World Bank guarantees policy reform

26 February 2014

In November 2013, the World Bank published a draft of a proposed new operational policy on guarantees. Guarantees are designed to help extend the reach of private financing by mitigating perceived risk and encouraging private sector involvement in developing countries. The proposed reform aims to “support a fuller and more effective use of Bank guarantees in country engagements to leverage Bank resources in delivering critical infrastructure and reform programmes to reduce poverty and foster shared prosperity.” It has been proposed that guarantees will be governed as an alternative form of financing within a single policy framework that governs both guarantees and loans. The draft reform would open access to all types of Bank guarantees; lift unwarranted restrictions that currently limit the Bank’s opportunities to help mobilise financing for development needs; incorporate Bank guarantees into Investment Project Lending and Development Policy Lending; clarify aspects that were inhibiting the use of Bank guarantees; and modernise the policy to make it more flexible. If approved, the new policy will take effect in July 2014.