The Social Bond issued by CaixaBank in September 2019, the first in Spain supporting the United Nations Sustainable Development Goals (SDG), in its first year has contributed to creating 8,207 direct, indirect and induced jobs; starting 1,046 new companies; and helping 160,945 families with specific needs, self-employed workers and small businesses. This was achieved as a result of granting loans to self-employed workers, micro-businesses and SMEs and has a total impact on the Spanish GDP estimated at €1.48 billion.
These are some of the main conclusions that can be drawn from a study conducted by the financial institution chaired by Jordi Gual and led by Gonzalo Gortázar, in collaboration with the consulting firm Deloitte, and audited by PwC. This study is aimed at assessing the impact on the economy of this new financial instrument, amounting to €1 billion.
Due to its nature, this social bond is directly linked to the achievement of progress in the SDGs. Specifically, the objective was to contribute to SDG1 (End poverty) and SDG8 (Decent work for all and economic growth). The first SDG was covered with micro-credits granted by MicroBank and the second goal with CaixaBank's financing as part of the bond. The issue was recognised as the Social Bond of the year 2019, an award given by the prestigious publication Environmental Finance.
The total amount of the bond issue was allocated to loans for families, self-employed workers and small businesses, where €502 million were granted by MicroBank to projects linked to SDG1 and €498 million to SDG8. 50% of the amount of the loans benefited families, 29% micro-businesses, 11% small businesses, 5% medium-sized business and another 5% self-employed workers and entrepreneurs. 160,945 loans were granted, of which 147,868 went to families and 13,077 to self-employed workers and businesses.
The report has received an excellent response from the Socially Responsible Investment (SRI) investor base, which recognises that CaixaBank has far exceeded the recommendations set by the International Capital Market Association (ICMA) for this type of impact reports. The surveyed investors underlined the report's high level of detail; the transparency in the calculation methodology, highlighting the innovative approach of basing part of the analysis on surveys presented to customers; and CaixaBank's effort in defining not only the direct impact on the GDP and employment, but also the indirect and induced impact.
Many investors state that CaixaBank has set a new standard in the way issuers, not only financial, should approach their respective impact reports. What some investors questioned was precisely the difficulty involved in measuring the impact of their investments in Social Bonds in comparison to Green Bonds.
Impact on the business fabric and the labour market
The recipients of this funding have been self-employed workers, without collateral or guarantees, micro-businesses and small businesses operating in Spanish provinces with a per capita GDP under the 30 percentile thereof or above the 30 percentile in terms of unemployment rate. The loans have funded the consolidation of companies and the creation of new business projects. In this sense, the Social Bond has helped establish 1,046 new companies. With the aim of supporting territorial balance, 18% of the loans' beneficiaries are located in rural areas. CaixaBank's report points out that the granted loans have helped create 2,591 direct jobs, 2,855 indirect jobs and 2,761 induced jobs (generated as a result of wages spent by employees of the companies that have received the loan, as well as by employees of their suppliers); this adds up to 8,207 new jobs. These figures translate into the fact that approximately 16 jobs were created per one million euros invested in the Social Bond.
According to a survey conducted with the borrowers to assess the funding's impact, purchases of technology and equipment (31% of the cases analysed), investments to expand the business and open new facilities (30%), purchases of goods or tax and lease payments (24%) and expenses borne to set up businesses (11%) stand out among the main projects developed by self-employed workers and companies with the granting of CaixaBank's loan. Twelve months after obtaining the loan, over 60% of beneficiaries state that it has enabled them to open their business or consolidate it and, in the case of the SMEs, 75% said that their company is now stronger.
Furthermore, 85% of self-employed workers consider that, without the loan, they would not have been able to open their business, and among those which looked to consolidate it, 65% believe that it has had a positive impact on their growth.
Besides the implications on the labour market, the initiative's impact extends throughout society as a whole, as, according to the report, the loans to self-employed workers and companies have had an effect on the Spanish Domestic Product (GDP), estimated at €1.48 billion, which means that every one million euros invested in the Social Bond has contributed to the economy by three million euros.
Social inclusion of vulnerable families
Families have benefited from €502 million of the Social Bond supporting SDG1 (End poverty) via MicroBank. As part of this, CaixaBank's social bank has granted micro-credits to 139,731 families that needed to fund specific needs, such as health, education, home restoration or vehicle purchasing expenses. The amount financed is small, an average €3,395 per family, with an average repayment period of 2.3 years.
The loans have been specifically directed to people with difficulties in accessing funding through conventional channels, with a total yearly income of the family unit below €17,200 euros and that do not have the possibility of providing collateral.
The loans' impact on families is reflected in the study conducted by CaixaBank, according to which 98% of the beneficiaries said that they fulfilled their intended purpose and 87% stated that the funding had a positive effect on their life. Furthermore, 79% claimed that the micro-credit enabled them to maintain or increase their savings capacity. 15% of the beneficiaries are located in rural areas.
About MicroBank
MicroBank offers solutions to different segments of the population whose financial needs are not sufficiently met. It plays a defining role in CaixaBank's Socially Responsible Banking Plan, the mission of which is to promote financial inclusion by helping all social groups access loans, especially the most vulnerable groups, as well as reinforcing its commitment towards the territory's socioeconomic development.
CaixaBank is MicroBank's only shareholder and since its inception, it has lent the social bank its support through two channels: by giving it the funding required to grow its lending activity while marketing MicroBank products through CaixaBank's commercial network of 4,000 branches, with the aim of offering customers its entire range of products with the highest possible quality of service and the best possible relationship.
The MicroBank's 2019-2021 Strategic Plan has given the entity fresh impetus to face the challenges and set goals: financial inclusion, promotion of the productive activity and generation of social impact.
