IFC, a member of the World Bank Group, has announced an investment of up to IDR 2.75 trillion (equivalent to $200 million), in privately-placed gender and green bonds issued by Bank OCBC NISP as part of the bank’s Sustainability Bond Program. The proceeds from the gender bond will enable the bank to increase lending to women entrepreneurs and women-owned small and medium enterprises (WSMEs). The green bond will support the bank to expand green financing, particularly development of green projects and financing of green mortgages.
Bank OCBC NISP’s gender bond is the first ever in Indonesia, and second in Asia-Pacific, following Bank of Ayudhya’s Gender Bond issuance in 2019, also supported by IFC. The bank’s green bond, also fully sponsored by IFC, follows a successful first project in 2018, which has been fully deployed. With this new project, Bank OCBC NISP is expected to further grow its sustainable portfolio.
WSMEs play a central role in the nation’s economy, with women owning 34 percent of medium enterprises and 50 percent of small businesses. Yet, according to IFC’s MSME Financing Gap Study (2017), Indonesian WSMEs face a $60 billion financing gap. Approximately, 40 percent of WSMEs in the country are financially constrained, and 17 percent of women-owned firms perceive financing as a major growth constraint.
“Increasing women’s participation in the Indonesian economy and reducing the gender gap is part of IFC’s core strategy in Indonesia. Investing in Bank OCBC NISP’s Sustainable Bond Program, which aims to empower women entrepreneurs and WSMEs in addition to catalyzing green projects, demonstrates IFC’s commitment towards Indonesia’s sustainable economic growth,” said Azam Khan, IFC Country Manager for Indonesia, Malaysia, and Timor Leste.
As an archipelago nation and following decades of rapid carbon-intensive growth, Indonesia is vulnerable to climate change impacts. Green financing is therefore critical to help the country meet its greenhouse gas emission reduction targets — 29 percent by 2030. In this context, IFC estimates that Indonesia’s green financing opportunities could be as high as $274 billion between 2016 and 2030.
“As a pioneer bank in sustainable financing for green projects in Indonesia, IFC’s extension funds will help us continue our efforts to provide financing for green projects to reduce climate change footprint. In addition, this fund will also be used to empower women to build sustainable businesses. This initiative is one of our efforts to move business process towards sustainable development and ensure a better future for the next generations,” said Parwati Surjaudaja, President Director of Bank OCBC NISP.
As part of the project, IFC will partner with the bank to provide training to the bank’s staff as well as Indonesian property developers on green buildings. The bank will also work with IFC to develop a targeted approach to support the growth of women entrepreneurs. Apart from demonstrating the viability of WSMEs as a distinct customer segment, the project aims to support the government’s efforts to establish climate finance as a distinct asset class.
The gender bond is supported by the Women Entrepreneurs Finance Initiative (We-Fi) program and is aligned with the government of Indonesia’s development goals to reduce Indonesia’s gender gap.
The green bond, which has green building as one of the key priority segment, is supported by the United Kingdom government’s Market Accelerator Green Construction Program, aimed to promote market shifts towards green construction and support green mortgages development. This initiative is also in line with the recent policy incentives for green mortgages issued by Bank Indonesia.
In 2014, IFC and Indonesia’s Financial Services Authority (OJK) established a cooperation to improve regulatory frameworks leading to the issuance of OJK Regulation (POJK 51/2017) on Sustainable Finance for Financial Institutions. The regulation aims to transform the country’s financial sector towards more sustainable practices.
Since 2005, IFC has provided more than $24 billion in long-term financing for climate-related projects in addition to nearly $19 billion in core mobilization. In FY19, IFC’s own account volume was $2.6 billion and its core mobilization reached $3.2 billion. IFC’s climate investments in FY19 were spread across 93 deals, helping avoid an equivalent of 15.5 million tons of carbon dioxide emissions.