Deutsche Bank, Home Credit ink partnership

MANILA, Philippines — Deutsche Bank and global consumer finance provider Home Credit Philippines signed a first environmental, social and governance (ESG)–linked loan in the country.

Kamran Khan, head of ESG for Asia Pacific at Deutsche Bank, said the pioneering transaction reflects the transitioning of consumer lending in Asia toward responsible and sustainable lending.

Khan said the partnership with Home Credit also evolves the ESG landscape by demonstrating that beyond environmental considerations, financing could also be meaningfully tied to social impact objectives strongly focused on financial inclusion.

“The parameters of the loan track and incentivize Home Credit’s commitment to provide loans to new market entrants, which are typically women and young adults obtaining credit for the first time. This is an emerging and important area of ESG, particularly in Asia; both the need and the opportunity to drive impact are great,” Khan said.

The transaction represents an important step forward in the development of ESG-linked financing with robust targets related to ‘S’ or social considerations.

The short-term loan facility establishes clear metrics and key performance indicators (KPIs) with respect to ESG considerations, as well as concrete targets for those metrics that Home Credit has committed to achieve over the term of the loan.

The primary KPIs focus on expanding credit access to underserved communities in the Philippines, including female and first-time borrowers, and increased provision of financial literacy programs in the Philippines.

The transaction also features targets around Home Credit’s digitalization efforts, committing them to providing at least 60 percent of their loans via digital channels, in order to provide a higher level of transparency to customers, to enable more equitable loan rates and terms to customers regardless of their economic or social background.

In addition, the KPIs track data to confirm Home Credit’s commitment to protect the data privacy of its customers, and ensure that these are used for agreed purposes.

The indicators would be measured and verified by an independent third-party advisor to make sure the loan complies with the Sustainability-linked Loan Principles of the Asia Pacific Loan Market Association.

Home Credit funding, treasury, investor relations as well as mergers and acquisitions head Jean Lafontaine said the transaction reflects the trust that partners have in its work to drive ESG agenda.

“As a business, we are consistently looking at innovative funding solutions and this is our first ever ESG-linked loan at Group level and an important milestone. ESG is not something new to Home Credit Group and is part of our company DNA,” Lafontaine added.

Lafontaine said Home Credit continues to deliver greater financial inclusion in markets like the Philippines.

“With the KPIs linked to this loan facility, we are even better placed to continue to deliver equitable and transparent access to financial services for the communities where we operate,” Lafontaine said.