A (partial) guarantee 28 is the commitment of a guarantor to back up and provide repayment in case of default or non-performance of the enterprise. A (partial) guarantee can have an important role for impact enterprises as it represents a mechanism to increase the security and facilitate the mobilisation of private capital from investors, thus promoting financial access. In fact, the guarantee acts as a sort of insurance, allowing the impact enterprise to lower the relative risk 29 of the organisation, increase access to lending, and obtain exposure to a wider source of funding with improved financial terms and conditions. A partial guarantee does cover only part of the risk (e.g. 80% of a loan) in order to ensure alignment of interest between the guarantor and the investor. A partial guarantee can also cover a portfolio of investments insofar that it provides partially repayment in case of default from any investment in the portfolio (e.g. 80% from any investment) up to a pre-defined cap of the portfolio (e.g. 30% of the portfolio).


Enabling the impact enterprise to access private risk capital

Can replace

Grants, subordinated loans, and other blended finance instruments

Risk/Return Profile


Enterprise Lifecyle

All stages


Linked to the maturity of an outstanding loan or other financial obligations

Defining Criteria

Guarantee level:
It represents the percentage that the guarantor commits to cover in case of default or non-performance.
It is the agent who agrees to be held responsible for the repayment of the guaranteed portion of the financial debt if the receiver defaults. The main provider of guarantees are multilateral agencies or development finance institutions.
Front-end fee:
It represents the one-time fee that the borrower has to pay on the guaranteed amount. It is usually required to cover due diligence, processing of the guarantee and other potential up-front costs
Guarantee fee:
It represents a per annum fee on the disbursed and/ or outstanding guarantee exposure. It is required in order to cover the guarantor exposure on the guaranteed amount.
Commitment fee:
It represents the fee required to be paid on the amount requested, yet not disbursed.

Interesting Variants and Options

  • The guarantee or partial guarantee may be structured to partially cover principal repayments and interest, or only a part of the principal repayment, or only the interest payments.


  • Guarantees are usually applied to infrastructure and financial services, but other sectors could be considered.


  • Linking financial rewards to the achievement of impact, for example increasing the guarantee level or reducing the guarantee fee – see “Examples of relevant terms” and “Examples of partial guarantee structures” below.

Source: Innovative Financing Toolkit, BRIDDHI, 2020

Other instruments that may be useful to you