The Private Investors’ Protector

We talk with CEO of the World Bank’s Multilateral Investment Guarantee Agency, Keiko Honda.

By Matthew BrodskyWharton alum and World Bank executive Keiko Honda

The job came to Keiko Honda WG89. She did not seek it out. With nearly 24 years of tenure at McKinsey & Co., having been the consultancy’s first female director in Asia outside of Australia, Honda had a lot invested in the firm and her career. And she enjoyed the work. Then she received a call about an opportunity at the World Bank Group: executive vice president and CEO of the Multilateral Investment Guarantee Agency. Her 14-yearold daughter told her, “This is my dream job.” And that set Honda on to thinking about her legacy. And on to joining the World Bank in July 2013.

The Multilateral Investment Guarantee Agency, or MIGA, is one of the World Bank Group’s five organizations. To support the bank’s overarching goals of reducing poverty and promoting development and shared prosperity, MIGA facilitates foreign direct investment in developing nations through political risk insurance and credit enhancements. In short, it protects investors from noncommercial-related losses from breach of contract, government expropriation, war, civil disturbance and more. In fiscal year 2014, MIGA guaranteed $3.2 billion in private investments, up from $2.7 billion in the previous fiscal year. The goal is to grow that total by at least 50 percent by 2017.

What follows is an excerpt from an interview with Honda about the increasingly relevant role of MIGA around the world, about her dedication to the mission, and about her career and experiences in general.

WHARTON MAGAZINE: What’s the attraction of MIGA for investors?

KEIKO HONDA: They may be able to find a similar service. But private investors select risk mitigation providers in multiple dimensions. Availability is obviously one consideration. Another one is the trustworthiness of those risk mitigators. It’s the same thing as when you choose which insurance company to buy your car insurance. And then, obviously the third one is premium or price. What MIGA is good about is the second one. Availability, obviously too, but MIGA is very strong financially, as well as strong to support private investors if they enter into a discussion. So if something happens, we support them to have a proper conversation with the government to solve the problem.

WM: What due diligence does MIGA undergo to avoid investors even having those conversations?

HONDA: This is our underwriting process: A client comes with some idea, we have a quick screening where we look at developmental impact and the financial soundness of the project, as well as at the environmental-social and integrity dimensions. Then we do underwriting. We send a team on the ground. Then they come back and we have another internal meeting. Every single project that we do, we have to bring to the board.

WM: Does MIGA have guidelines or quotas in terms of what types of projects must be taken on in what geographies?

HONDA: Well, we don’t really have any kind of quotas. We are trying to support many different countries around the world. We’re actually extending insurance to 140 countries right now. We have to diversify their risk for our financial stability purposes—not only the country, but also the industry.

WM: How do you sum up the importance of MIGA being in those 140 countries?

HONDA: Private investors sometimes hesitate to go to developing countries for various reasons. First one, you know, they see the continuity of the administrations may not be kept. Some difference of philosophy could be reflected into policy. Therefore, the private investors are very sensitive toward the breach of contract or major change of regulations. That’s actually where we are helping. I think another thing that we are also helping is through our credit enhancement products; we are supporting some of the poor countries to reduce the finance cost.KeikoPullquote

WM: What will MIGA’s role be in the coming Sustainability Goals?

HONDA: The World Bank Group is getting together with other multinational banks to develop the initiative called “Billions to Trillions,” since we need a lot more money to provide power, public transportation, food, free water and sanitary systems to the people in the world—essentially, to reduce the poverty. We need more money. What can we do?

One way is mobilize more private investors. At this moment, private investors that we are dealing with, bringing to the developing world, are primarily very experienced equity investors and very savvy commercial banks. Unfortunately, pension funds, life insurance companies and asset management companies are not necessarily spending a lot of money there. We’re discussing how we can mobilize those large institutional investors. One good thing about those investors: They’re not necessarily looking for a super return. They are smart. They’re looking for a medium return or a lower return while taking limited risk.

WM: What have been the highlights so far in two years as CEO?

HONDA: I learned many things that I didn’t have an opportunity to see in my previous professional life. First of all, I did not really understand how people are living in difficult countries. There is a concept of fragile and conflict states in the World Bank Group. Those are the countries either in war or just got out of war, extremely low income per capita. And in those places, people don’t have power, people don’t have access to clean water, sanitation is limited. Of course, they don’t have money to buy enough food. For those countries, bringing power makes a lot of difference … bringing a public transportation system makes a big difference.

One interesting example—the Ivory Coast—is the second-largest host country for MIGA. … We supported them to build a bridge, we supported them to build a power plant and also doing several different things. My first mission was to the Ivory Coast. I was stunned. I was very, very, very surprised how people lived. At the same time, that one power plant, which now is not only providing access to power but also creating jobs … that changes a lot of people’s lives. I really learned by working. I really felt like it’s my honor, my privilege, to serve MIGA and the World Bank Group.

WM: What would you say is your leadership style?

HONDA: I try to be honest, straightforward. But I’m maybe too honest, too straightforward for the World Bank Group. McKinsey has a value of dissent, which I really liked. So people are kind of straight shooters. With the World Bank Group, maybe I should learn more about the culture and adjust my leadership style.

WM: Kidding aside, do you feel like you’re still learning two years into the executive leadership role?

HONDA: I’m 53 right now, but I feel like I’m still learning every day. I feel like I’m on a different learning curve. Not only for the things that I do here in terms of the business, but it’s leadership style—how to encourage people because people here have diverse backgrounds.

WM: How have you changed your leadership approach?

HONDA: I think at McKinsey, I had more like a logical-based leadership style. I think people here want to have more consensus-based decision-making.

Read the other stories in our “Partnering on Global Priorities” package by clicking on the corresponding images below.

 

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