Risk Participation Agreement Adb

a. The microfinance portfolio of a partner financial institution (retail) ADB guarantees or participates in the risk of default of wholesale loans from a PFI to a given IFM and sets a credit limit for each participating MFI. However, in some countries (for example. B India), loans are grouped by microcredit borrowers (often MFIs that are used as agents). The current and potential new partners of the PFI program and MFIs have asked the ADB to guarantee or participate. The ADB will guarantee or risk a partial guarantee or risk for the participation of 50% of the microcredits pooled in the balance sheet of a PFI, thereby reducing the risk profile of these assets for the PFI and promoting the continuation of loans to the sector. This portfolio guarantee and/or risk participation are carried out on a pilot basis with existing accredited PFIs and should be applied initially in India. Political risk guarantees protect investors and lenders from political incidents that result in interruptions or terminations of construction, operation and activity, ownership and/or contractual relationships of an infrastructure project. If such incidents result in late payments, the guarantor will compensate the guarantors for the losses they incurred to a level of contract.

Political guarantees and insurance instruments help to increase the solvency of projects and attract private capital by covering political risks that are not controlled by private investors and lenders. The range of political risks includes: RPP is structured so that small and medium-sized enterprises (SMEs) benefit from it, which is an extension of the strategic axis of the old RPP, for which SMEs accounted for 83% of the use. The agreement also contains provisions for women`s property companies, which are a strategic priority for both the bank and SMEs. Credit guarantees cover a borrower`s borrowing obligations through guaranteed capital and interest payable to lenders. Credit guarantees cover the risk of default, regardless of the cause of non-payment, whether political or commercial. The instrument can be designed to address specific debt payment structures and risks at different stages of the project.