IFC invests $150M in UnionBank’s ‘social bonds’

Aboitiz-led Union Bank of the Philippines has teamed up with the World Bank’s private sector investment arm, International Finance Corp. (IFC), on a $150-million funding lifeline program for thousands of micro, small and medium enterprises (MSMEs) bludgeoned by the prolonged COVID-19 pandemic.

UnionBank is set to issue $150 million worth of seven-year “social bonds,” the first bond of this kind issued by the bank and its longest termed US dollar-denominated bond to date.

This is only the second social bond issuance in the Philippines after Bank of the Philippine Islands sold in August last year P21.5 billion worth of these bonds to fund COVID-19 recovery efforts.

Unlike BPI, which offered the social bonds to the public, UnionBank is raising the entire $150 million through a bilateral issuance of debt securities to IFC, which, in turn, is investing in a social bond out of Asia for the first time.

Tens of thousands of local jobs are expected to be created over the next seven years as targeted MSMEs recover from the impact of COVID-19. The social bond program is seen to create 2,000 new loans to MSMEs at a time when most banks’ loan books are on the decline as lenders turn more cautious and selective to protect their asset quality amid the challenging environment.

“Our goal in issuing this bond is to support the recovery of MSMEs from the COVID-19 pandemic,” Jose Emmanuel Hilado, chief financial officer of UnionBank, said in a press statement on Friday. “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. It could not have come at a better time, as this market segment has been hit particularly hard by the current crisis.”

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