Hurricane Dorian’s impact on The Bahamas is a reminder that natural disasters can cause devastating loss of life and property, and impacted countries could have urgent financing needs for emergency response following a catastrophic event.
The Inter-American Development Bank’s Contingent Credit Facility for Natural Disaster Emergencies (CCF) is designed to provide a financial safety net in times when it is needed most.
What is the Contingent Credit Facility for Natural Disaster Emergencies (CCF)?
The Contingent Credit Facility for Natural Disaster Emergencies (CCF) is one of the Inter-American Development Bank (IDB)’s main tools to help countries develop effective strategies for natural disaster financial risk management.
The CCF offers contingent loans that are prepared in advance but are disbursed after the IDB has verified the occurrence of a disaster event in terms of type, location, and intensity.
This is part of the IDB’s effort to help countries move from a primarily after-the-fact approach to managing disaster and climate risks to one that includes greater prevention, mitigation, and preparedness measures taken before disasters strike.
What is the CCF for?
The CCF’s objective is to provide countries with cash following a natural disaster of severe to catastrophic proportions for humanitarian relief and to restore basic services.
Proceeds from CCF Loans are used to cover extraordinary government expenditures incurred six months after the disaster. Examples of eligible expenditures include emergency sanitation equipment, medications and vaccines, temporary shelter equipment and installations, water and foodstuffs for displaced or distressed populations, and debris removal, among other.
Who can access the CCF?
All IDB’s borrowing member countries are eligible to receive financing through the CCF, provided they have in place a Comprehensive Natural Disaster Risk Management Program (CDRMP) approved by the IDB. The CDRMP includes measures on governance, risk identification, risk reduction emergency preparedness and response, and financial protection and risk transfer. The CDRMP has measurable output and annual indicators to allow regular monitoring.
What is the amount of the CCF?
The coverage limit of the CCF per country is up to US$300 million or 2% of the borrowing member country’s GDP, whichever is less.
How is a CCF loan triggered?
The country, through the project executing agency, submits to the IDB a Request for Verification of Eligibility of the disaster event. The IDB will then apply a previously agreed calculation methodology to produce an Eligibility Verification Report.
If the assessment concludes the event is eligible for disbursement, the IDB will include in the Eligibility Verification Report the maximum disbursement amount. The borrowing country must confirm in writing its intention to disburse.
What is the cost for the Borrower if the CCF loan is never triggered?
There is no cost for the Borrower if there is no disbursement of funds.
What are the terms of the CCF?
The same as an Investment Loan. Typically, these loans have a maturity period of 25 years, a grace period of 5.5 years and an interest rate based on LIBOR.
Learn more about the Contingent Credit Facility here.