International Finance Corporation (IFC), a member of the World Bank Group, has signed an agreement to invest up to $500 million in PT Bank BTPN Tbk through a social bond and green bond issuance to help the latter support Indonesia’s small businesses, according to a statement on Thursday.
By investing through thematic bonds, which remains uncommon in Indonesia, IFC seeks to deepen the archipelago’s capital market while supporting women-led businesses and actions on climate change.
“This investment will not only drive green growth, but it will also increase access to vital financing for small businesses — in particular, those owned by women,” IFC managing director Makhtar Diop said.
A minimum of $400 million will be invested equally in the social and green bonds, while another $100 million will be allocated to either. According to the statement, around half of the social bond proceeds are earmarked for women-owned micro, small, and medium, enterprises (MSMEs).
“IFC’s proposed investment in Bank BTPN’s social and green bond issuance proves our commitment to supporting the achievement of sustainable development goals through environmental and social loans. This will help us in realising our vision to bring significant changes in the lives of millions,” Bank BTPN president director Henoch Munandar said in the statement.
Bank BTPN has become part of Tokyo-based SMBC Group following the merger of SMBC Group’s PT Bank Sumitomo Mitsui Indonesia (SMBCI) and PT Bank Tabungan Pensiunan Nasional Tbk in 2019.
“As a member of SMBC Group, Bank BTPN will use the proceeds to support SMBC Group’s transition plan in promoting sustainable finance and aligning its loans and investments with net zero emissions by 2050,” Munandar added.
IFC took part in addressing an estimated $166 billion financing gap for MSMEs or about 19% of Indonesia’s gross domestic product (GDP). Despite the gap, the World Bank noted that Indonesia managed to have strong economic growth and poverty reduction over the past two decades.
The rapid growth, however, moved in parallel with rising greenhouse and gas emissions. The Indonesian government has the commitment to addressing its climate and development challenges in its Nationally Determined Contributions (NDCs).
Indonesia seeks to reduce emissions by 31.9% in 2030, compared with the business-as-usual scenario. This plan is more ambitious compared with the 29% reduction initially planned in 2016. Indonesia may cut its emissions even further by 43.2% if given appropriate international financial support.
Besides the funding, IFC will also support BTPN through knowledge sharing and capacity building related to climate risk management, green building finance, supply-chain finance, and gender finance.