the climate change agenda?
Junaid Kamal Ahmad: The World Bank is traditionally seen as a lending bank, and it is. The World Bank provides significant amounts of loans to countries directly for climate change.
MIGA, the Multilateral Investment Guarantee Agency, is part of the World Bank family, but its role is not to provide loans. What it does is it de-risks market finance. In other words, it provides political risk insurance and guarantees for private finance to come into development. In particular, we are providing de-risking for the market finance to come directly into climate finance.
I’ll give you a couple of examples. In Egypt, we are funding or guaranteeing the largest renewable energy program, which is a renewable energy park in Africa. What it is doing is providing renewable energy for the Egyptian public sector electricity company to absorb. This money is completely financed by the private sector, and we provide the de-risking.
What de-risking does is it enables long-term tenor of money, and it also enables us to provide the private sector directly into the hands of investment and this is a major difference. Traditionally, development finance is seen as loans. However, the future of development finance is increasingly going to be how much can we leverage from markets. Because the market is where big finance exists today for addressing climate and health issues like pandemic fragility, and the big global issues. The amount of money needed exists in private markets. Thus, to bring private markets into development you have to de-risk, and that’s the role of MIGA.
Economy Middle East: What do you think the governments in MENA and GCC in particular need to do more to advance the climate change agenda?
Junaid Kamal Ahmad: I think we have learned from experience that whenever governments can provide stable policy announcements and regulatory frameworks, this will bring in private finance.
However, private finance also waits to see if these announcements by the government are stable and sustained over the long term. So to bring in immediate private finance based on announcements made by the government, de-risking is a very important instrument. De-risking lowers the political risk and enables the protection of the regulatory and policy framework. Therefore, it enables private finance to come in. Today in Ethiopia, there are very challenging circumstances. Ethiopia announced the creation of the first private telecom operator in the country. A billion-dollar equity came in through Vodacom, Safaricom, and Japanese investors.
What MIGA did was provide $175 million to guarantee a billion dollars of equity. In guaranteeing the billion-dollar equity, the full risk was not taken on by MIGA. MIGA was able to resell about 65 percent of that risk to market reinsurers. As a result, for every dollar that we guarantee, we bring in $16 of private finance. This leveraging, 1-16, is the biggest of any multilateral development finance organization. Then, for every dollar we guarantee, we reinsure 65 cents to private reinsurers. In fact, in 1988, when MIGA was created, we had an investment of $366 million as capital. That $366 million has been converted into $75 billion of private finance for development. That’s the power of leverage that MIGA brings into the game of development finance.
Economy Middle East: What is MIGA’s role in GCC?
Junaid Kamal Ahmad: Today, we are beginning to see that countries like Saudi Arabia and the UAE are global investors. They’re putting investments in Africa, Central Asia, and Asia. They are investing in areas such as water, energy, electricity, and many others.
Now, this investment in countries in Africa or Central Asia requires de-risking. For example. Uzbekistan could require de-risking and that is the relationship between GCC and MIGA. MIGA would be able to de-risk and protect GCC investment in many countries around the world, especially in climate transition.
We’re already beginning to do that. Today, the UAE is in Africa. Saudi Arabia is in Central Asia in areas such as energy and water. Therefore, we’re beginning to de-risk and protect that investment so it has an impact on nations across Africa and Central Asia. So, it’s a particular relationship between GCC and MIGA that we like to see grow in the future.
About Junaid Kamal Ahmad
Junaid Kamal Ahmad is vice president of operations at the Multilateral Investment Guarantee Agency (MIGA), the Political Risk Insurance and Credit Enhancement arm of the World Bank Group (WBG). He is responsible for advancing and enhancing MIGA’s brand partnering across WBG and with financial institutions, private investors, and development actors to originate and pursue meaningful, impact-driven projects. He also leads the Operations team of the Agency to deliver MIGA’s mandate of mobilizing private finance for development projects in emerging markets and developing economies (EMDEs).
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