Boosting financial inclusion for the most vulnerable through social bonds

An article on the IDB Invest blog states that microenterprises are the main source of economic development and employment in Latin American and Caribbean (LAC) countries, but also ensures that they face many barriers in accessing finance.

Microfinance institutions, with their limitations and difficulties, continue to be the vehicle to promote bank access and reach vulnerable segments. On the other hand, thematic bonds, particularly social bonds, are financial instruments that increasingly attractting more investors seeking to reduce inequities in the region and to contribute to a just transition. As of June 2022, thematic issuances (GSSSB) in LAC represented 35% of the total issuances made in the region.

IDB Invest seeks to act as a catalyst for thematic investments by developing knowledge, opening doors to the capital market, generating trust, and even connecting supply and demand. The need to report positive socioeconomic impacts in a transparent and homogeneous manner is also relevant, with ICMA leading as benchmark in guidance, requirements and best practices.

Finally, the article describes the learnings from the case study of Banco Solidario, a leader in microfinance in Ecuador, highlighting its value proposition for excluded populations, its complementary non-financial assessments, its commitment to financial inclusion, its recent issuance of a gender bond and inclusion for 30 million dollars, among other relevant milestones.