Search
Close this search box.

Table of Contents

Multilateral Investment Guarantee Agency (MIGA)



Definition

The Multilateral Investment Guarantee Agency (MIGA) is a part of the World Bank Group. It promotes foreign direct investment in developing countries as a means to support economic growth, reduce poverty, and improve people’s lives. MIGA achieves this by offering political risk insurance and credit enhancement guarantees to investors and lenders to protect against losses caused by non-commercial risks.

Phonetic

Multilateral Investment Guarantee Agency (MIGA): Mu̇l-tē-læt-ər-əl In-ˈves(t)-mənt Ga-rən-ˈtē ˈA-jen(t)-sē (MIGA)MIGA: M-ai-gee-ae

Key Takeaways

  1. MIGA is an international financial institution offering political risk insurance and credit enhancement guarantee to investors and lenders. It’s a member of the World Bank Group and aims to encourage foreign direct investment into developing countries which contributes to their economic growth and improved living conditions.
  2. The agency offers several crucial services, including guarantees against risks of transfer restriction and inconvertibility, expropriation, breach of contract, war and civil disturbance. Such protections give investors the confidence to invest in projects around the world, especially in regions perceived as high-risk.
  3. MIGA’s partnerships with other institutions and its policy advocacy help foster a favorable business environment for foreign investments in member countries. The agency also contributes to creating stable and resilient economies, reducing poverty, and promoting shared prosperity around the world.

Importance

The Multilateral Investment Guarantee Agency (MIGA) is a critical entity in the sphere of global finance and business due to its role in stimulating foreign direct investment (FDI) into developing countries. As a member of the World Bank Group, it offers political risk insurance and credit enhancement guarantees, helping investors and lenders to deal with risks that may deter them from investing. Consequently, the assurance provided by MIGA bolsters investor confidence, facilitates financial stability, encourages economic growth, and helps in the reduction of poverty in developing nations. Its function, therefore, is critical in creating a conducive business environment and spurring development, thus highlighting the agency’s importance.

Explanation

The Multilateral Investment Guarantee Agency (MIGA) serves a crucial function as part of the World Bank Group. Its primary purpose is to encourage foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives. MIGA achieves this by providing guarantees (political risk insurance and credit enhancement) to investors and lenders, essentially safeguarding them against losses that may arise from non-commercial risks in the host country. These non-commercial risks may include currency transfer restrictions, breach of contract, expropriation, war, terrorism, and civil disturbances, etc.MIGA’s role is extremely important in stimulating economic development as it allows for productive international investment to occur even in regions that are viewed as high risk. By providing coverage to investors, MIGA lowers the barrier to entry for investment, drawing capital into regions that may otherwise be overlooked due to their inherent risks. Not only does this lead to increased foreign direct investment, but it also encourages the transfer of knowledge and technology, fosters sustainable economic growth, and promotes private sector development in the beneficiary countries.

Examples

1. Housing Development Project in Nigeria (2018): MIGA was used to guarantee the International Finance Corporation (IFC) loan to Nigeria’s Federal Mortgage Bank. MIGA’s guarantee of $150 million supported the bank’s investment in a housing development program, meant to generate thousands of jobs countrywide, stimulate local economies, and create new avenues to affordable housing finance.2. Renewable Energy Project in Senegal (2014): MIGA provided $102.6 million in guarantees to two Norwegian companies for their investment in a Photovoltaic Solar Power project in Senegal. The project helped to improve Senegal’s energy security, diversify its energy mix, and reduce its reliance on expensive, polluting fossil fuels.3. Avianca Airline’s Aircraft Leasing in Guatemala, El Salvador, and Honduras (2013): MIGA issued guarantees of $137.4 million to cover the non-honoring of sovereign financial obligations related to funding agreements between an Avianca-TACA affiliate and several financiers in these countries. The guarantees helped Avianca-TACA affiliates in these Central American countries to secure the final installment of debt funding for nine aircrafts, which improved air travel service in that region.

Frequently Asked Questions(FAQ)

What is Multilateral Investment Guarantee Agency (MIGA)?

The Multilateral Investment Guarantee Agency (MIGA) is an international financial institution that offers political risk insurance and credit enhancement guarantees. These services help investors safeguard against risks such as expropriation, non-honoring of financial obligations, wars, and civil disturbances; and help creditors protect against the risk of non-payment.

Who formed MIGA and when?

MIGA was formed in April 1988 as a member of the World Bank Group.

What is the purpose of MIGA?

MIGA’s main purpose is to promote cross-border investment in developing countries by providing guarantees, or insurance, against political and non-commercial risks in these countries. It encourages direct foreign investment by reassuring private investors their investments will be protected during volatile situations.

Who can be members of MIGA?

MIGA membership is open to all World Bank members. The institution currently has 182 member countries globally.

What types of projects are eligible for MIGA guarantees?

Most projects in a vast range of sectors are eligible, including manufacturing, services, and extractive industries. MIGA also covers many types of investments, from greenfield projects to expansions of existing projects, mergers, and acquisitions.

How does MIGA obtain its funds?

MIGA operates with its own capital base which is contributed by its member countries. In addition, its income is derived from the guarantee fees it charges its clients.

How does MIGA assist in dispute resolution?

MIGA provides assistance to investors and member states in dispute resolution. It often acts as a mediator between governments and investors to negotiate differences and avoid escalation into legal disputes.

Who can apply for MIGA guarantees?

Private investors of any nationality, banks or financial institutions, equity investors, holders of shareholder loans and loan guarantors, and public sector entities in certain situations, can apply for MIGA guarantees.

What is the duration of MIGA guarantees?

The duration varies depending on the contract. However, MIGA typically provides guarantees for up to 15 years, with possible extensions.

: How does MIGA contribute to poverty reduction and development?

: MIGA supports economic growth by encouraging private investment in developing countries. This can help promote job creation, boost productivity, and subsequently contribute to poverty reduction and development.

Related Finance Terms

Sources for More Information


About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More