The ILO's Think Impact Toolkit for guarantee instruments

17 May 2024

Credit guarantees can be a powerful instrument to mobilize private capital for achieving positive development results. To maximize their impact, it is imperative for guarantee providers to consider impact throughout the guarantee process and to do so in a systematic way. This is especially important as impacts created through guarantees are largely indirect and experienced at the level of final beneficiaries.

The ILO’s Think Impact Toolkit supports organizations (guarantors) which provide portfolio guarantees to financial institutions to embed impact considerations throughout their guarantee process. The tools contained therein can be easily adjusted to the needs of different guarantee providers. Moreover, they can be integrated into an existing impact management framework of the provider or inform the development of new ones.

We adapted an impact management framework commonly used by investors, the Operating Principles for Impact Management (OPIM), to fit the purpose of guarantee instruments and used it for the Think Impact Toolkit:

Framework for impact management
(modified from The 9 Principles | Operating Principles for Impact Management (impactprinciples.org))

Framework for impact management workflow chart contains the following stages: Strategic intent, Project Development/Structuring, Decision, Portfolio Management, Exit and Independent verification throughout the whole process. — Framework for impact management under the ILO’s Think Impact Toolkit

This impact management framework ensures that impact considerations are integrated throughout the guarantee process. The ILO’s Think Impact Toolkit currently contains the below tools that can be used across the different guarantee design and implementation phases.

We invite stakeholders to share feedback on the toolkit. You can also reach us for support in applying the tools at [email protected].

Phase: Strategic intent

Terms of Reference for identification of how a guarantee could support addressing gaps between supply and demand of capital for target groups.
An example of how these Terms of Reference were applied can be found here: A system analysis of the financial market in Bosnia and Herzegovina.

ToR analysis of potential of the financial sector_ILO's Think Impact Toolkit.docx - DOCX 85.8 KB

Phase: Project development/structuring

Questionnaire to be used as a light-touch initial screening of potential partners from an impact contribution angle. That is, when you have several potential partners and you need to select the most suitable partner(s). The questionnaire should be supported by communication materials (not yet included in the toolkit) explaining the requirements of the guarantor to potential guarantee partners.

Questionnaire and Guidance - screening_ILO's Think Impact Toolkit.docx - DOCX 73.41 KB
Questionnaire which forms the basis for a deeper analysis of the potential partner from an impact contribution angle. For most guarantee providers, such assessment takes place once a preliminary agreement has been reached regarding the willingness to work with a particular financial intermediary.

Questionnaire and Guidance - detailed assessment_ILO's Think Impact Toolkit.docx - DOCX 216.25 KB
The tool provides a generic Theory of Change for achieving inclusive economic development through guarantee instruments. Moreover, it helps users to define indicators to measure progress and impact of a guarantee.

Theory of Change and Indicators tool_ILO's Think Impact Toolkit.xlsx - XLSX 224.59 KB

Phase: Portfolio management

Baseline Terms of Reference to be used once the guarantee partner has started disbursing loans under the guarantee agreement, with the goal of collecting impact data from the partner and its clients.

ToR evaluation of guarantees - baseline_ILO's Think Impact Toolkit.docx - DOCX 209.71 KB

Phase: Exit

Endline Terms of Reference to be used at the end of the guarantee agreement, with the goal of establishing changes, compared to baseline, that occur at different levels (partner/ borrowers/ employees) throughout the term of the guarantee.
An example of how the Baseline and Endline Terms of Reference were applied and some results achieved can be found here: Developing an impact monitoring system for Sida’s guarantee instrument

ToR evaluation of guarantees - endline_ILO's Think Impact Toolkit.docx - DOCX 208.73 KB

Download the full toolkit.

This toolkit was co-developed through a partnership between the ILO and the Swedish International Development Agency (Sida) and tested on Sida’s guarantee instrument. We thank Sida for the support.