BPI to issue PH’s first COVID response bond

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Ayala-led Bank of the Philippine Islands is set to issue the first Philippine bonds that will raise fresh funds in response to the coronavirus (COVID-19) pandemic, specifically targeting eligible micro, small and medium enterprises (MSMEs) in need of lifeline during this challenging period.

The Securities and Exchange Commission has confirmed that BPI’s pioneering coronavirus action response or CARE bonds would qualify as “social bonds” under the Association of Southeast Asian Nations (ASEAN) Social Bond Standards in the Philippines.

Under the ASEAN framework, social bonds are meant to fund projects that directly aim to help address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially, but not exclusively, for a target population.

In this case, the CARE bonds recognize the significant contribution of MSMEs to the Philippine economy, and will be launched as a direct response to their needs as one of the sectors hardest hit by the global pandemic. Proceeds will be used to finance or refinance eligible MSMEs under BPI’s recently established sustainable funding framework.

“MSMEs account for a relatively small percentage of total bank borrowings but a very large percentage of total nationwide employment. Loans to MSMEs go a long way to keeping Filipinos working. To support MSMEs is to embrace the Bayanihan spirit,” BPI president and chief executive officer Cezar Consing said.

The planned offering is seen to supplement BPI’s efforts to support the recovery of MSMEs. Some of the bank’s existing initiatives include the loan payment deferral program that allowed businesses to delay payments without interest charges, waiver of fees for online funds transfer transactions, and discussions with state-owned Philippine Guarantee Corporation to refine its loan products for qualified clients.

As a borrower segment, MSMEs only get 10 centavos out of every peso of loans extended by the Philippine banking system. However, they account for 60 percent of the total annual revenues of all Philippine businesses, contribute 35 percent of the country’s gross domestic product and employ 63 percent of the labor force.

“The BPI CARE Bonds highlight the bank’s commitment to achieve positive social outcomes by creating value not only for its business, but also for its stakeholders including clients and the communities in which it operates,” the bank said in its disclosure to the Philippine Stock Exchange on Thursday.

BPI’s CARE bonds, which will be peso-denominated, will likely be launched “in the next few days,” said BPI chief financial officer Maria Theresa Marcial-Javier.

This initiative is part of the Ayala group’s comprehensive hand-holding program for about MSMEs. The group earlier launched the Ayala Enterprise Circle (AEC), a synergistic initiative focused on helping SME partners continue their operations and recover from the pandemic.