The World Bank said on Wednesday its private sector arm issued about US$165 million in “women’s bonds” in the first debt sale by the development lender specifically aimed at raising money for businesses owned or run by women in emerging markets.
The International Finance Corporation (IFC) issued the new five-year, triple-A-rated bond to Japanese investors.
It follows the World Bank’s sale of several billion dollars in “green bonds” over the past five years, the proceeds of which go to help countries cut greenhouse gas emissions and adapt to climate change.
Bonds tied to social or environmental targets are part of a new trend of social finance, as a growing class of investors seek to bridge the gap between philanthropy and pure financial returns.
Besides helping businesswomen, women’s bonds can help raise awareness about the importance of gender issues in development, said Jingdong Hua, vice-president and treasurer at IFC.
“The gender issue … weaves so tightly into every social and development issue we’re facing today,” he said.
Like the rest of the World Bank, the IFC focuses on fighting poverty, but it targets its investments at the private sector instead of governments.
Women make up roughly half the world’s population but 70 per cent of the world’s poor people. A third of small and medium-sized businesses in emerging markets are owned by women, but they often face hurdles in accessing credit from banks, meaning their businesses cannot grow.
A joint study by IFC and consulting firm McKinsey found that women entrepreneurs face a US$260 billion to US$320 billion credit gap, meaning the difference between the desired and actual level of loans businesses are able to get.
The money raised from the bond, which settles on November 21, will go to local banks and financial intermediaries that are required to commit it to businesses in which women own the majority stake, or where they own at least a fifth of the company and hold senior leadership positions.
The World Bank is committed to reducing extreme poverty to 3 per cent of the world’s population by 2030, which is impossible without focusing on women, Hua said.
To meet the poverty-reduction goal, World Bank president Jim Yong Kim launched a major reorganisation of the bank’s divisions and designated gender as one of five cross-cutting “themes” that must tie in to everything the bank does. The other four themes are climate change, conflict and fragility, jobs, and public-private partnerships.
Daiwa Securities arranged and distributed the women’s bonds, which were available only in Japan, though the programme could expand to other investors next year. Japanese retail and institutional investors are particularly open to innovative financial instruments focused on social issues, the IFC said.