Review of Risk Mitigation Instruments for Infrastructure: Financing and Recent Trends and Development (Trends and Policy Options (PPIAF))

Although the importance of infrastructure sectors in achieving economic growth and poverty reduction is well established, raising debt and equity capital for infrastructure development and service provision has been a challenge for developing countries. Risk mitigation instruments facilitate the mobilization of commercial debt and equity capital by transferring risks that private financiers would not be willing to take to third-party official and private institutions that are capable of taking such risks. There has been increasing interest and discussion on risk mitigation instruments in the context of infrastructure financing among developing country governments, multi- and bilateral donors, and the private sector. However, due to the complex and diverse nature of risk mitigation instruments, what they can and cannot offer and how they can best be utilized for infrastructure financing are not well understood. This book summarizes existing risk mitigation instruments - primarily focusing on those offered by multilateral and bilateral official agencies - and presents recent trends and developments that make these guarantee and insurance products valuable in securing financing for infrastructure projects in developing countries. Topics covered include descriptions of different types of risk mitigation instruments characteristics of multilateral, bilateral, and private providers of risk mitigation instruments and compatability of instruments recent developments and innovative applications of risk mitigation instruments through case transactions areas that pose challenges to the use of risk mitigation instruments as catalysts of infrastructure development. This book will be of particular interest to readers working in business and finance, law and regulation, and infrastructure projects and finance. Although the importance of infrastructure sectors in achieving economic growth and poverty reduction is well established, raising debt and equity capital for infrastructure development and service provision has been a challenge for developing countries. Risk mitigation instruments facilitate the mobilization of commercial debt and equity capital by transferring risks that private financiers would not be able or willing to take to third-party official and private institutions that are capable of taking such risks. There has been increasing interest and discussion on risk mitigation instruments in the context of infrastructure financing among developing country governments, multi- and bilateral donors, and the private sector. However, due to the complex and diverse nature of risk mitigation instruments, what they can and cannot offer and how they can best be utilized for infrastructure financing are not well understood.The Review of Risk Mitigation Instruments for Infrastructure Financing and Recent Trends and Development summarizes existing risk mitigation instruments-primarily focusing on those offered by multilateral and bilateral official agencies-and presents recent trends and developments that make these guarantee and insurance products valuable in securing financing for infrastructure projects in developing countries. Topics covered include: descriptions of different types of risk mitigation instruments, characteristics of multilateral, bilateral, and private providers of risk mitigation instruments and compatibility of instruments, recent developments and innovative applications of risk mitigation instruments through case transactions, areas that pose challenges to the use of risk mitigation instruments as catalysts of infrastructure development. Appendixes describe in detail each transaction case and the risk mitigation instruments offered by major multilateral and bilateral institutions. This report will be of particular interest to readers working in business and finance, law and regulation, and infrastructure projects and finance. The objective of the Review of Risk Mitigation Instruments for Infrastructure Financing and Recent Trends and Developments is to provide a concise yet comprehensive guide as well as reference information for practitioners of infrastructure financing, including private sector financiers and developing country officials. The work is also intended as a reference for institutions offering (or developing) risk mitigation instruments, allowing them to learn from each other's recent practices. The book is organized into five chapters with the following objectives: Chapter 1 Type of Risk Mitigation Instruments: increases awareness of the different types and nature of risk mitigation instruments currently available for private financiers. Chapter 2 Recent Trends in Risk Mitigation: highlights areas in risk mitigation for developing country infrastructure financing receiving recent attention. Chapter 3 Characteristics of Providers and Compatibility: summarizes the characteristics of multilateral, bilateral, and private providers of risk mitigation instruments and the compatibility of those instruments. Chapter 4 Innovative Application of Risk Mitigation Instruments: presents recent developments and innovative applications of risk mitigation instruments through case transactions. Chapter 5 Challenges Ahead: summarizes areas that pose challenges to the use of risk mitigation instruments as catalysts of infrastructure development. The focus of this book is on the multilateral development banks and agencies (that is, The World Bank Group and regional development banks and affiliates) and bilateral development agencies and export credit and investment agencies of major developed countries that have supported the compilation of this information This book examines the financing of infrastructure projects in developing countries, looking at the descriptions of different types of risk mitigation instruments; characteristics of multilateral, bilateral and private providers of these instruments and compatability issues; recent developments and innovative applications using case transactions; and areas that pose challenges to the use of risk mitigation instruments as catalysts of infrastructure development.. Types Of Risk Mitigation Instruments -- Recent Trends In Risk Management -- Characteristics Of Risk Mitigation Providers And Compatibility Of Products -- Innovative Application Of Risk Mitigation Instruments -- Challenges Ahead. Tomoko Matsukawa, Odo Habeck. Includes Bibliographical References.