Strategic Advisory - Gargaara’s Partial Credit Guarantee Scheme
Area of Operation: Somalia
Duration of Assignment: November 2022 – February 2023
Name of Client: The World Bank Group
Project Description:
The WB funded Somalia Capacity Advancement, Livelihoods and Entrepreneurship, through Digital Uplift Program (SCALED-UP) being implemented by the Government was expected to help increase access to basic digital financial and government services targeting entrepreneurship and employment, particularly for women. As part of SCALED-UP, the Development Bank of Somalia (Gargaara) was established to provide wholesale financing to MSME and enhance provision of financial services.
One of the components was to develop and risk sharing mechanism for banks to be able to be able to better manage risk and improve lending products and services. A preliminary study recommended setting up of a Partial Credit Guarantee Scheme (PCGS) and the counterparts have requested WB support to build on the preliminary study and provide further guidance to facilitate setting up of the PCGS.
In order to support the client request, the World Bank sought a firm to support SCALED-UP Task Team explore key strategic considerations of piloting and setting up a PCGS to facilitate finalization of the scheme’s design.
Our Services:
- Conducted a desk review of existing studies, outcome of previous discussions with selected institutions to develop a perspective on the current status of the PCG preparatory work.
- Provided different options for institutional set of the PCGS.
- Developed arguments for different mandates of the PCGS vis-à-vis the wholesale lending activities of the development bank.
- Provided guidance on approach to, implications of, and appropriate levels of leverage for the PCGS and pricing of its guarantees.
- Determined the key parameters to be analysed and developed further in Phase 2.
- Determined appropriate targeting of the PCGS interventions.
- Developed a high-level approach to ensure compliance of the PCGS with non-interest finance principles.
- Provided a high-level description of a preliminary PCGS design.
- Developed guidance notes covering the various strategic/ philosophical considerations regarding the critical aspects of the potential PCGS.