2014年-世界发展银行全球_A_Partial_Credit_Guarantee___Enhancing_Access_to_Credit_Markets_during_Constrained_Times_4页_2mb

Summary of SmartLessons: Partial Credit Guarantee for HBOR

Core Content

The document outlines the implementation of a Partial Credit Guarantee (PCG) by the World Bank for the Croatian Bank for Reconstruction and Development (HBOR) to address credit market constraints during the European financial crisis. The goal was to support the private sector by enabling HBOR to access long-term financing from international markets, which is crucial for economic recovery and competitiveness, especially ahead of Croatia's EU accession in 2013.

Main Points

• Context of Crisis: Croatia faced severe credit market limitations, with private sector credit declining by 10.3% in 2012, one of the highest contractions in the EU. This was exacerbated by a reduction in foreign investment and uncertainty in global financial markets.
• Role of HBOR: As a development and export bank, HBOR played a vital role in providing long-term financing to exporters and SMEs. However, its borrowing costs remained high due to sovereign risk concerns and limited access to capital markets.
• World Bank's PCG Instrument: The PCG was designed to:
  • Leverage private sector funding.
  • Secure long-term financing (up to €250 million) with competitive pricing (3-4% all-in cost) and long maturity (seven-plus years).
  • Reduce transaction risks and improve debt sustainability for HBOR.
  • Enhance market confidence in Croatia and HBOR through IBRD guarantee.
• Structure of the PCG: The PCG involved a three-party arrangement between commercial lenders, HBOR, and IBRD. The guarantee coverage was set at €200 million, and the grace period was at least three years.

Key Information

• Total Financing: Up to €250 million.
• Guarantee Coverage: €200 million (80% of total financing).
• Funding Flow:
  • HBOR raises funds from international banks.
  • HBOR on-lends to eligible private companies (exporters and FX-earners).
  • The World Bank provides a guarantee to reduce risk.
• Impact: The PCG helped maintain credit flow, support competitiveness, and facilitate market entry for HBOR.

Lessons Learned

1. Explain Instrument Rationale:

   • The World Bank team spent significant time explaining the rationale behind the PCG to secure full client ownership and ensure its suitability for HBOR’s needs.

2. Understand Client Needs:

   • The client (HBOR) was price-sensitive, so the guarantee coverage was set at 80%. However, higher coverage was later preferred to reduce financing costs for final beneficiaries.

3. Flexibility in Processing:

   • The World Bank adjusted its internal processing requirements to align with the client's transaction timeline, securing Board approval early and dividing the operation into stages.

4. Division of Responsibilities:

   • The client was in leading role for market sounding and negotiations, with support from the Bank team. The Bank could have improved RFP drafting support to increase bank participation.

5. Capacity Building and Technical Support:

   • HBOR required assistance in assessing financial offers and understanding the impact of PCG on financial terms. The Bank provided timely analysis and technical support, which was well received.

6. Effective Cross-Department Teamwork:

   • The project involved a cross-department team from FPD, Treasury, Poverty Reduction and Economic Management, Sustainable Development, and Legal. This collaborative approach ensured efficient execution and clear division of responsibilities.

Conclusion

The Partial Credit Guarantee for HBOR was a strategic response to market constraints and sovereign risk perceptions, enabling the bank to access international capital and support private sector growth. The project highlighted the importance of client engagement, flexibility in operations, and inter-departmental coordination in successfully implementing such financial instruments.