By Anna Yukhananov
WASHINGTON (Reuters) - The World Bank's private sector arm on Wednesday sold about $105 million in "inclusive business" bonds, the first-ever debt offering that target businesses which include the world's poorest people in their supply chains.
The International Finance Corporation, or IFC, issued the four-year, triple-A rated bond only to Japanese retail investors, tapping into the growing interest in low-risk investments with a social or environmental focus.
The World Bank, a Washington D.C.-based poverty-fighting institution, has sold several billion dollars in "green bonds" over the past six years, with proceeds going to help countries and firms cut greenhouse gas emissions and adapt to climate change.
Last year, the IFC launched a second thematic bond, a "women's bond" that raises money for businesses owned or run by women in emerging markets.
The latest offering, Inclusive Business bonds, would finance firms that work with or sell to the 4.5 billion people in the world that make less than $8 (5 pounds) a day.
Like the rest of the World Bank, the IFC focuses on fighting poverty, but targets its investments at the private sector instead of governments.
IFC said while most poor people do not spend a lot individually, as a whole they represent an estimated $5 trillion consumer market that firms could tap into.
For example, the IFC has invested at least $136 million in the Indian firm Jain Irrigation Systems (NS:JAIR), the world's largest maker of micro-irrigation systems. These systems help small-scale farmers boost their produce yields. The firm also helps the farmers process and distribute what they grow.
The project is an example of the ideal "win-win" situation, as farmers increase their incomes while the company expands its market, said Toshiya Masuoka, head of the IFC's inclusive business programme.
IFC's inclusive business focus aligns with the World Bank's efforts to boost the incomes of the poorest 40 percent in each country, what its President Jim Yong Kim calls "shared prosperity."
IFC visits the projects of any company before providing financing to ensure it benefits poor people.
However, IFC is still working on measuring the development impact of projects after it funds them. It hopes to expand a pilot programme in Nicaragua and Ivory Coast by using a "poverty scorecard" to measure household income and track how it changes over time.
The women's and inclusive business bonds have so far been sold only to Japanese retail investors, traditionally most amenable to innovative products that allow them to diversify away from low-yielding Japanese yen.
Benjamin Powell, the head of funding at IFC's Treasury, said other countries have also been interested, and he hopes to expand both kinds of thematic bonds globally by the end of June 2015, in issuance of around $250 million.
"There's clearly a growing number of investors out there in the world that really are changing their mandates (to) investing in socially-responsible, fixed-income products," he said.
(Reporting by Anna Yukhananov; Editing by Diane Craft)