JIN-503 -- Donor-backed bonds prove immune to downturn

Thu Mar 12 17:03:53 JST 2009

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J at pan Inc Newsletter
The 'JIN' J at pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 503 Thursday March 12, 2009, Tokyo

In these post-Lehman days, it's interesting to see that one form of
debt security is gaining in popularity. Donor-backed bonds for
children's vaccines are giving their investors a warm, fuzzy feeling -
and that's not just from their monetary returns.

The UK-based non-profit International Finance Facility for
Immunisation (IFFIm) has continued to raise cash at a time when
investors remain extremely wary of debt. On March 2, HSBC started
offering its UK customers the fund's vaccine bonds as a five-year
savings plan with 16-percent returns. Together, the governments of
France, Norway, Italy, Spain, Sweden, the UK and South Africa have
pledged $5.3 billion over the next 20 years to repay investors.

This comes following the announcement that the fund raised the
equivalent of $429 million in an offering to Japanese retail
investors. The largest tranche was in the South African rand, 3.17
billion or the equivalent of $310 million (at the time the money was
raised). The rest of the transaction was made in Australian and New
Zealand dollars. The issue, made by Daiwa Securities SMBC, offered a
coupon of 6.26 percent on the rand tranche, 2.65 percent on the kiwi
dollar tranche and 2.6 percent on Aussie dollar tranche.

This issuance came a year after the funds first "uridashi" bonds were
a hit in Japan. The first issuance happened in a lot more favorable
conditions, but now Japan's retail bond market, along with the
world's, has shown that people are willing to invest in a program that
they believe will a) get them a monetary return and b) a social
return.

The fund is another example of how charity organizations are using
capitalist principles to produce effective results for humanitarian
causes. All profits from the fund go the Geneva-based GAVI Alliance
which then uses the money to immunize children in 70 developing
countries. The children are vaccinated against easily preventable
diseases such as polio, hepatitis B, yellow fever and tetanus.

When Dr Muhammad Yunus won the 2006 Nobel Peace Prize for his role in
the creation of microcredit through the Grameen Bank project, the
world began to take notice of how mutually beneficial (from a monetary
point of view) investment projects can actually be, as well as being
more effective in combating poverty.

By allowing capitalism to work in its natural way, organizations such
as IFFIm and Grameen Bank are able to raise large amounts of funds for
people in developing countries. More importantly, the funds are being
put to use effectively. I remember when the Central Government
announced it would provide 415 billion yen in loans and financial
assistance worth 260 billion yen for African development at the last
TICAD (Tokyo International Conference of African Development). One
government official lamented to me the stupidity of the move, saying
how now they had to figure out how to spend all the money, rather than
doing it the other way round - identifying the needs and then
providing the amount of money required.

Initiatives such as micro-financing and donor-backed bonds are
providing blueprints for those looking to raise capital for aid.
Meanwhile, investors are still willing to buy into the debt with an
eye to decent returns, even in the current risk-averse climate. It's
encouraging to see.

One last thing worth mentioning is the age bracket IFFIm's uridashi
bonds seem to be resonating with. At a recent seminar held by Daiwa
Securities SMBC, the majority of the audience were elderly. A Dow
Jones report stated that the majority of the investors in the 2008
issuance were also elderly - 65 percent. It's a growing market and a
perfect fit for IFFIm - investors with a good deal of money who are
looking to give something back, socially.

In a climate where most are watching their money cautiously after
seeing hard fought-for investments washed away by the demise of
markets worldwide, the success of the recent issue of vaccine bonds is
reassuring.

Michael Condon
Editor-in-chief

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東京マラソンランナーの皆さん！
がんと闘っている子供たちとその家族をサポートする非営利団体タイラー基金の
"シャインオン チャレンジ"の募金を募ってます。
オリンピックランナー山口マーラさんは、"シャインオン チャレンジ"の
メインサポーターです。

詳しくは： www.tylershineon.org/

Tokyo Marathon Runners! We need help!
Raise funds for children with cancer and their families.
Join the Tyler Foundation's "Shine On! Challenge".
supported by Olympic Runner Mara Yamauchi.

More info: www.tylershineon.org/

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Our Entrepreneur Handbook Seminar is obviously filling a
need in the community right now, as many people look at
their employers and see the writing on the wall. We had a
sell-out audience of 35, and still more people wanting to
attend.
So, we have decided to re-run the seminar this
month for those people unable to make it last month.
The new date will be Saturday March 21.

Details will be posted on the website shortly, at:
http://www.japaninc.com/entrepreneur_handbook_seminar

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