UNDP-supported Guarantees

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Programme and Project Management
Crisis Response
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Financial Resources Management
Financial Management and Implementation Modalities
UNDP-supported Guarantees

Main navigation

Inventory Management
- Inventory Management
Cash Banking and Investment
Financial Closure of Development Projects and Trust Funds
Financial Management and Implementation Modalities
Financial Operations Management
- Corporate Operations and Information Management
- Statutory Financial Reporting
Pipeline and Revenue Management
Expense Management
Resource Planning and Cost Recovery
Working with External Auditors
- Working with External Auditors

Focal Point

Sahba Sobhani, Miguel Garcia-Bermejo, Michelle Armfield

Effective Date

19/12/2022

Planned Review Date

19/12/2025

Version

1.0

About this policy

The UNDP-supported Guarantees Policy has been approved on a pilot basis, with the pilot period envisaging up to five guarantee projects per Regional Bureau, with clear potential and identified non-core funding. To ensure it is putting forward robust proposals with the best chance of success, the Regional Bureau must agree that a CO should proceed with submitting a proposal to initiate a pilot guarantee project for review and clearance by HQ, including by BPPS Global Policy Network (GPN) and Finance Sector Hub for the programme facets, as well as BMS for the financial and legal facets. If a CO identifies an opportunity to pilot a guarantee project, an initial diagnostic, concept note, and country risk assessment must be prepared and shared with the Regional Bureau, BPPS GPN, Finance Sector Hub, and the BMS/OFM Guarantees Project Team for review and clearance. For more information, please refer to the policy and procedures.

Latest updates

December 19, 2022 - The UNDP-supported Guarantees policy has been approved for a five-year pilot period, and includes credit guarantees and procurement guarantees, which were previously assessed as areas of high demand and thus prioritized for the first phase of implementation. UNDP-supported Guarantees must be part of broader development interventions in DIM and CO-support to NIM projects and be fully donor funded. The pilot policy will enable UNDP to leverage guarantees in a prudent manner to incentivize sustainable/SDG-aligned investments in line with its ambition to leverage public finance and mobilize private finance for the SDGs. In addition, it will open new partnership venues and strengthen UNDP’s ability to act as an integrator across the UN development system. p tag used her

December 19, 2022 - The UNDP-supported Guarantees policy has been approved for a five-year pilot period, and includes credit guarantees and procurement guarantees, which were previously assessed as areas of high demand and thus prioritized for the first phase of implementation. UNDP-supported Guarantees must be part of broader development interventions in DIM and CO-support to NIM projects and be fully donor funded. The pilot policy will enable UNDP to leverage guarantees in a prudent manner to incentivize sustainable/SDG-aligned investments in line with its ambition to leverage public finance and mobilize private finance for the SDGs. In addition, it will open new partnership venues and strengthen UNDP’s ability to act as an integrator across the UN development system. p tag used here for line break

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Relevant Regulations and Rules

UNDP Financial Regulations and Rules

Policies

Main Policy

UNDP-supported Guarantees

DOCX (122.53 KB)

Download

The UNDP-supported Guarantees Operational Manual supplements this policy

Related Policies

Formulate Programmes and Projects
Direct Implementation (DIM) Modality
UNDP Support Services to National Implementation (NIM)

Procedures

Main Procedures

1

Step

Guarantee Origination: CO identifies opportunity to use guarantee, conducts initial diagnostic, drafts concept note and initiates country risk assessment, consulting with the GPN and Guarantees Project Team as required, and submits proposal for review.

Responsible Party

CO in consultation with GPN & Guarantees Project Team

Template/Guideline

Explanatory Notes

Guarantees Project Team is a dedicated project team established to support the initial phases of roll out of the guarantees policy.

2

Step

Review guarantee proposal, including the diagnostic, evidence of positive impact and country risk assessment. Approve or request CO to revise and resubmit.

Responsible Party

Finance Sector Hub &GPN

Template/Guideline

Explanatory Notes

3

Step

Conducts financial and programmatic structuring of the guarantee, including appropriate exit strategy, pricing based on credit risk assessment of the lending portfolio and cost recovery, consulting with the Guarantees Project Team and GPN as required. Guarantees Project Team reviews the guarantee structure, including proposed pricing and cost recovery, and requests CO to modify if necessary

Responsible Party

Template/Guideline

Explanatory Notes

4

Step

Initiate identification, screening (including initial due diligence and credit risk assessment), selection and engaging of lender(s) and guarantee issuer in consultation with Guarantees Project Team and BMS/OFM Treasury.

Responsible Party

CO in consultation with Guarantees Project Team & BMS/OFM Treasury

Template/Guideline

Explanatory Notes

5

Step

Conduct solicitation process for guarantee issuer. Provide advice, review and clearance for lender(s) selection. Provide advice on due diligence and credit risk assessments, as required. Initiate formal agreement process with guarantee issuer.

Responsible Party

BMS/OFM Treasury

Template/Guideline

Explanatory Notes

6

Step

Conduct initial due diligence and credit risk assessment of lender(s) and guarantee issuer, consulting with Treasury as required. Assess if OK to proceed with guarantee. If not OK, reject guarantee proposal and notify CO.

Responsible Party

Guarantees Project Team

Template/Guideline

Explanatory Notes

Due diligence on borrowers is conducted by lender(s).

7

Step

Modify financial and programmatic structuring, if necessary, in consultation with Guarantees Project Team and GPN, and submit guarantee documentation (agreements) for review.

Responsible Party

Template/Guideline

Explanatory Notes

8

Step

Review guarantee arrangement, advise on legal and other issues/risks of the guarantee, and approve or reject the guarantee arrangement. For exceptional cases, Treasury escalates the guarantee to the Credit Risk Committee and CFO for review.

Responsible Party

Template/Guideline

Explanatory Notes

Refer to paragraph 49 for examples of cases that must be escalated to the Credit Risk Committee for review and approval.

9

Step

Credit Risk Committee and CFO review exceptional cases and approve/reject or escalate to Enterprise Risk Management (ERM) committee for final decision.

Responsible Party

Credit Risk Committee & CFO, followed by ERM Committee

Template/Guideline

Explanatory Notes

Credit Risk Committee will be advised and supported by the Guarantees Project Team

10

Step

If guarantee agreement is cleared, record the guarantee and assign guarantee funds to the escrow account

Responsible Party

Treasury,

BMS/GSSU and BMS/OFM Treasury

Template/Guideline

Explanatory Notes

11

Step

Conduct ongoing programmatic and financial monitoring, reporting and oversight of guarantees.

Responsible Party

CO, GPN, Finance Sector Hub, Guarantees Project Team, BMS/OFM Treasury, Credit Risk Committee, ERM Committee

Template/Guideline

Explanatory Notes

Includes providing donor reporting and refunds where required by financing agreements.

United Nations
Development Programme

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