World Bank launches new cat loan

The World Bank Group today announced a new loan facility for natural catastrophes and revised the terms of an existing contingency financing product.

The announcements are part of a drive by President Robert B. Zoellick to improve the World Bank Group’s efforts to overcome poverty in middle-income countries.

They follow a major reduction in loan pricing announced in September as well as measures that have accelerated loan processing times.

Zoellick said: “These financial product enhancements reflect the World Bank Group’s commitment to using creative ways to expand resources for our country partners. As our client relationships with middle-income countries become more sophisticated, the World Bank is responding with development solutions that share knowledge, build markets and institutions, and provide capital.”

“These financial product enhancements reflect the World Bank Group’s commitment to using creative ways to expand resources for our country partners.

The World Bank President Robert B. Zoellick

The Catastrophe Risk Deferred Drawdown Option (DDO) facility, or CAT DDO, offers middle-income countries up to US $500m if they suffer a natural catastrophe such as a hurricane or earthquake. Its purpose is to provide bridge financing while other sources of funding are being mobilized. Funds will be disbursed when a country suffers a natural disaster and declares a state of emergency. Countries signing up for the facility must have a hazard risk management program in place that is monitored by the World Bank.

The board of directors also approved improvements to the existing Deferred Drawdown Option (DDO), launched in 2001 for countries that have no immediate need of funding but which may be forced to borrow because of unforeseen events.

The World Bank also loaned Colombia US $300m under a new policy that significantly extends maturities.