UnionBank’s social bond proceeds finance loans to 3,751 small businesses

UNIONBANK of the Philippines, Inc. (UnionBank) used the proceeds of its $150-million social bond issuance to help finance loans to small- and medium-sized businesses.

UnionBank submitted its 2021 Social Bond Allocation and Impact Report in a disclosure to the local bourse on Tuesday.

“The proceeds of the Social Bond shall be allocated exclusively to qualified Micro, Small and Medium Enterprises (MSME) loans, screened against the IFC (International Finance Corp.) eligibility criteria and exclusion list,” the bank said in the report.

“As of Dec. 31, 2021, the Social Bond Use of Proceeds Registry amounted to P7.793 billion, representing 103.225% allocation to the gross proceeds of the Social Bond,” UnionBank added.

The bank financed 3,751 MSME loans from the proceeds of the social bond, it said. Refinancing of outstanding loans made up 90.75% of the allocation, while 9.25% went to financing new loans. 

With the use of proceeds being exclusively for MSME loans, 100% belong to the Employment Generation Social Project Category.

“In the Philippines, MSMEs accounted for over 90% of businesses and over 60% of jobs pre-COVID-19 (coronavirus disease 2019), but MSME loans only accounted for 6% of total bank loans in the country. This makes increasing access to MSME financing critical to fostering a resilient and inclusive [economy],” UnionBank said.

“MSMEs have also been disproportionately impacted by COVID-19 and the Social Bond has helped UnionBank boost financing for MSMEs primarily through its supply chain financing platform, enabled using digital technologies,” it added.

UnionBank issued $150 million or P7.55 billion in social bonds with IFC as sole investor on July 23, 2021. The deal was IFC’s first pandemic response social bond investment in Asia, which is expected to help create jobs in the MSME sector.

The dollar-denominated bonds have a seven-year tenor and were issued under the bank’s sustainable finance framework.

The bonds conform with International Capital Markets Association social bond principles and the ASEAN Social Bond Standards, as confirmed by a second-party opinion provided by research and ratings company Sustainalytics.

UnionBank recorded a lower net profit in the first three months of the year as trading gains normalized. Its net income dropped by 45% to P2.6 billion in the first quarter from P4.72 billion in the same period last year.

Shares in the Aboitiz-led bank declined by 25 centavos or 0.34% to close at P74 apiece on Tuesday. — KBT