A co-operative from Ecuador has launched a $20m diversity and inclusion social bond, the first of its kind in the world.
Cooperativa de Ahorro y Crédito Jardín Azuayo was set up in 1996 in the canton of Paute, province of Azuay, to help the local community recover from the 1993 Josefina landslide and flood, which destroyed more than 1,000 homes and killed at least 100 people.
The co-op, which provides a range of financial services, has launched the bond in collaboration with IDB Invest, a multilateral development bank. IDB Invest advised Jardín Azuayo in the design of the conceptual framework for the use of funds, which contains the criteria for selection, monitoring, evaluation and reporting of projects, aligned with the Social Bond Principles of the International Capital Markets Association (ICMA). It also supported the co-op as it obtained an independent verification of the conceptual framework.
The diversity and inclusion social bond has been subscribed with investments of $10m by each IDB Invest and Oikocredit. The co-op will use the resources from the bond placement to finance, promote, and expand access to credit for micro, small, and medium-sized enterprises (MSMEs) owned and/or led by women, people with low incomes, with a low level of education, ethnic groups such as indigenous people, and/or migrants in Ecuador.
The deal will see IDB Invest grant the issuer advisory services and a monetary bonus subject to the fulfilment of objectives related to the portfolio of MSMEs for women, women migrants and Indigenous women.
The bank said it would also provide an advisory service to accompany the co-op in the assessment to improve credit decisions towards women and underrepresented groups through the development of alternative credit ratings, such as psychometric tools.
“For Jardín Azuayo, the issuance of the first diversity and inclusion social bond with incentives linked to the achievement of objectives, the first of its kind in the world, is important because it strengthens the founding objective of the co-operative, which is to improve the living conditions of a society and be an instrument for the development of our peoples,” said Juan Carlos Urgilés, Jardín Azuayo general manager.
Marisela Alvarenga, general director for the Financial Sector of IDB Invest, said: “This operation ratifies IDB Invest’s commitment to financial inclusion in Ecuador and the region, strengthening and supporting access to financing for MSMEs in vulnerable segments, thus promoting equal opportunities for access to credit and the growth of their businesses.
“We are also pleased to be catalysts for impact, attracting new investors that support sustainable initiatives, mobilising on a larger scale the capital available to finance companies owned by these groups, generating a positive impact on society and promoting equitable development.”