Service & Consulting
Small Investment Program
IFS has developed a guarantee program called the Small
Investment Program (SIP), which is specifically designed for small and
medium-size investors (SMIs) investing in small and medium-size enterprises
(SMEs). IFS helps the SME sector in emerging economies in two ways: (1)
directly, by providing political risk insurance (guarantees) to foreign
investors who wish to invest in SMEs, and (2) indirectly, by providing
political risk insurance to financial institutions that will then lend
to small and medium-size businesses through local affiliates. IFS SIP offers
a standardized package of risk coverages including currency inconvertibility
and transfer restriction, expropriation, and war and civil disturbance.
The program is tailored to small and medium-size investors,
quick and efficient underwriting process
single application form
no application fee
IFS has a dedicated SIP team that guides investors through
the underwriting process.
Depending on the availability of the necessary project
information, IFS can issue guarantees within 6-8 weeks of receiving an
What is Eligible?
IFS insures new investments destined for developing countries
as well as investments associated with the expansion, modernization, or
financial restructuring of existing projects. Acquisitions that involve
the privatization of state-owned enterprises are also eligible. Other investments
may be eligible and are considered on a case-by-case basis. Types of foreign
investments that can be covered include equity, shareholder loans, and
shareholder loanguaranties, provided the loans have a minimum maturity
of three years. Commercial bank loans can also be insured, provided that
an equity investment in the project is insured concurrently or has already
been insured. Other forms of investments, such as technical assistance
contracts, and franchising and licensing agreements,
are also eligible for coverage.
New investments are those that have neither been made
nor irrevocably committed on the date of submission to IFS
of an application for guarantee. In keeping with IFS'
objective of promoting economic growth and development, investment projects
must be financially and economically viable, environmentally sound, and
consistent with the labor standards and other development objectives of
the host country.
Size of Investment
Investments are eligible for coverage under SIP if they
are related to the establishment of an SME, or made into an existing SME,
in a developing member country.
In order to qualify as an SME the project enterprise
must fulfill two of the following criteria:
No more than 300 employees
Total assets should not be more than US$15 million
Total annual sales should not be more than US$15
Investments in the financial sector are eligible under
SIP if they are geared towards providing financial services for SMEs, and
at least 50 percent of clients related to the investment are SMEs as defined
Eligible investors include:
Nationals of IFS member countries
Corporations if they are either incorporated and
have their principal place of business in a member country, or if they
are majority-owned by nationals of member countries.
The Small Investment Program has no restrictions with
respect to the size of the investor. However, the Programm is specifically
designed to assist small and medium-size investors. The application fee
is waived for SMIs. In order to
qualify as an SMI, the company must have no more than
375 employees and fulfill one of the following additional criteria:
have no more than US$50 million in assets or US$100 million
in annual sales.
TERMS OF SIP GUARANTEE
SIP guarantees have a term of up to 10 years (three years
minimum), with the possibility of an extension of up to five
years at the end of the original term, at IFS' discretion.
The maximum amount of guarantee offered is US$5 million
(the actual size of the investment may be bigger). There
is no minimum required amount of guarantee. SIP covers
up to 90 percent of the investment for equity and up
to 95 percent for debt.
For guarantee requests above this amount, investors may
apply for coverage under IFS' regular guarantee program.
SIP' contract of guarantee includes coverage against
three types of risks:
Currency inconvertibility and transfer restriction
War and civil disturbance
Breach of contract coverage and Category A projects—
which are likely to have significant adverse environmental impacts— not
available or eligible for coverage through SIP.
Investors requiring breach of contract coverage or investing
in a Category A project may apply through IFS'
regular guarantee program.
In order for IFS to pay a claim on an insured investment,
shares, assets and other securities obtained by the investor
in connection with such investment must be assigned to
Currency inconvertibility and transfer restriction
Protects against losses arising from an investor' inability
to convert local currency (capital, interest, principal, profits,
royalties and other remittances) into foreign exchange
for transfer outside the host country. The coverage insures against excessive
delays in acquiring foreign exchange due to host government action or failure
to act. IFS pays
compensation in the currency specified in the contract
Protects against losses arising from host government
actions that may reduce or eliminate ownership of, control over,
or rights to the insured investment. In addition to outright
nationalization and confiscation, "" expropriation—a series of acts that,
over time, have an expropriatory effect— also covered. Coverage is available
on a limited basis for partial expropriation (e.g., confiscation of funds
or tangible assets). Bona fide, nondiscriminatory measures by the host
government in the exercise of legitimate regulatory authority are not considered
to be expropriatory.
For total expropriation of equity investments, IFS pays
the net book value of the insured investment. For expropriation
of funds, IFS pays the insured portion of the blocked
funds. For loans and loan guaranties, IFS can insure the outstanding principal
and any accrued and unpaid interest.
Compensation will be paid upon assignment of the investor'
interest in the expropriated investment (e.g., equity shares or interest
in a loan agreement) to IFS.
War and Civil Disturbance
Protects against loss from, damage to, or the destruction
or disappearance of, tangible assets caused by politically motivated acts
of war or civil disturbance in the host country, including revolution,
insurrection, coups d' sabotage, and terrorism. War and civil disturbance
coverage also extends to events that, for a period set forth in the contract
of guarantee, result in an interruption of project operations essential
to overall project financial viability. Business interruption coverage
is effective when the investment is considered a total loss; at that point,
IFS will pay the book value of the total insured equity investment.
For equity investments, IFS will pay the investor' share
of the least of the book value of the assets, their replacement cost, and
the cost of repair of damaged assets. For loans and loan guaranties, IFS
will pay the insured portion of the principal and interest payments in
default as a direct result of damage to the assets of the project caused
by war and civil disturbance or as a result of business interruption caused
by covered events. Breach of contract coverage is not offered under SIP,
but investors requiring this coverage may apply through IFS' regular guarantee
How to Apply
Application Process and Form
The SIP application, to be completed by the investor,
provides IFS with the information needed to underwrite a project and prepare
a contract of guarantee. The application requires information on the amount
and type of investment, the expected developmental and environmental impacts
of the project, and its financial and economic viability.
Once the SIP application is received, IFS will register
the project and contact the investor to begin the underwriting process.
Investors may download an electronic copy of the SIP
Once the application is registered, implementation of
the investment, through transfer or irrevocable commitment of investment
resources to the project, may commence. Should the investor have insufficient
information to complete the SIP application, we request that the investor
submit Section 1 of the application and update once full information is
This will allow IFS to register the project and preserve
its eligibility as a new investment. However, until IFS' analysis and due
diligence is complete, the agency will not be able to commit to providing
the requested guarantees.
The approval process should not take longer than 6-8
weeks if the information requested in the application is fully completed
and IFS is supplied with all relevant project documentation. Once the guarantee
proposal has been approved by IFS, the investor will receive a contract
of guarantee, and on receipt, will have a period of six weeks to sign the
contract. If the investor decides not to go ahead within this period, IFS
will terminate the guarantee process. To avoid delays in the application
process, business and financial plans should be in place and financial
projections available prior to filing the application.
Please contact us
Questions regarding SIP or the application process should
be forwarded to: