UNIONBANK of the Philippines, Inc. is set to issue social bonds to finance small business loans through a $150-million investment from the International Finance Corp. (IFC)
The dollar-denominated bonds have a seven-year tenor and will be issued under the bank’s sustainable finance framework, the Aboitiz-led lender said in a statement.
The deal is IFC’s first pandemic response social bond investment in Asia, which is expected to help create jobs in the MSME sector.
“Our goal in issuing this bond is to support the recovery of micro-, small-, and medium-sized enterprises (MSMEs) from the coronavirus disease 2019 (COVID-19) pandemic. It could not have come at a better time, as this market segment has been hit particularly hard by the current crisis,” UnionBank Chief Financial Officer Jose Emmanuel U. Hilado was quoted as saying.
“In the wake of the COVID-19 crisis, 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,” Alfonso Garcia Mora, Vice President, Asia and Pacific at IFC, said.
UnionBank will use the proceeds from the bond issue to extend credit to over 2,000 MSMEs hit by the pandemic and boost available funding for MSMEs through the bank’s supply chain financing platform.
The bonds conform with International Capital Markets Association (ICMA) social bond principles and the ASEAN Social Bond Standards, as confirmed by a second-party opinion provided by research and ratings company Sustainalytics.
As of 2020, IFC has issued 53 social bonds in public and private markets in 11 different currencies. The World Bank Group unit has also backed 153 eligible projects worth $4.3 billion through its social bonds since 2017.
UnionBank’s social bonds are the second of its kind to be issued in the country. In August 2020, Bank of the Philippine Islands raised P21.5 billion through its COVID-19 Action Response or CARE bonds also meant to help finance MSME loans.
MSMEs made up 99% of the roughly one million business establishments in the country in 2018, based on data from the Department of Trade and Industry. They also accounted for 5.7 million or 63.19% of the new jobs that year.
UnionBank’s net earnings jumped by 78% to P4.7 billion in the first quarter from a year ago.
Its shares went down by 45 centavos or 0.59% to close at P76.05 apiece on Friday. — L.W.T. Noble