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Social bond will benefit emerging free press
Joanna Chung
5/15/2006
A NEW financial product aimed at promoting independent media in developing countries will be listed on a stock exchange for the first time as investor interest grows in assets related to social change and sustainable development.
Vontobel Group, the private Swiss bank, has teamed up with Zurich-based investment specialist responsibility, to create a tradable instrument -- being listed on the Zurich stock exchange on May 18 -- that will give investors a fixed-interest financial return as well as a "social" return.
Part of the capital raised will go to the New-York based Media Development Loan Fund (MDLF), which provides loans on favourable terms to independent media outlets that typically use the money to buy printing presses, new TV and radio transmitters and broadcasting equipment.
Sasa Vucinic, managing director at MDLF, said: "The listing of a financial product that mobilises private investment to support a free press is a truly revolutionary step, not just for media development but for all social causes. It could provide a blueprint for engaging private finance in social projects around the world."
The bond-like certificate, which follows the launch last December by MDLF of Free Press Investment Notes, could raise tip to SFr20m ($16.2m), Of that amount, 20 per cent will go to MDLF, and the rest comprises a five-year swap note that pays a fixed interest to investors.
While the deal is relatively small by bond market standards, it comes at a time when innovative financing techniques are increasingly being used to address social, humanitarian, and political issues.
Microfinance, the business of making tiny loans to individuals in developing countries, is increasingly turning to the international capital markets for funding. Meanwhile, six developed nations are planning to issue bonds, backed by future aid money, to fund immunisation programmes.
Roger Studer, head of financial markets at Vontobel, said: "More and more investors are asking for such products because it provides another option in addition to regular donations they might make to such causes."
Vontobel and the Swiss Agency for Development and Co-operation will ensure secondary trading of the new instrument and investors can resell the bond before maturity if necessary. "Investors end with a slightly lower yield than a normal bond but there are also social returns," said Mr Studer.
Klaus Tischhauser, managing director at responsAbility, said the market for such products was growing.
MDLF was started in 1996 with seed money provided by George Soros, the billionaire financier.
It is currently active in 13 countries, predominantly in the former Yugoslavia and Russia and the Commonwealth of Independent States, but its activities are increasing in Africa and Latin America in particular.
Under syndication arrangement with FE
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