MIGA’s Trade Finance Guarantee provides protection against losses resulting from the failure of a state-owned bank or public authority to pay an unconditional financial obligation related to a trade finance transaction.
Cross-border trade typically involves an importer and an exporter, and between them a bank that issues a letter of credit to guarantee shipment to the importer and payment to the exporter. There is often a private international bank that confirms the issuing bank’s letter of credit.
MIGA’s guarantee protects the confirming bank against the risk of payment default by a state-owned issuing bank.
In addition, MIGA can issue a guarantee for a trade loan against the risk of a nonpayment by a state-owned bank, state-owned enterprise, or sovereign or sub-sovereign entity.
