International Finance Corporation (IFC), a member of the World Bank Group, is considering investing $150 million in a seven-year social bond to be issued by Union Bank of the Philippines (UBP), one of the country’s largest banks.
The bond will be issued under Union Bank’s new sustainable finance framework and will be the first social bond by the bank and its longest-term USD-denominated to date. It also marks the second social bond of its kind in the Philippines.
Proceeds from the bond are expected to finance over 2,000 loans to micro, small, and medium-sized enterprises (MSMEs), which have been disproportionately impacted by COVID-19, the listed lender disclosed to the Philippine Stock Exchange Friday.
In the Philippines, MSMEs accounted for over 90% of businesses and over 60% of jobs pre- COVID-19, but MSME loans only accounted for 6% of total bank loans in the country, according to data from the Asian Development Bank. This makes increasing access to MSME financing critical to fostering a resilient and inclusive recovery.
Union Bank said IFC’s investment will help Union Bank boost financing for MSMEs through its supply chain financing platform, enabled using digital technologies.
“Our goal in issuing this bond is to support the recovery of MSMEs from the COVID-19 pandemic. We are confident that we can achieve this through the use of IFC’s long-term funding and by leveraging our supply chain financial platform,” said Jose Emmanuel Hilado, the bank’s chief financial officer.
Alfonso Garcia Mora, vice president, Asia and Pacific at IFC, said the use of social bonds to generate financing to meet the needs of vulnerable underserved people, including small businesses, will be critical to helping spur recovery.
“This landmark deal marks IFC’s first COVID-19 response social bond investment in Asia and will help create jobs, strengthen and deepen the country’s capital markets, and contribute to the development of a more resilient, efficient and inclusive financial sector,” Mora said.