De-risking for Private Investors

The private sector would invest more in emerging markets if it were less risky. Yet, a lack of familiarity, concerns about political risk, and a scarcity of bankable projects have too often prevented them from doing so. Recent breakthroughs in the application of political risk insurance and credit enhancement products are pointing a new way to easing such anxieties. MIGA political risk insurance, and an assurance of liquidity from EBRD, for example, recently contributed to a coveted two-notch bump in the rating of a bond issued to raise funds for a hospital PPP project in Turkey. As a result, a new and broader class of investors is now demonstrating interest in this, and similar projects. If scaled up effectively, trillions of dollars currently sitting on the sidelines and earning little interest could be channeled to development projects through such innovations.