Many investors opt out of investments in developing countries due to high risk and high uncertainty. This means that projects that could, among other things, contribute positively to the green transition and social development cannot be implemented. The aim of the Development Guarantee Programme is to change this.
The Development Guarantee Programme of DKK two billion, granted by the Ministry of Foreign Affairs and financed through the State’s re-lending scheme, will be managed by IFU. The guarantees will contribute to reduce the risk of investors and thereby create access to increased capital mobilisation for projects in developing countries. Focus is on climate financing and capital for poor and fragile developing countries.
“There is a need for a giant green leap to significantly increase private climate investments in the developing countries. Therefore, the government has launched the Development Guarantee Programme to make it less risky for private investors to participate. If we are to realise the Sustainable Development Goals and the goals of the Paris Agreement, it is of great importance that we get the private investors involved in the green transition in the developing countries.”
Flemming Møller Mortensen, Minister for Development Cooperation and Minister for Nordic Cooperation.
“We are very happy to be managing this guarantee programme. It enables us to guarantee part of the investors’ possible loss and thereby create more security and greater appetite for investments to improve the living conditions in developing countries and contribute to the green transition,” said Torben Huss, CEO of IFU.
Examples of guarantees could be a guarantee to private investors offering loans to small-scale solar plants provided by private companies in Africa, or offering loans for climate-adapted agriculture, which at the same time contributes to food security.
In cooperation with Swedish SIDA
The Development Guarantee Programme is initially a four-year pilot project carried out in cooperation with Swedish SIDA, which is a counterpart to Danida. SIDA has more than ten years of experience in issuing guarantees to finance projects in developing countries.
It is expected that the guarantees will average DKK 250-300 million and that the total mobilisation of private capital will amount to DKK 3 to 4 billion.