The Multilateral Investment Guarantee Agency (MIGA) has announced details of the Trade Finance Guarantee facility it created in 2021 in response to the impact the Covid-19 pandemic had on global supply chains.

The World Bank Group member initially specialised in using political risk insurance to help stimulate foreign direct investment, but says it has moved into other areas of financial support in response to crises that have had negative impacts on the less-developed markets that are the focus of MIGA's attention.

L/C support

The pandemic created global supply chain bottlenecks and an urgent need for critical goods to flow more easily between countries.

That required an increase in trade finance, which typically takes the form of letters of credit (L/Cs) and other bank instruments that can reduce the payment risks involved in international trade.

So last year MIGA created its new Trade Finance Guarantee product to support trade flows of critical goods, including food and medical equipment, in low-income and fragile countries to help revitalise global supply chains damaged by the pandemic.

Live in Rwanda

The first new guarantee went live in collaboration with the International Finance Corporation (IFC) in November with a US$20 million line of credit to Rwanda's Bank of Kigali, and more are under development.

The Trade Finance Guarantee was rolled out with the IFC under its Global Trade Finance Programme, alongside which MIGA provides a guarantee.

MIGA says the successful implementation of its guarantee products relies on the strong relationship it has with the IFC, which is also a member of the World Bank Group.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.