Micro finance NGO issuing P2-B bonds

MANILA, Philippines -  Microfinance non-government organization ASA Philippines Foundation is issuing P2 billion in corporate bonds to expand its lending activities to about two million women-led micro, small and medium enterprises (MSMEs) across the country.

This is the largest issuance by an individual microfinance institution so far.

Proceeds from the issue will largely be used for ASA’s expansion and related projects through 2021. The NGO intends to open 150 branches annually to make their services more accessible to women entrepreneurs.

ASA Capital has tapped BPI Capital as the lead arranger of the issue. The initial bondholders are BPI, Land Bank of the Philippines, and the Philippine National Bank.

The Credit Guarantee & Investment Facility, a guarantee facility established by the Philippine government together with its fellow ASEAN member countries, China, Japan, South Korea, and the Asian Development Bank, is partially guaranteeing the bonds, which will have a five-year maturity period and an interest rate based on PDST-R2, plus a credit spread mutually agreed upon between parties.

“This issuance is a milestone not only for us, but for the entire microfinance industry, as it allows us to further grow and expand, and essentially contribute to the level of financial inclusion in the Philippines, laying a strong foundation for the development of the lives of the poor nanays across the country,” said Kamrul Tarafder, ASA Philippines Foundation CEO.

Tarafder said with their recent growth, ASA needs to look more towards the capital markets to fuel its expansion.

From its humble beginnings in 2004, ASA Philippines has grown significantly, employing about 5,964 full-time staff catering to 1.27 million borrowing clients.

By 2021, ASA expects to hit a lender base of two million, with a projected increase of an estimated 700,000 borrowers, and a corresponding growth of 100 percent in its portfolio.

The NGO is already present in 850 locations across all 82 provinces.

As of the end of December 2016, ASA Philippines had extended P91.6 billion in loans, and recorded a recovery rate of 99.92 percent.

It also spent close to P760 million for benefits and activities, including death, hospitalization, disability and health care benefits, child feeding, scholarship, and business development programs – which directly impacted over a million Filipinas and their families.

“This issuance marks a significant step in ASA’s corporate maturity, graduating from a purely bank financing to a capital markets issuer, and extending the duration of its liabilities to more closely match its investment profile,” said Eric Luchangco, head of Debt Capital Markets for BPI Capital.

“The partial credit guarantee for ASA demonstrates that bonds have a catalytic role to play in financing MFIs as a viable alternative longer term funding source to short-term bank loans, “Kiyoshi Nishimura, CGIF chief executive officer said.