IFC invests in UnionBank’s social bond

World Bank’s investment-arm International Finance Corp. (IFC) is investing in Union Bank of the Philippines’ “social bond” that aims to finance loans to micro, small and medium-sized enterprises (MSMEs).

In a statement, Alfonso Garcia Mora, IFC Asia and Pacific vice president, said Friday, July 23, that the company is investing $150 million in the seven-year social bond to be issued by the Aboitiz-led financial institution.

IFC said proceeds from the bond are expected to finance over 2,000 loans to MSMEs that have been impacted by COVID-19.

IFC’s investment will also help UnionBank boost financing for MSMEs through its supply chain financing platform, enabled using digital technologies.

Jose Emmanuel Hilado, UnionBank, chief financial officer said the goal in issuing the social bond is to support the recovery of MSMEs from the pandemic through long-term funding and by leveraging their supply chain financial platform.

In the Philippines, MSMEs account for over 90 percent of businesses and over 60 percent of jobs pre-COVID-19, but their loans only accounted for six percent of total bank loans in the country.

“This makes increasing access to MSME financing critical to fostering a resilient and inclusive recovery,” IFC said.

In the wake of the COVID-19 crisis, Mora 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 the 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.

He added that the UnionBank’s issuance can also pave the way to open the social bond market in the Philippines, replicating IFC’s success opening the market for green bonds in the country and deepening capital markets for thematic bonds.

As of last year, IFC had issued 53 social bonds in public and private markets in 11 different currencies.

Since 2017, IFC social bonds have supported 153 eligible projects totaling $4.3 billion, reaching 2.6 million farmers, feeding three million people, and treating 1.6 million malnourished children.