Building on the track record of its previous two Women’s Livelihood Bonds (WLB), social impact finance pioneer Impact Investment Exchange recently announced its latest in the series, aimed at helping underserved women and women entrepreneurs in the Asia Pacific region recover from the pandemic. The $27.7 million bond targets enterprises in Cambodia, India, Philippines and Indonesia.

It’s also the first investment of IIX’s Women’s Catalyst Fund (WCF), which focuses on accelerating new financial instruments for women.

Sustainable Ag and Manufacturing

About half of the eight enterprises are traditional microfinance organizations. The other half are lenders that make somewhat larger loans of $2,000 to $20,000, as well as businesses in such sectors as sustainable agriculture and manufacturing. The average loan size is approximately $3.5 million.

Example of one borrower: an India-based sustainable agriculture company that buys marigolds from women smallholder farmers and provides training in such practices as fertilizer use and crop planting. Marigolds are a high-value crop used in many natural healthcare products, according to Robert Kraybill, IIX’s chief investment officer.

Farming contracts are typically signed by male members of the family, even if women do the work in the field. With that in mind, the enterprise will increase the number of women signing contracts over the loan’s four years, thereby building gender equity in the Indian agricultural sector.

Guarantees Against Risk

To make the WLB3 happen, IIX pulled together a wide assortment of public and private sector entities and investors, ranging from the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) to Nuveen. (Technically, IIX set up a special purpose vehicle to be the bond’s issuer). It also took steps to provide investors some guarantee against risk. For one thing, it had already negotiated a partial guarantee from the U.S. International Development Finance Corporation for its previous bond. The WCF, which is backed by the Taiwan International Cooperation and Development Fund (TaiwanICDF), also provided first-loss capital in the form of subordinated notes.

Putting together the pieces took some doing. Still, it all happened pretty quickly. IIX talked to 100 or so potential investors over a period of three to four months. The speed with which it assembled the various parties needed to make the bond work is largely attributable to all the spadework done for the first two bonds, as well as their positive track record, according to Kraybill.

Due Diligence

Covid had a particularly significant impact on the due diligence process. Usually, IIX conducts interviews in the field with potential beneficiaries, including many discussions with smallholder farmers, among others. This time, those interviews—more than 500—were done via Zoom. The staff also tapped an online survey tool IIX recently developed that allowed them to interact with beneficiaries via text. The upshot:  “We talked to a broader sampling of women than usual,” says Kraybill. In all, IIX screened over 300 organizations before whittling the number down to the final selection.

More about the first two bonds: Issued in 2017, WLB1 was an $8.5 million issuance, impacting 385,000 underserved women in Cambodia, Philippines and Vietnam; the $12 million WLB2 was issued in early 2020, right before the pandemic hit, impacting 265,000 underserved women in Cambodia, Sri Lanka and Indonesia, according to the company. WLB1 was the first impact investing instrument to be listed on a stock exchange and also was also Asia’s first multi-country listed gender bond, reporting both social and financial returns, according to the company. IIX plans to issue the next bond in the series towards the end of next year.

IIX, which was founded about 10 years ago, has soup-to-nuts services for impact enterprises, including, for example, an early-stage accelerator, a crowdfunding platform for accredited investors and a social stock exchange for impact enterprises.

Read More