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Project Cycle
Types of Financing
The IDB Group uses loans, grants, guarantees and investments to fund development programs.
Development Effectiveness
Guarantees
The IDB can guarantee loans made by private financial sources in public and private sector projects. This instrument seeks to improve financing conditions for projects in Latin America and the Caribbean and helps promote investment in the borrowing countries.
The Bank can provide guarantees to projects with or without counter-guarantees by the borrowing country's government.
Public Sector Guarantees (Sovereign)
The IDB has a Guarantee Disbursement Loan program that provides the option of disbursing loans in the form of a guarantee.
The program allows a borrower to take all or a portion of a loan disbursement in the form of a guarantee, and use that guarantee to enhance the terms of borrowing from private sector sources—i.e., by extending available tenors, reducing interest rates, and increasing borrowing capacity from market sources.
Private Sector Guarantees (Non-Sovereign)
IDB guarantees are also available to private businesses and subnational government entities without a federal government guarantee, using market-based pricing.
The IDB offers guarantees for partial credit and political risk in private sector projects financed with private debt.
- Credit Guarantees. Several types of comprehensive all-risk credit guarantees are available. These consist of IDB coverage for all risks for selected terms of a loan made by a commercial lender. Credit guarantees cannot exceed 25 percent of total project costs, or $200 million, whichever is lower. For projects in the smaller economies that have limited capital markets access, the Bank can guarantee up to 40 percent of project costs, with the same $200 million cap.
- Political Risk Guarantees. The IDB offers several types of political risk guarantees for debt instruments: breach of contract guarantees, currency convertibility and transferability guarantees and guarantees for other political risks. Coverage needs are tailored for each project to cover specified risk events related to non-commercial factors. Coverage extends up to 50 percent of project costs or $150 million, whichever is less.
