To promote digitalization and jobs in emerging markets, the International Finance Corporation (IFC), a member of the World Bank Group, has partnered with Sumitomo Mitsui Financial Group (SMFG), a Japanese financial group, to launch the world’s first social bond exclusively dedicated to digital inclusion, including for micro, small, and medium enterprises (MSMEs), totaling $500 million.

IFC said in a statement on last Friday that the bond aims to expand financial access for micro, small, and medium enterprises (MSMEs) through digital tools further supports their role as the primary driver of jobs in emerging markets.

As an anchor investor, IFC collaborated with SMFG to conceptualize its Social Finance Framework in line with the ICMA Social Bond Principles (SBP).

This landmark transaction marks IFC’s first investment in a thematic bond focused on digital inclusion as well as its first investment in Total Loss-Absorbing Capacity (TLAC)-eligible instruments in the Asia Pacific region.

IFC’s investment proceeds will be allocated to Eligible Digital Inclusion Social Projects defined in SMFG’s social finance framework, including the loan portfolio of SMFG India Credit Company Limited (SMICC), a key SMFG subsidiary in India, targeting MSMEs through digital channels.

This initiative will help bridge India’s persistent MSME finance gap by leveraging digital tools to streamline loan processes and use alternative data for better credit assessments, thereby supporting business growth and fostering job creation.

“Worldwide, MSMEs are an important engine for creating jobs. This groundbreaking issuance represents a major step forward in using capital markets to expand digital and financial inclusion for MSMEs to help fuel such job creation,

“IFC is delighted to be partnering with a leading institution like SMFG for this impactful financing,” said Sarvesh Suri, IFC’s Regional Vice President for Asia and the Pacific.

Masayuki Takanashi, SMFG’s Group Chief Sustainability Officer, said this bond will not only strengthen their commitment to financial inclusion in India but also set a new benchmark for social finance in the Asia Pacific region.

According to the World Economic Forum estimates, $2.1 trillion will be required over the next five years to significantly reduce the global digital divide.

Since the launch of the ICMA SBP in 2017 which recognized digital access for underserved populations as an eligible use of proceeds, ICMA-compliant social bonds targeted digital access has been extremely limited, and none in the world was issued exclusively for digital inclusion purposes until now.

According to the statement, digital inclusion is recognized as a critical enabler of economic participation, innovation, and resilience.

By structuring and investing in this epoch-making bond, IFC and SMFG are demonstrating how capital markets can be harnessed to address one of the most pressing global challenges — the digital divide — while creating a replicable model for other issuers around the world, said the statement.

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