IMP Matrix Rating: C6
What: the IIX Women’s Livelihood Bond 4 (WLB4Climate) is a listed security comprising of a portfolio of loans to 10 sustainable SME portfolio companies in 4 countries (India, Cambodia, Indonesia, and Philippines) and 6 sectors: Microfinance Institutions, SME Lending, Agri Lending, Energy, Mobility Lending, Skills Training. The WLB4Climate is designed to provide funding to generate employment and support socio-economic advancement of underserved women from rural, low-income, disadvantaged or financially excluded communities.
Who: Each of the borrowing SMEs through their activities provide clear social benefits by empowering women to (i) increase their income through microcredit products for women-owned micro-businesses and Small and Medium Enterprises (SMEs); (ii) improve their financial resilience through savings and micro-insurance; (iii) increase productivity through skills training and mobility loans; (iv) increase ownership of assets including land, property and vehicles; and (v) advance climate action through transition to clean and affordable energy and through financial support for female smallholder farmers in regions affected by climate change. An anticipated ~30% of the portfolio will also support climate mitigation (~16% to clean and affordable energy) and climate adaption (18% for agriculture-related lending in regions where women smallholder farmers are impacted by climate change).
How Much Impact: For every US$1 invested, the WLB4Climate is expected to generate US$4 of social value by empowering women to (i) increase income; (ii) build financial resilience; (iii) increase ownership of assets (e.g. land, homes and vehicles); (iv) improve productivity; and (v) improve climate action. The WLB4Climate is expected to empower between 450,000 and 475,000 women and girls over the 4-year tenor of the Bond. The Bond uses covenants to formalize gender impact-targeted KPIs for its borrowers, e.g. for education > 50% of students being girls, for retail and microfinance >50-70% of employees and borrowers being women, etc.
Our Contribution: We participated in the primary issuance of the bond, helping it reach its USD $30 million target size. As regular investors, we benefit from a 50% USIDFC guarantee on losses of principal, and the first-loss protection from IIX’s Women’s Catalyst Fund. There is therefore significant downside protection built into the Bond’s blended capital structure.
Impact Risk: While the underlying borrowers are mature and large organizations with significant balance sheets and strong equity backing, there is a risk of default which would mean they would not be able to operate their businesses which benefit women. Moreover, Asia at the time was still experiencing significant risk due to COVID-19 and therefore this might continue to have an impact on the beneficiaries.
Sample Investments: Kinara Capital, which provides affordable loans to women-owned SMEs at a discounted rate to encourage female entrepreneurship.