Yes Bank to raise $100 million from IFC for green bond, women-owned SMEs

Yes Bank is planning to raise around $100 million from International Finance Corporation (IFC), a project report issued by IFC revealed. The investment by World Bank's investment arm comprises $50 million for a so-called Green Bond and an equal amount for the financing line for women-owned small and medium enterprises (SMEs), the IFC’s project disclosure report said.

This will be the first emerging market Green Bond investment by IFC, the proceeds of which will be lent to eligible climate change finance projects mainly in the renewable energy sector.

The long term funding will be on terms that are consistent with the underlying cash flow profile of such long gestation and capital intensive projects. IFC said the investment is aimed at generating support and confidence in the Green Bond market which is a new asset class in India and will go towards creating a new and viable source of long term financing for climate change projects in the domestic markets.

It added that the development of the Green Bond market will provide an impetus to the development of the overall local currency bond market, which is a high developmental priority for IFC and for the Indian government. IFC's investment in an emerging market Green Bond will encourage issuers in other markets to issue similar bonds and support greater resources for climate change finance and development of domestic capital markets.

IFC also said its financing complements its active and growing knowledge partnership with Yes Bank in the areas of infrastructure finance, small business lending, gender finance, renewable energy finance. IFC expects to engage closely with Yes Bank in these areas both through funding and advisory activities.

The second project will support women-owned businesses, which are less likely to be banked because they tend to be smaller and less formal. The socio-cultural environment, where men are still regarded as the heads of the household owning land and property of the family, makes it difficult for women to present assets as collateral to access finance. While banks perceive women-owned businesses to be at higher risk, they often do not recognize the economic and social benefit of banking women-owned businesses, who tend to be more loyal customers, less price sensitive and more risk averse, said IFC.

"IFC and Yes Bank are looking to explore deeper collaboration in Capital Markets including supporting Yes Bank's efforts to broaden the range of investors in its offerings of senior debt securities such as Green Bonds. This financing is consistent with and supportive of this overall strategic priority," said IFC.

YES Bank is India’s fourth largest private sector bank, with an asset base of $20 billion (Q3FY15), and a loan book that has grown at a CAGR of 29%. It has steadily diversified and increased its SME and retail portfolio, which presently comprises 32% of its loan book, and is looking to increase the proportion of the SMEs to 50% over the next five years.