Gender financial bonds to support women

A Colombian financial entity surprised the country in the midst of the crisis that is being experienced by the pandemic with an attractive announcement, the issuance of gender bonds as a strategy to economically and socially empower women without renouncing the criteria of profitability, as Gema Sacristán, IDB Invest's general business director, has been proposing in recent years.

Beyond being a fixed income financial product, gender bonds are subject to the same financial and capital markets regulation as a traditional bond, but they aim to close gaps in women's access to the labor market, to positions of leadership or funding. The interesting thing about this financial instrument is that it can be articulated by financing companies that meet any of these three objectives: that are led by women, that offer products or services for them or that are committed to promoting equality, explains the general director of IDB Invest business.

"This type of bonds, in addition, are one of the multiple investment products with gender lenses (known as gender lens investing) that, without renouncing the criteria of profitability, seek to empower women economically and socially" says Gema Sacristán in her Blog on sustainable businesses of the IDB.

To date there have been few, but very successful gender bond issues. Australia, Canada and some Latin American countries such as Panama and Colombia are entering into this financial commitment that will allow greater empowerment of women.

Davivienda made a recent announcement about the issuance of gender bonds through Jaime Castañeda, vice president of the company's Treasury, who explained that the bonds will benefit mothers who are heads of households and owners of small businesses.

The issuance of social bonds with a gender focus was made for a term of seven years, for US $ 100 million, which is equivalent to $ 362,500 million Colombian pesos.

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The structuring and subscription of these titles was carried out by IDB Invest, a member of the IDB Group, and the money raised will be used to finance the growth of the portfolio of SMEs led by women, as well as the purchase of affordable housing by women in Colombia, a significant contribution for Colombian women in the midst of the crisis, ensuring the tranquility of many of them in the future.

Through this program, IDB Invest will grant Davivienda a bonus of US $ 300,000 over five years for meeting objectives. The expansion of the Pyme Mujer loan portfolio will go from 20% to 27%, an action that will allow this modality to be the first in Latin America with this type of benefit.

Davivienda's compliance incentive will be generated when the bond is issued, under the commitment to achieve the objectives that have been proposed, such compliance as explained by Gema Sacristán to the Colombian newspaper Portafolio, will have a bonus from the IDB. “Basically the bond is for seven years, and in the next five we will monitor how much the portfolio to women increases, and if it is fulfilled, we will give them US $ 60,000 each year up to a total of US $ 300,000, which will make the financing cheaper".

That means, according to the general director of business of IDB Invest, that Davivienda each year will make public information on its progress, and the use of resources, so it is also an exercise in transparency on its part, concludes Sacristán.

IDB Invest will also provide technical assistance services with funds from the We-Fi program to support Davivienda in designing a value and positioning proposal focused on serving the SME segment.

The thematic bond boom

Thematic bonds, which seek financial, social and environmental profitability are a boom in the world. The trend that began with green bonds linked to the Paris Agreement and the 2030 Development Goals, and the need for entrepreneurs to adapt and implement actions to fight against climate change, allowed their positioning. Then the social and sustainable bonds arose and today as part of this financial growth process, gender bonds are imposed.

The first social bond in Colombia was issued in 2018; Bancóldex, the Colombian Business Development Bank, issued the country's first social bond in the local market for 400,000 million pesos.

The bond issuance had technical support from the Inter-American Development Bank through a technical assistance program financed by the Swiss Embassy in Colombia – Economic Cooperation and Development (SECO) and was aimed at "projects related to the generation and formalization of employment, the reduction of inequalities, the activation of rural economies, access to credit, the reduction of the wage gap between men and women and the integration of excluded groups within the productive economy ”.

But already in 2017, Bancóldex issued its first green bond in the local market for 200 billion pesos, to finance projects that would help reduce the negative consequences of climate change.

With the gender bonds, directed only for women, the story began in Panama, in 2019. The first bond was issued in the Central American country and was intended to finance small and medium-sized companies led by women. Part of this stemmed from the need for the United Nations to fulfill its fifth purpose by 2030, which is to achieve greater gender equality.

Banistmo was the organization in charge of placing the issue of US $ 50 million. According to Forbes Mexico, IDB Invest, the private sector bank of the IDB Group, structured the operation. The objective of the funds raised was to expand the scope of the Panamanian bank's “Impulsa” program, which continues to support small and medium-sized businesses led by women.

The issue is also accompanied by the company Vigeo Eiris, which as an independent expert validated its alignment with the principles of Social Bonds and its contribution to four UN Sustainable Development Goals.

Today, Colombia is following the same march at a crucial moment in which reducing the gender gap is necessary and providing security for women is a country priority.