Small loans, big dreams

A new type of financing in the form of social bonds has the potential to improve the lives of some of the world's poorest people.


In a bustling mid-sized city in India, a young man grapples with the age-old question of how to earn a living – and improve his station in life.

While he can read and write, office jobs are hard to come by. He could find a salaried job, but this would mean getting involved in the types of manual labour that leave little opportunity for progression. Launching his own small business requires only modest start-up capital, but with a monthly income of just $150, most banks are unwilling to lend to him.

This man could be any one of millions of young, entrepreneurially-minded workers in India, or indeed the rest of a least-developed world. They are ready and willing to earn their own money but lack what economists call “financial inclusion“. Essentially, it means they are too poor to be a customer of a bank, let alone access a line of credit at reasonable interest rates.


The solution to their quest could lie in social bonds, a new form of financing that investors are embracing as a way to improve the world, whilst making good returns at the same time. Social bonds allow lenders companies like Shriram Transport Finance Company (STFC) to raise money to put towards projects that improve livelihoods. That could mean into areas such as education, housing, healthcare and employment. The “doing good” aspect of the projects means that the companies can sometimes access funds at more competitive rates than the market would otherwise allow.

STFC is an Indian corporation that finances commercial vehicles, extending credit to allow drivers to become owner/operators of their own fleet of vehicles. Its successful issuance in the US market of $500 million from investors in the form of a social bond demonstrates there is appetite to support this kind of development. The proceeds will be spent on allowing even more would-be trucking entrepreneurs to own their own vehicles and make a decent living.

For big investors such as pension funds and insurers, allowing Environmental Social and Governance (ESG) criteria to guide their investments means money can flow into projects that improve the world, rather than the corporate bottom line.

While social bonds may be the youngest of the sustainable bonds family, this new type of financing is experiencing remarkable traction of its own, enabling STFC CEO & Managing Director, Umesh Revankar, to help truck owners dream big.

First international public social bond issuance from India
BNP Paribas was a joint bookrunner, joint lead manager and joint social structuring advisor on India’s first international social bond, supporting Shriram Transport Finance Company (STFC) to issue a $500 million, 3.5-year bond in January 2020.

This article was also published in The Business Times under the title “The heart of finance: Social bonds as a way to improve the world”.