Research Note: Guarantees for Sustainable Development
Guarantee schemes can play a critical role in unlocking private capital at scale, especially when collateral is scarce and risk misperceptions are acute.
Guarantees are a cost-efficient method to improve the creditworthiness of businesses in emerging markets and developing economies. By reducing risk and transforming sub-investment-grade assets into investment-grade securities, guarantees can offer best-in-class mobilisation rates. Yet, they remain underutilised in developing economies – the very markets where the could add the most value.
Development finance actors are especially well-placed to expand the provision of guarantees. In addition to de-risking directly, donors and development finance investors can provide seed equity to establish dedicated guarantee platforms offering requisite specialisation and funding flexibility.
MOBILIST’s investment in the Green Guarantee Company (GGC) shows the value of official development finance in scaling green guarantees indirectly through seed equity investment in a specialist guarantor company. GGC is the first specialist guarantor for emerging market climate adaptation and mitigation projects.
This MOBILIST Research Note on Guarantees explores their potential for private capital mobilisation. It explains how guarantees work, why they remain underutilised, and how development finance actors can contribute to a renewed expansion of guarantees for sustainable development.