How social finance can advance equity and economic growth in Asia

Social finance has soared in importance in Asia Pacific in recent years. While the Covid-19 pandemic marked a turning point in awareness globally, Asia Pacific has since become the driving force behind the growth of finance that is labelled for social purposes.

Issuance of social bonds in Asia has almost doubled in the last three years, in contrast to an overall decline in the rest of the world. In 2023, social bonds in Asia Pacific represented nearly 40% of global social bond issuance and 22.5% of all labelled ESG bonds issued in Asia, up from 11% in 2019.¹

Social finance – including bonds, loans and other financing instruments – is a subset of sustainable finance that is dedicated to socially beneficial outcomes. Similar to green finance, social financing can be directed towards a variety of uses, many of which are aligned to the Sustainable Development Goals adopted by the United Nations (see Figure 1). These range from improving access to education, finance, healthcare, affordable housing and basic infrastructure, to providing opportunities for advancement for women, youth and underprivileged individuals.

At its heart, the mission of social finance is to identify and address barriers that may prevent people from accessing opportunities, promoting greater inclusion, and improving the resilience of otherwise disadvantaged groups, which in turn benefits the economy overall.

The upgrading of the telecommunications network in the Philippines is one example of this, with network operator PLDT working to improve the connectivity to underserved communities in lower income municipalities across the country. In early 2024, we provided a PHP1 billion green loan to finance the upgrading of more of the network from copper to fibre.² In October 2024, we provided a PHP2 billion (USD34.5 million) social loan to PLDT to help fund the expansion of its fibre network to these communities.³

Figure 1: Possible uses of social finance proceeds

Closing the gender gap

Proceeds of social finance can be used to target projects that help improve the socio-economic status of women, to help address gender inequality. Research from the International Monetary Fund suggests that fully closing gender gaps could lift GDP in emerging markets and developing economies by an average of 23%.⁴

Bangladesh, for example, witnessed a surge in GDP per capita from 2007 on the back of rising participation of women in the workforce. Local conglomerate DBL Group experienced a marked improvement in quality control under the watch of female supervisors, which led it to set a formal target for increasing the representation of women in leadership positions. We supported the company to link its efforts to improve gender equality to financial outcomes by incorporating that goal in a sustainability-linked loan (SLL).⁵

Businesses in Asia Pacific’s more developed markets are also aligning their financing with efforts to address the gender gap. AirTrunk, which operates hyperscale data centres in Australia, Hong Kong, Japan, Singapore and Malaysia, tied its recent AUD4.6 billion (USD3.1 billion) SLL to ambitious environmental and social commitments, including gender diversity and gender pay equity targets.⁶

In addition to supporting gender equality in the workplace, social finance can also recognise the importance of empowering female-owned businesses. We launched a USD1 billion Female Entrepreneur Fund⁷ in 2022 and expanded its support for gender equality in Asia in 2023 with a IDR150 billion (USD9.6 million) social loan to Indonesia’s PT Mitra Bisnis Keluarga Ventura, which provides financing to more than 1.52 million female micro-entrepreneurs.⁸

Foundations for prosperity

Access to healthcare is another core focus for social financing. We provided a social loan to Gene Solutions to enable the Vietnam-based biotechnology firm to further expand its network across Southeast Asia.⁹ The overarching goal is to make it easier for people to access and afford essential healthcare services across Southeast Asia, particularly in early risk detection, non-invasive prenatal testing, cancer screening and diagnosis.

Social finance can also support the development of affordable housing – a priority area in many countries across Asia Pacific. In Malaysia, for example, we extended a social loan in accordance with the Social Loan Principles to Jayyid Land, to build affordable apartments targeting first-time homebuyers, in line with the Malaysian government’s aim of promoting home ownership for all its citizens.¹⁰

Businesses in Malaysia can also access Islamic financing to support social projects. Homebuilder LBS Bina turned to HSBC Amanah to arrange a social sukuk in January 2024, raising MYR200 million (USD42 million) for use on affordable housing projects.¹¹

Inclusion and innovation

Access to finance is also a crucial enabler of social advancement. Across Asia Pacific, financial technology firms are helping to broaden financial inclusion by extending credit to individuals and small businesses. In Indonesia, AwanTunai provides inventory financing for small corner shops, many of which lack access to formal lending. By stocking more inventory, these shops have a greater chance to make sales and earn profit. To support AwanTunai’s expansion, we arranged an innovative IDR300 billion (USD18.5 million) senior secured asset-backed facility to finance the procurement of inventory by end-borrowers.

Another way to create more opportunities for small businesses is to allow them to rent rather than buy innovative technology that could greatly improve their productivity. Indonesia’s eFishery offers a fleet of AI-driven automatic feeding devices, known as eFeeders, to smaller sized fisheries. These devices can increase feed efficiency by up to 30% and production capacity by up to 25%, while also potentially supporting more sustainable aquaculture in the country.¹²

In China, we played an important role in the rise of Micro Connect, which enables capital from a community of global investors to flow to very small Chinese businesses to help them grow and scale. We served as the first bank to arrange an asset-backed loan of USD25 million through Micro Connect’s fund dedicated to providing growth capital to innovative businesses in new economy sectors such as e-commerce, fintech, robotics, biotechnology and healthcare technology.¹³

And in Bangladesh, we arranged a BDT6.12 billion (USD51 million) social loan — the country’s second loan aligned with Social Loan Principles — to BRAC,¹⁴ a development organisation which provides a wide range of social development programmes serving tens of millions of people living with inequality and poverty. These include the provision of micro loans for small enterprises, women, migrant households and farmers.¹⁵

At HSBC, we believe in opening up a world of opportunity for our customers, colleagues and the communities in which we operate. By contributing to positive social change across Asia, there will be greater opportunities for all to prosper.

Today we finance a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability.