An $8 million bond set to debut on Singapore’s stock exchange will mobilise private capital to support social enterprises and microfinance institutions (MFIs) in Cambodia, Vietnam and the Philippines, providing nearly half a million women in these countries with more access to credit in order to improve their livelihoods.
The Women’s Livelihood Bond (WLB), billed as the first-ever social sustainability bond, was developed by Impact Investment Exchange (IIX), a Singapore-based organisation that works toward increasing the access to capital for social enterprises in Asia.
The WLB has a maturity of four years and a coupon rate of 5.65 per annum, according to IIX. The $8 million bond will initially list on the Singapore Exchange, though could eventually be migrated to the Impact Exchange, a Mauritius-based platform devoted to listing shares and bonds issued by impact enterprises, NGOs and social impact funds.
Proceeds from the bond will be used to provide loans to social enterprises and MFIs across Cambodia, Vietnam and the Philippines, enabling them to better serve women beneficiaries and improve their access to finance, essential goods, income-generating assets and vocational training.
An IIX spokesman said the bond saw a strong demand from global institutional and high net worth investors, with over 60 percent of these investors coming from Asia.
“IIX received a high level of interest for this bond from investors across geographies that were attracted by its dual focus in social and financial return,” the spokesman said.
“Having over 60 percent Asian investors was a big move for impact investing in emerging markets and a testament to IIX’s deep track record in the region.”
Forty percent of the loan proceeds, or about $3.2 million, will be channelled to Cambodia to support local MFIs, enabling them to expand their beneficial impact on women through credit creation and providing access to affordable goods and services.
“The underlying borrowers are sourced and screened through an intensive process which assesses the entities using both financial and social criteria,” the spokesperson said.
According to the bond’s information sheet, the borrower selection criteria requires that the institutions are financially stable and operationally mature, and have a focus on serving low-income or marginalised women as well as a commitment to improving their livelihoods.
To mitigate the bond’s risk, the United States Agency for International Development (USAID) has put up a 50 percent guarantee on the loan portfolio, while IIX is providing $500,000 first-loss capital.
“USAID is pleased to be backing the WLB with a loan guarantee. Working with Australian Department of Foreign Affairs and Trade, we are helping to mitigate risk and attract investors, as evidenced by the full $8 million capitalisation of this bond,” said Todd Sorenso, deputy mission director at USAID’s Regional Development Mission for Asia.
Robert Kraybill, managing director of IIX, said the WLB has received the support from a wide range of stakeholders, and more are expected to join.
“We are delighted to work with new partners such as DBS Bank, Shearman & Sterling, Hogan Lovells and ANZ Bank, who have helped in supporting our efforts to create this innovative financial structure for social good,” he said. “We look forward to bringing in new partners into this exciting space of impact investing.”