The World Bank is set to reform its loan and guarantee framework

The World Bank plans to strengthen its loan and guarantee framework, as part of a target to triple its annual guarantee issuances to USD 20 bn by the end of the decade, according to a statement released last week. The new reforms — which will come into effect on 1 July — are part of a target to increase its overall lending to USD 150 bn over the next decade to alleviate the impact of climate change and other global crises. The lender notes the new strategy — its “first significant change in 15 years” — will ensure speedy financing approvals and create a new, convenient marketplace.

The fineprint: The streamlined approach will consolidate all of the bank’s guarantee experts under one roof, condense its guarantees in “a single menu” catered to individual clients' needs while creating new products, and see the bank apply a risk-weighted approach that focuses resources on high-impact projects to reduce duplicative risk analysis while freeing up capacity to tackle more complex challenges, the statement said.

The WB’s new approach is centered around six core updates: The core updates include bringing together guarantee experts from across the giant organization for a unified structure; compiling all of the group’s guarantees into a single menu; launching a unified approach for guarantee reviews to eliminate needless processes; expanding the guarantee teams and training staff globally to boost accessibility; directing resources toward significant projects and portfolios in a risk-weighted approach; and introducing new and innovative guarantee products.

Some think this is not enough to take on the climate crisis: The bank’s President Ajay Banga noted the newly announced USD 20 bn annual increase over the next five-six years is an “arbitrary figure,” and that the ambition is “to go in quantum number” from current lending levels, Reuters reported. The capital adequacy would need to be reviewed, Banga added.

MENA stands to gain a lot from the new reforms: The World Bank said during COP28 it plans to increase climate finance to MENA up to USD 10 bn by 2025, as part of a target to expand its global funding capacity to USD 40 bn by the same timeframe.

The WB has been working on adapting its policies to strengthen climate resiliency: The UK, France, the World Bank, AfDB, EBRD, and the IDB announced during COP that they will expand the use of climate-resilient debt clauses in their lending to pause debt when countries are hit by natural disasters.