41721 - DCM BAY Women Entrepreneur Bond

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Summary of Investment Information

Project Number

41721

Company Name

BANK OF AYUDHYA PUBLIC COMPANY LIMITED

Date SPI Disclosed

Aug 22, 2019

Country

Thailand

Region

East Asia and the Pacific

Projected Board Date

Jun 13, 2019

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 13, 2019
Signed : Aug 21, 2019
Invested : Oct 16, 2019

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The proposed investment entails IFC anchor investment of up to US$150 million in a US$220 million privately-placed, senior, unsecured USD-denominated “Women Entrepreneurs Bonds” to be issued by Bank of Ayudhya Public Company Ltd. (“Krungsri” or the “Bank”) to finance the expansion of the Bank’s women-led small and medium enterprises (“WSME”) loan portfolio (the “Project”). The Project will support the Bank’s ongoing efforts to increase its lending portfolio to WSMEs, an important sector that drives economic growth and employment, and to promote resilient and sustainable growth and strengthen financial inclusion in Thailand.

Krungsri is the fifth largest commercial bank in Thailand, in terms of total assets, with 11.4% market share of total banking sector assets (US$67 billion) as of December 2018. The Bank has a leading position in consumer lending and ranks #1 in retail and #5 in the SME and corporate loan segments. Krungsri is listed on the Stock Exchange of Thailand, with a market cap of US$9.4 billion as of July 31, 2019 and is recognized as a Domestic Systematically Important Bank by the Bank of Thailand.

IFC has a multi-level partnership with the Bank and its subsidiaries in the East Asia and the Pacific region, notably Hattha Kaksekar Limited in Cambodia, as well as the Bank’s major shareholder - MUFG Bank, Ltd., the largest commercial bank in Japan (“MUFG Bank”)

Associated Advisory Engagement

IFC Banking on Women advisory services engagement is also being explored to help the Bank develop and launch the first differentiated financial and non-financial product offering in the market specifically designed for women entrepreneurs.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	150.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to Woman-Owned SMEs

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Project-level Outcomes Stakeholder effects - increased access to finance for WSMEs: The proposed project will use 100% of the bond proceeds to ramp-up the financing of new and existing WSME customers. Through this project, IFC anticipates the Bank's WSME loan portfolio to grow by 59 percent to US$4.2 billion (from a baseline of US$2.6 billion in 2018), serving 32,170 WSMEs (94 percent increase from a baseline of 16,568 in 2018), thus increasing the share of WSME borrowers as a percentage of total SME borrowers from 37.6 percent to 51.1 percent and growing WSME lending volume as a percentage of total outstanding portfolio from currently 33.7 percent to 37.5 percent in 2026. Stakeholder effects - improved quality of financial and non-financial products and services for WSMEs: Through this project, IFC will support Krungsri to develop a WSME-centric customer value proposition, which will strengthen the Bank's existing SME business and help expand the Bank's WSME loan portfolio. The project is further expected to benefit WSMEs through additional non-financial services tailored towards WSMEs. Economy-wide effects - job creation: If the Bank grows its WSME portfolio as expected, IFC estimates the project will create between 45,000 and 83,000 jobs over the next five years. Market Creation Integration: Thai capital markets are considered somewhat developed relative to other emerging economies. The themed-bond market in Thailand is gaining momentum. Krungsri's Women Entrepreneurs Bonds will be the first social bond in the market and the first issuance 100-percent dedicated to WSMEs. IFC therefore anticipates that this new capital market instrument, endorsed and issued by a systemic commercial bank, will demonstrate to other market participants the opportunity of mobilizing funding from private sector investors, and thus enhancing financial market integration. As the first Women Entrepreneurs Bonds in Thailand issued under SBPs and ASBS by a commercial bank, the Project will further contribute to market integration via standard setting channels. Inclusiveness: IFC anticipates the Project will significantly improve market inclusiveness for WSMEs by supporting a systemically important, publicly listed financial institution with a strong SME business to demonstrate to other market participants a successful pilot case for raising funds to establish an innovative women-centric lending program that will both improve access to finance for WSMEs and demonstrate the financial viability of investing in women entrepreneurs. Successful implementation is expected to trigger replication by other market participants, thus encouraging further issuances of themed (women-)bonds to mobilize private sector funding and to enhance WSME-focused financial and non-financial products and services for a more inclusive and competitive market environment.

Innovative financing instrument: IFC will help Krungsri, a systemically important financial institution, to issue its first US-dollar denominated senior bonds and the first Social/ Women Entrepreneurs Bonds in the country in line with the Social Bond Principles (SBPs) and the ASEAN Social Bond Standards (ASBS). As an anchor investor, IFC will subscribe up to US$150 million of the 7-year Women Entrepreneurs Bonds through a private placement. IFC undertook a programmatic approach to develop the themed bond market in Thailand. Through investing in the bond, IFC will introduce WSME loans as an investable asset class to the market, which will pave the way for the issuance of future capital market instruments related to social and gender lending. Resource mobilization: IFC will help mobilize at least US$70 million of funds from DEG to invest in the Women Entrepreneurs Bonds. As an anchor investor, IFC provides comfort to other investors in the new instrument, so that the Bond will be successfully issued with full subscription, which otherwise might be delayed or uncertain. Catalyzing policy or regulatory change: The Women Entrepreneurs Bonds will be the first social bond issued in Thailand under the International Capital Market Association (ICMA) SBPs and the ASBSs. Consequently, IFC's involvement in the Project catalyzes the investment response to these recent changes in the policy and regulatory environment governing Thailand's capital markets. IFC's involvement in this first Women Entrepreneurs Bonds issuance in accordance with internationally accepted SBPs will test the new framework and inform regulators to further refine the policy environment to encourage future issuances of such instruments.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The proposed Project is an IFC subscription of US$150 million in a privately placed USD-denominated senior unsecured bond issuance by the Bank, with 100% of the proceeds to support eligible WSMEs in Thailand. The underlying environmental and social risks (E&S) risks of the prospective portfolio are considered to be medium risk. The Project will not support coal-related activities or higher risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, or d) significant Occupational Health and Safety risks. The Project has been categorized as FI-2 in accordance with IFC Sustainability Policy. The Project will be required to comply with the IFC Exclusion List and relevant host country E&S laws and regulations.

Contacts

For Inquiries About the Project, Contact

Bank of Ayudhya Public Company Ltd.
Duangkhae Khunviseadpong
Senior vice president head of department
+66 (0) 2296 5307
duangkhae.khunviseadpong@krungsri.com
1222 Rama III Road, Bang Phongphang, Yan Nawa, Bangkok 10120 Thailand
https://www.krungsri.com/bank/en/Contact/CU/ContactUs.html

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