In a newly revealed partnership, the International Finance Corporation (IFC) will make a significant investment of up to $500 million in PT Bank BTPN Tbk (BTPN), consisting of a social bond and a green bond issuance. This marks BTPN’s inaugural bond issuance and reflects the bank’s commitment to empowering Indonesia’s micro, small, and medium enterprise (MSME) sector, with a specific focus on women-led businesses, while also addressing the urgent need for climate change action.
The collaboration between the International Finance Corporation (IFC), a member of the World Bank Group, and PT Bank BTPN Tbk (BTPN) is anticipated to have a transformative impact on Indonesia’s financial landscape. The investment by IFC, which includes social and green bond issuances, is expected to stimulate the growth of thematic bonds in the country. This partnership will particularly encourage private sector issuers to explore thematic bonds, thereby enhancing the overall depth and breadth of Indonesia’s capital markets.
Bank BTPN’s President Director, Henoch Munandar, expressed their commitment to sustainable development goals and the positive impact of the proposed investment by the International Finance Corporation (IFC) in the bank’s social and green bond issuance. This investment will enable Bank BTPN, as a member of SMBC Group, to contribute to SMBC Group’s sustainable finance transition plan and align loans and investments with a net-zero emissions target by 2050. By leveraging the proceeds from the bond issuance, Bank BTPN aims to bring about significant positive change in the lives of millions of people.
Indonesia faces significant challenges due to climate change, and limited access to financial products has hindered climate financing efforts. IFC’s investment in Bank BTPN’s green bond reinforces Indonesia’s commitment to greener growth and aligns with the country’s Paris Agreement commitments. The green bond will be utilized to fund various environmentally friendly projects, such as renewable energy, energy efficiency, green buildings, and clean transportation. It will play a crucial role in closing the financing gap for climate mitigation and adaptation, resulting in an estimated annual reduction of 137,326 tons of CO2 emissions.
“We are proud to be partnering with BTPN on this pioneering initiative, which will help catalyze further development of Indonesia’s capital markets and bring tangible benefits to Indonesians across the country,” said IFC Managing Director Makhtar Diop. “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.”
The financing gap for MSMEs, estimated at $166 billion or about 19 percent of Indonesia’s GDP, was exacerbated by COVID-19. IFC’s investment in the BTPN social bond will be used to finance MSMEs, which are vital to the Indonesian economy and are key job creators but are constrained by limited access to finance. With around half of the social bond proceeds earmarked for women owned MSMEs, the structure of the bond will ensure that female entrepreneurs, who are an important segment of MSMEs but face even wider financing gaps, receive greater access to finance.
A minimum of $400 million will be invested equally in the social bond and green bond with the balance of $100 million to be allocated to either the social bond or to the green bond. IFC will also support BTPN through knowledge sharing, innovation, and capacity building in relation to climate risk management (including environmental and social risk management), green building finance, supply chain finance and gender finance.