Liberty Specialty Markets (LSM) has closed its first deal under a new partnership with International Finance Corporation (IFC), a member of the World Bank Group, which sees LSM insure a loan of US $185 million from IFC to Vietnam Commercial Joint Stock Bank (VIB).
Last year, LSM agreed to provide unfunded credit insurance for IFC’s Managed Co-Lending Portfolio Program (MCPP), a syndicated loans platform that supports emerging market borrowers by providing access to additional funding from third party investors and insurers.
Under the partnership, IFC will originate, structure and administer loans to financial institutions like VIB, while transferring a portion of the loan’s credit risk to LSM, allowing IFC to lend up to $2 billion to commercial banks in developing countries.
This arrangement increases the borrower’s provision of debt financing to local small-to-medium enterprises (SMEs), and in the case of the new VIB loan will support lending to SMEs, micro-SMEs, and affordable housing projects in Vietnam.
Peter Sprent, LSM’s Head of Global Financial Risks, indicated that the company’s arrangement with IFC represents a new strategic priority for its global financial risks team, and will be the first in a series of new partnerships with major international development institutions.
He explained: “Economic development is a priority for Liberty Specialty Markets. Creating prosperity in the communities in which we do business around the world is one of our core values. Managed effectively, it can also generate positive returns for us.
“Providing capacity to insure up to US$500m of loans made by IFC’s newest platform is a positive way of generating economic growth in some of the poorest countries of the world, but it’s just a first step for us.
“Our guiding principle is to work with the best partners we can find, who can also offer us exposure to a range of high quality alternative risks. Cooperating with this type of body offers us access to a broader range of emerging market risks that we might not otherwise see, plus the chance to develop new markets.
“There is no doubt that this partnership represents a significant milestone in our strategy to provide innovative insurance solutions for global development institutions whose goals align with our own. Our hope is that our partnership with IFC will grow and that by facilitating more lending, a halo effect will be created that will in turn attract more capital to meet development goals.”
IFC is a sister organisation of the World Bank and is the largest global development institution currently focused on supporting the private sector in emerging markets, working with over 2,000 businesses globally.
