Under an agreement announced, the International Finance Corporation (IFC), will invest up to $500 million in PT Bank BTPN Tbk, comprising a social bond and a green bond issuance. The issuance of these bonds will be a first for BTPN, underscoring the bank’s support for Indonesia’s micro, small and medium enterprise sector, in particular women-led businesses, as well as action on climate change.

Thematic bonds are uncommon in Indonesia. The investment from IFC, a member of the World Bank Group, is expected to help grow the nascent market for thematic bonds in the country, especially among private sector issuers, and contribute to boosting the depth and breadth of Indonesia’s capital markets.

“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 realizing our vision to give significant change in the lives of millions,” said Bank BTPN President Director Henoch Munandar. “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.”

Indonesia is highly vulnerable to the impacts of climate change, but limited availability of financial products has posed challenges in climate financing. IFC’s investment in a BTPN green bond supports Indonesia’s goal for greener growth, aligning with the Government of Indonesia’s Paris Agreement commitments. The bond will be used to finance green projects, including renewable energy, energy efficiency, green buildings, and clean transportation, among others. It will help bridge financing gaps for climate mitigation and adaptation and is expected to result in total projected greenhouse gas emissions reduction equivalent to 137,326 tons of CO2 per year.

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“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.