British International Investment, the UK’s development finance institution, is funding a bond arranged by Symbiotics. It will provide loans to MSME banks offering green lending to small-scale borrowers in Africa and Asia
British International Investment (BII) is funding a $75m Green Basket Bond arranged by impact investment platform Symbiotics, which will provide loans to micro, small & medium enterprise (MSME) banks providing green lending to small-scale borrowers in Africa and Asia.
This programme will support 10-15 MSME banks that require smaller investment capital than BII is usually able to fund directly. The maximum loan size per MSME bank will be $7.5m.
“We’ve seen green loans and green bonds going to large banks in our markets, which often end up going to larger projects, so targeting MSMEs in this way is something new,” Jo Fry, investment director and head of intermediated credit at BII, told Impact Investor.
The aim is to enable MSME banks to provide loans to help fund small-scale green projects such as rooftop solar panels, sustainable agriculture, energy-efficient appliances including clean cookstoves, energy efficiency improvements to buildings or electric vehicles. The programme is focused on BII’s markets, which include Africa, India, Pakistan, Bangladesh, Sri Lanka, Nepal, Indonesia, Philippines, Vietnam, Cambodia and Laos.
Dispersal of funds from the bond will benefit from Symbiotics’ extensive network of MSME bank partners acquired through the development of its market access platform, which focuses on financing micro- small and medium enterprises and low- and middle-income households in emerging and frontier markets. Symbiotics says it has structured and originated around 6,500 deals representing more than $6.5bn for over 520 companies in more than 90 countries since 2005.
As part of the green basket bond package, BII will also provide an additional $520,000 via its technical assistance facility to enable the chosen MSME banks to better support the growth of green projects and businesses.
“The first measure of success will be in the deployment of these smaller climate loans, as there is limited track record in the market of doing so at scale,” said Michael Sanni, the investment manager at BII who led the bond deal for the institution
“In the longer-term, we want these MSMEs to build their capacity and strengthen the teams so they can grow their broader green lending beyond this programme,” he added.
BII also hopes that, by showing what is possible, the deal will set a replicable structure for private investors seeking to increase their allocation of climate finance in Africa and Asia.
“We hope that by putting a series of 10-15 very small bonds together in one larger basket bond we can create a way of investing in this market with which private investors can feel comfortable. Demonstration is the most important factor,” Sanni said.
BII – formerly known as the CDC Group – currently invests £1.5bn-2bn annually to support the UK government’s Clean Green Initiative, which aims to give developing countries better access to green technology. Over the next five years, at least 30% of BII’s total new commitments by value are to be in climate finance, which, the development finance institution says, will make it one of the world’s largest climate investors in Africa.