The creation of the Development Guarantee Group: delivering the UN SDGs through guarantees

Welcome to Knowledge Guaranteed. I'm Marjula F. Compan, head of communications marketing and advocacy at the Development Guaranteed Group. Our mission is to finance a sustainable future for everyone through innovative guarantee solutions. And in this podcast we'll be sharing how we're making that vision a reality. In our first episode, co-founder and chairman, Buhokku is joined by his fellow co-founders, La Sita Pereira, Chief Executive Officer and Dale Petri, Chief Operating Officer of the Development Guaranteed Group. The three of them discuss everything from the origin story of the company to what makes DGG the first of his kind. Plus how it hopes to positively impact millions of lives across the world, over to Buhokku. Let's kick things off, Flas. Can you tell us how you started dipping your toes and then diving into the world of guarantees before culminating in the founding of DGG? Thanks Buhokkuya. So I started my career in investment banking, working at Barclays and I spent a decade there working largely with institution investors and trying to get them to invest in complicated debt situations. And what I learned there was a lot about structuring and the importance of being able to tell stories as to why investors need to come in. My family originally from Sri Lanka and so I've always had a strong connection to the developing world through that. And I got to point in my career where I wanted to go and do something which had a more direct impact on countries like Sri Lanka. And that's how I ended up getting into the world of development finance through luck and happens to onsite ended up joining Granco when it was in its startup period. Granco being a guarantee company which is part of the private and structured boom group. And it's mandate at the time as to focus very much on developing local capital markets using guarantees. And I spent 13 years there and over that time I really learned about the power of guarantees. I think sometimes when people ask me, well, what do I mean by that? I like to tell them a little analogy. So you know, if you imagine investing like driving a car, you can look at that situation of where as an investor, you either get into the back seat of the car and have somebody else drive you to the destination. And the truth is in that situation, you're going to get to that point to the destination, but you're not learning how to drive the car. You're just being driven there by somebody else who has the skills and the knowledge of how the ability to see what's ahead and drive, right? Whereas with a guarantee, US investor have been put in the driving seat. You need to learn how to drive the car. You need to learn to navigate the road to the destination. But you always have the comfort of knowing if something goes wrong, you have an airbag. And that's what the guarantee is, is the airbag. But what's powerful about the guarantee in that role is that the investor is still learning. They're learning about how to drive the car. They're learning about the geography of the area that they're going into. They're learning about the situation and the issues that they have to deal with on the way. And only if something truly goes wrong will the airbag deploy. And that capacity building is really the power of the guarantee versus the other approach where the investor just gets in the back seat and somebody else is driving the car for them. I got to learn over those 13 years at Garanko. And that's why I've got so excited and passionate about the guarantee as a product, particularly from the perspective of helping countries develop. Because, you know, as we all know, there are lots of opportunities in those countries. And what's missing is the ability of investors to feel safe enough to go in and learn about how to invest in those opportunities and make the most of them. And that's kind of how I got into the guarantee product and why I'm so passionate about it. Fascinating. Guarantees is airbags. How about you, Dale? So I actually fell into guarantees. I qualified as a charter management accountant with insurance services. And shortly after qualifying, I was keen to use some of the knowledge I'd learnt whilst studying in particular accounting for complex financial instruments and foreign currency transactions. So I joined a boutique fund manager who at the time specialised in managing a debt and a debt fund and a guarantor. The guarantor was called Garanko. And that's in fact where both last and I cross paths. So both the debt fund and the guarantor focused on supporting infrastructure projects and emerging markets and developing economies. And when I joined the boutique fund manager, I was familiar with debt funds, but not guarantees. And my manager did what all good managers do. She threw me into the deep end and gave me the responsibility of overseeing the team responsible for preparing the financial reporting of the guarantor and also all the operations as well. So I learned very quickly how to account for guarantees, but also all the underlying operational realities of that, which included some of the risk management. So that's where I cut my teeth on guarantees. It's also where I was introduced into the world of blended finance. And a little bit like last, I realised very quickly how effective guarantees can be as a catalyst for change. And I've been a guarantee junkie ever since. Why do you think guarantees are needed through the development guarantee group? Bless. You know, during my 13 years at Garanko, one of the frustrations I had was that I kept getting calls from different investors and banks and so on and saying, you know, and other development finance organisations saying we have this specific problem that we think a guarantee can solve. Can you solve it? And, you know, we were constrained to Garanko with what we could do there because they had a clear mandate on focusing on local currency and local capital markets. And I think it was, and it was very important that work that they were doing there. But there were clearly other problems that needed other kinds of guarantees to solve those problems. And so from our perspective, I felt there needed to be something new. Now, if you are an investor looking for an equity product, there are maybe 30 or 40 different platforms you could approach in the development finance world that could potentially offer you that product or develop it for you. Same with debt products. But for guarantee products, there was no clear independent centre of excellence that you could approach. And that's why we felt we really needed to create the development guarantee group because then we were bringing the first platform that was solely focused on developing new guarantee solutions for anyone that needed them. And that's really the ethos and the reasoning behind creating the development guarantee group. Great. So let's talk about the first guarantee solution, right? If I can ask Dale, what is DGG talking to see at the moment? Climate finance, which is highly topical at the moment, in particular discussions around climate finance gap. I mean, we know that finance gap is huge. The number is moving around a bit, but it's a big number. It's an abundance of not trillions. And we set up the green guarantee company to mobilize capital from global capital and credit markets where they're trillions of dollars of capital into infrastructure in developing nations. So by providing an investment grade financial credit guarantee to borrowers in emerging markets, it gives these borrowers access to pools of capital for climate adaptation and mitigation projects, which they wouldn't otherwise have access to. So we've seen a huge number of highly impactful bankable projects in challenging countries. For example, solar wind or wind farms or innovative sustainable technologies in countries which are on not investment grade. And that prevents investors in global capital and credit markets from from actually investing in those countries. So last where are we on GGC's maiden ceiling? We've made a lot of great progress. GGC was officially launched in March of 2024 at the lot of stock exchange and we have raised $100 million of capital, which gives us a billion dollars of guarantee capacity to start with. And really that's one of the strengths of GGC. It's ability to leverage at 10 times. So for every dollar of capital we get in, we can write $10 guarantees, which is very powerful. You know, where we are now is the team has been established. We're working with our network of origination partners to build a pipeline and the response has been really strong. We're very much hopeful that we're going to close our first couple of transactions to see here as well. So things are moving really well. Yeah, we're seeing them in the built. So we're all very excited about this about 2025 for GGC. Fantastic. Everyone I speak to on GGC is actually very excited. And they've asked for support as to how we got it done. I guess I see a few more heavy ropes being tied to the rear of the boat. And Dale, can you tell us what are the guarantors? There's two other guarantors that we are looking at at the moment. First is a financial inclusion guarantor, which will focus on supporting alternative finance institutions. So they can increase the amount of sustainable financing that they can extend to Microsoft and medium-sized enterprises. And the second is Nautilus, which will focus on supporting ocean positive projects. And these could be projects, for example, which protect marine ecosystems or enhance community resilience and drive social economic growth and vulnerable coastal regions. So coming back to last, so how would say an organization keen on deploying guarantees, benefit from the GG support with respect to starting one for themselves? There are two clear areas of competence that we can bring to to the table for somebody that's looking to develop a guarantee product or set it up. So firstly, we worked a lot with different kinds of guarantees across the organization in different situations. And so we have that sort of learned knowledge that we can bring to the table that can be very valuable. And we work with a number of global consultancies who use us because they recognize that expertise. And so that's clearly an area of strength for us. And the second, which is perhaps less obvious, but actually very important is that if you're setting up a guarantee company from scratch, it takes a long time. And a lot of that time is taken from setting up the operations and the governance of these guarantee companies. And what we have established is a platform that has this operational and governance capability already been built and ready to go. We can actually leverage this platform across multiple guarantors and help them launch and get to market much quicker than if they were doing it on their own. And really that's another strength you bring. And you know, Dale and his team have significant experience in managing and running the operations of guarantors. And what we're able to do and what his team are able to do is basically generate efficiencies by being able to do that across multiple guarantors as well. So fundamentally, that's where we look to try and help be helpful and useful, which is bringing our experience and understanding of how do you design a guarantee product that's actually going to deliver the impact you want. And how do you generate efficiencies because you don't have to go and rebuild something that we already have and can give you through our ability to manage that guarantor for you. That's really interesting because our experience is actually what we can help others succeed. I wanted to just touch on a couple of things that we do. So we help design guarantors for people who are at the design stage. And from that, we can start helping them develop the establishment of the guarantee. And once it's established, we can manage the guarantee initiative as well. Like we do for the green guarantee company. But my question is, do we do all three for clients or can we just take one course of the three course menu? The answer to that question sits with the client as to what they want. From our perspective, we are very happy to offer them the full range of services that the development guarantee group has, being from advisory to product development to asset management. But fundamentally, it will come down to what service best suits them and their needs. And we have cases in each of case where we have done all three for our clients or we have been able to support on one or two. Great. We can track a little bit and how can three persons realistically fulfill the potential of DGG? So perhaps if I can ask Dale to tell us about the crew that we're assembling at DGG? You know, happy to. So we currently have a diverse and highly experienced team. The background of the team and indeed the board of DGG include financial professionals with experience obviously in financial credit guarantees. It also extends of experience in originating structuring and executing transactions in emerging markets and developing economies. We also have some X rating folk as well and also X auditors and individuals with project development and insurance experience and impact monitoring, learning and evaluation experience too. In terms of the type of people we like to work with at our core, we are down to earth company that values respect and trust above all. We believe in the potential of each team member and work collaboratively to achieve guarantees together, being innovative and solutions focused and acting with integrity or paramount and being resilient is important to what we do is not easy, but it's obviously necessary and hugely rewarding. Excellent. I promised that we would include some snippets. So perhaps we owe the listeners some backstory about how the co-founders got roped in by last to set up DGG. Sure. As I mentioned, the genesis of the development guarantee group was very much came out of my frustration that there was so much demand for guarantees and there was a lack of an obvious place for people to go and try and help to develop and make those guarantees a reality. So that's where it was. But I think, you know, Buhok, when he comes to you and me, we were peers in a sense as where when I was the chief executive officer of Granco, you were the chief operations officer if I recall at the credit guarantee investment facility, which is a local currency guarantee guarantee that was set up by the Asian Development Bank and I recall you had set that up. But actually, what you don't maybe don't know is that you are the inspiration for the strategy that we set up a Granco round developing local currency guarantees with infrared being first because in my early years at Granco, as I was sitting there, you know, trying to work out how we could best achieve the mission of developing local capital markets. I in my reading came across an example of one of a local currency guarantee that was set up in Malaysia called Donna Jamon and about how successful it had been in mobilizing its own domestic capital market to finance infrastructure and I was like, oh wow, this is what we need. It so happened that, you know, when I was in Nigeria for a conference, I was making a presentation on guarantees, I got up and I just said, you know, what did we build to local currency guarantee here? Inspired by that example of Donna Jamon and that's what ultimately snowballed into what became an infrared in Nigeria and please say that that has proven to be a success as well. I then remember a few years later getting a message from yourself saying that you were going to be in London and that we should meet and talk. And I remember having lunch with you and what really struck me was everyone seemed to think in the market that Granco and CGI for competitors and actually you and I had never crossed parts at that till that point and it was only at that point that you just sat there and we were having lunch and you said to me, everyone says we're competitors, but is that how you see us? And I said, no, I think we should be allies and you said, I feel exactly the same way. Sadly, I think it didn't take, it wasn't that many years after that that you decided that at the tender age of 51, you were going to retire and move to the golf course. But I knew that when I was setting up DGG, I needed someone who really understood the mission and also had the same ethos and so I was very glad to drag you off the golf course to become our chairman and I'm very grateful for that. From my side, you were competitor in Vietnam that I didn't know of but was told to me by the Vietnamese. So I had to show up in London and meet the competitor and I think when we met, like you said, there's no competition in development finance. And we decided, I think we to try to work together, although we never were able to work together. But when I was told in Vietnam one day, there's a new guarantor in town, my response was quite plainly, oh, I know them well. That was it. I think we've just met in person twice before we really got into talking about DGG. So it's absolutely a pleasure to work with you. There you have it, the story of the founding of DGG and some intimate insights as icing in the cake. I trust this has been knowledge to some of you listening in. It's been an absolute pleasure with my co-founders. Being on the podcast, we'll see you next time. Thank you, Boohawk, for hosting and to our guests, Los Pereira and Dale Petri. You've been listening to Knowledge Guaranteed, the podcast from the Development Guaranteed Group. To learn more about our organisation and our ambitious goals and vision, please visit garanteed.de.