FAQ

The GEMs Consortium is governed by a Steering Committee co-chaired by EIB and IFC, and comprising
senior officials from the European Bank for Reconstruction and Development (EBRD), International Bank
for Reconstruction and Development (IBRD), African Development Bank (AfDB), Asian Development Bank
(ADB), and Inter-American Development Bank Group (IDB Group). The Consortium is managed by the
GEMs Secretariat hosted at the EIB in Luxembourg, which is responsible for the overall coordination of
the GEMs activities and the collaboration between Consortium members. The GEMs Secretariat also
provides facilities and infrastructure support.

In March 2024, IFC hired Delphos International to conduct an in-depth market study to assess the
relevance of GEMs statistics from an investors’ perspective. Survey results
(www.gemsriskdatabase.org/#marketstudy) indicate that: (i) credit risk data is not readily available for
investors; (ii) GEMs does not have currently sufficient visibility among investors; (iii) investors familiar with
GEMs value the availability and content of the GEMs statistics; (iv) further disaggregation is desirable to
guide investors’ asset allocation decisions in emerging markets; and (v) country and sector level
disaggregation are considered the most useful levels of granularity for investors. The latest GEMs
publications already address many of the main needs raised by investors in this survey.

Access to default and recovery rates of MDB/DFI loan portfolios in emerging markets can help investors
better understand the risk profile of this asset class, and possibly be used in risk and pricing models. This
can help assessing the risks of investing in emerging markets for private investors, especially when
investing alongside MDBs/DFIs, thus potentially helping mobilize private capital into these markets during
a critical time of multiple challenges and private investment needs.

Since 2021 the GEMs Consortium has been publishing its reports on the GEMs website. This was initially
done through annual reports focusing on default rates for private and public lending. Starting in 2022, the
reports have also covered sovereign and sovereign-guaranteed lending. In March 2024, for the very first
time, the GEMs Consortium published recovery rates for private and public lending.
In October 2024, the Consortium released two other first-of-a-kind reports available on the GEMs website
in PDF and excel forms: Default and Recovery Statistics for private and public lending for the period 1994-
2023, and Default and Recovery Statistics for sovereign and sovereign guaranteed lending for the period
1984-2023. With the publication of these reports, the GEMs Consortium has completed the coverage of
publicized recovery statistics by also including those for sovereign and sovereign-guaranteed lending.

The report on private and public lending discloses for the first time: (i) default and recovery statistics in a
single report, as opposed to separate reports previously; (ii) disaggregation of statistics by countries,
granular sector cuts, and region/sector combinations, all of which were not available in previous reports;
and (iii) statistical quantities such as medians and distributions, in addition to averages reported
previously.
The report on sovereign and sovereign-guaranteed lending discloses for the first-time: (i) statistics derived
from 40 years of pooled data, which is over a decade more than previously; (ii) recovery statistics; and (iii)
statistical quantities such as medians and distributions, in addition to averages reported previously.

Emerging markets have long been viewed as high-risk destinations for investment, particularly for loans
to businesses. This perception stems largely from uncertainty about repayment prospects and limited
historical data. Investors, without reliable metrics on likely default and recovery rates, often approach
emerging markets with great caution. The newly released GEMs statistics in October 2024 provide a more
nuanced view of these risks and insights into the behavior of loans to emerging market firms over the past
three decades, as experienced by the MDBs and DFIs. When analyzing the annual average default rates
over periods of economic and financial crises, the statistics also highlight the benefits of incorporating
emerging markets into diversified investment portfolios. For example, during the 2008 global financial
crisis, which originated in the advanced economies, defaults by emerging market firms were less
pronounced than among their advanced economy counterparts. This suggests that advanced economy
investors with portfolios including emerging markets reaped diversification benefits at a crucial time.
While default and recovery rates for private investors going alone into these markets may be different
from the GEMs portfolio, GEMs statistics provide a useful benchmark thus far unavailable.

As harmonizing of data methodologies and definitions continues across the 27 GEMs members, the GEMs
Consortium strives to continuously improve the level of disaggregated statistics published to better guide
investor decisions. The October 2024 set of GEMs annual reports showcases both default and recovery
statistics disaggregated by regions, countries, sectors, regions by sector, country income groups, and
currency types. Further disaggregation of statistics is under review factoring harmonization of
methodologies and sample size, among other details.

Public reports are currently the most efficient way to disseminate GEMs statistics to broader audiences.
The GEMs Consortium took part in the G20- commissioned MDB’s Capital Adequacy Frameworks (CAF)
review in May 2022. GEMs statistics were used by the G20 panel to understand the impact of preferred
creditor status on the capital adequacy of the eleven participating MDBs.

Consistent with the practice of commercial banks and of most public sector financial institutions, detailed
underlying loan portfolio data cannot be made public as this constitutes commercially sensitive
information that is protected by confidentiality agreements. To ensure confidentiality, members of the
GEMs Consortium only have access to aggregated anonymized statistics of other members.