BRICS to Launch Investment Guarantee Fund
Why in news:
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The BRICS group is preparing to launch a Multilateral Guarantee Fund, backed by the New Development Bank (NDB), to boost private and infrastructure investment in member and other developing nations.
Key Highlights:
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Name of Fund: BRICS Multilateral Guarantee (BMG) Mechanism
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Modelled on: World Bank’s Multilateral Investment Guarantee Agency (MIGA)
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Purpose:
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Reduce financing costs
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Attract private capital
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De-risk projects in infrastructure, climate adaptation, and sustainable development
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Strengthen NDB’s role and relevance in global governance
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Significance:
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Responds to global investment uncertainties (e.g., US economic policy fluctuations)
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Demonstrates BRICS unity and commitment to global south cooperation
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No new capital contribution from member countries needed
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Will leverage existing NDB resources
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Expected Outcomes:
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Each $1 in NDB guarantees is expected to mobilize $5 to $10 in private investment.
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Pilot projects to begin receiving guarantees by 2026.
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Seen as the flagship financial initiative of Brazil’s 2025 BRICS Presidency.
Status:
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Has technical approval from all member countries.
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Awaiting formal endorsement by BRICS Finance Ministers (expected soon).
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To be included in BRICS Summit 2025 joint declaration (Rio de Janeiro).
Multilateral Investment Guarantee Agency (MIGA)
Established: 1988.
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Headquarters: Washington D.C., USA.
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Member of: World Bank Group (5th institution after IBRD, IDA, IFC, ICSID).
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Main Objective: Promote Foreign Direct Investment (FDI) in developing countries by insuring against political and non-commercial risks.
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Total Members: 182 (as of 2022), including 156 developing and 25 industrialized countries.
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India is a member of MIGA.
Published reports like "World Investment and Political Risk".
Established: 1988.
Headquarters: Washington D.C., USA.
Member of: World Bank Group (5th institution after IBRD, IDA, IFC, ICSID).
Main Objective: Promote Foreign Direct Investment (FDI) in developing countries by insuring against political and non-commercial risks.
Total Members: 182 (as of 2022), including 156 developing and 25 industrialized countries.
India is a member of MIGA.
Published reports like "World Investment and Political Risk".
Core Functions:
MIGA provides insurance (guarantees) against five major non-commercial risks:
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Currency inconvertibility and transfer restriction
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Expropriation or nationalization
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War, terrorism, and civil disturbances
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Breach of contract by governments
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Non-honoring of sovereign financial obligations
Instruments covered: Equity, shareholder loans, bonds, lease agreements, franchise/license contracts, and more.
Insurance Tenure: Up to 15 years (with a possible 5-year extension).
Dispute Resolution: Engages in mediation before disputes become formal claims; uses subrogation rights to recover compensation.