Guarantees have a number of benefits as a blended finance instrument. Unfunded guarantees can be particularly useful in situations with constrained budget. Guarantees both funded and unfunded have demonstrated significant mobilisation effects. OECD data indicate that guarantees mobilised more capital than any other financial instrument during 2012-2018 and have been the most effective tool for mobilising capital in every year for which data is available. Guarantees can bring financial additionality by changing the risk-return profile of investments and alleviate credit restrictions for underserved borrowers. Also, the cost of using guarantees are relatively low as guarantees are commitments to repay loans only in case of default. Yet, guarantees are not used to a large extend by development actors. Where used, guarantees constitute only a small fraction of portfolios and they are still applied in a limited number of geographical areas and market contexts. A fireside chat with a representative from OECD and GuarantCo will discuss guarantees on the basis of recent OECD work on the topic.
Moderator: Haje Schütte, Senior Counsellor and Head of the Financing for Sustainable Development Division of the Development Co-operation Directorate, OECD
2.1 Fireside chat: Making more and better use of guarantees