Kangaroo bonds bounce back – Industry roundup: 5 May
by Graham Buck
African Development Bank issues A$155m 10.5-year kangaroo social bond
The African Development Bank (AfDB) has successfully launched an Australian dollar (AUD) 155 million 10.5-year kangaroo social bond, due October 2032, marking its first social bond transaction this year. The kangaroo social bond – the term for bonds issued in Australian dollars by foreign non-domestic entities, including corporations, financial institutions, and governments – was launched on 14 April.
The transaction was arranged by Daiwa Capital Markets Europe, which acted as a sole lead manager. It marks the AfDB’s second social bond in the Australian dollar market, following an inaugural AUD social kangaroo issued in June 2021, which was an A$600 million 5.5-year bond and marked the AfDB’s return to the Australian dollar bond market after an absence of three and a half years.
The new issue also marked the first AUD social kangaroo to be exclusively issued to institutional investors in Japan. Two Japanese insurance companies, Meiji Yasuda Life Insurance and Asahi Mutual Life Insurance, participated in the deal.
“Africa is an importer of food from both Ukraine and Russia, especially wheat and maize, and the current geopolitical instability has led to a worsening of the food situation on the continent,” said the AfDB. “Combined with the rise in energy prices, this is especially distressing for the continent’s most vulnerable communities.
“By issuing social bonds to finance socio-economic development in its regional member countries, the Bank is advancing its mission and strategy to spur sustainable economic development and social progress in Africa. It is also capitalising on its track record of financing projects with strong social impact on the African continent.”
Proceeds from the Bank's social bonds are allocated to eligible projects that will have significant social impact and outcomes, leading to poverty reduction and inclusive growth in Africa. This is expected to bring socio-economic development and empowerment including solving food insecurity, improving access to basic infrastructure (electricity, water and sanitation, transportation), basic services (medical, education, vocational training), financial services, and job creation.
The AUD is the fifth currency in which the AfDB has issued social bonds since the establishment of its Social Bond Program in 2017, following deals denominated in euros, US dollars, Norwegian kroner and Swedish kronor. “The success of this AUD transaction is reflective of the Bank’s solid social bond framework and the high quality of its impact reporting, the AfDB added.
Established in 1964, the AfDB Group, aka Banque Africaine de Développement, is a multilateral development finance institution and has been headquartered in Abidjan, Ivory Coast, since September 2014.
Philippines plans CBDC pilot later this year
The Philippines’ central bank is joining others in trialling central bank digital currencies (CBDCs) and will launch a wholesale pilot in the fourth quarter of this year, according to the Bangko Sentral ng Pilipinas’ (BSP) Governor, Benjamin Diokno, who first announced plans for the project last November.
Diokno stressed that Project CBDCph is experimental and has already signed up several major banks, although they were not identified and BSP is still looking to add more banks. A wholesale CBDC is restricted to banks rather than consumers or businesses and is used to facilitate faster payments and settlement for blockchain networks.
“And at the same time, we consult with our neighbours Singapore plus the Bank for International Settlements (BIS), for their projects on CBDC,” said Governor Diokno.
Last September, the Monetary Authority of Singapore (MAS) initiated Project Dunbar, an initiative to demonstrate that financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform. This has the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions.
Dunbar is a collaboration between the MAS, the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, Bank Negara Malaysia and the South African Reserve Bank. As a cross border wholesale CBDC initiative, it is dubbed a multi-CBDC (M-CBDC) project in which each country has a CBDC that is used for cross border payments.
In March 2022, Project Dunbar published a paper on its work so far. One of the issues addressed is whether central banks would allow foreign banks to hold their CBDCs directly or whether they would require a local sponsoring bank to hold it on their behalf. This is a central question as one of the promises of CBDC is to do away with intermediary or correspondent banks, which are regarded by many as the reason for the high cost of cross border payments and delays.
Last November, Singapore announced a deal with the Philippines to explore payment interoperability and cross border payments. At the time Governor Diokno said that Singapore would be the first ASEAN country to which the Philippines would link its payment system.
Cross border payments, particularly low-value remittances, are particularly important to the Philippines as many of its citizens work overseas. According to the World Bank, in 2021 the Philippines was the fourth largest recipient of inward remittances after India, China and Mexico. The figure for 2020 was US$35 billion.
The BSP also wants to encourage digital banks to develop in the Philippines, as it believes they can help empower the country’s micro, small and medium enterprises (MSMEs).
MSMEs account for 99.6% of all business firms in the Philippines, the Governor noted during a recent virtual briefing, but while they are important contributors to the economy, many have experienced difficulties that have been highlighted since the arrival of Covid-19.
Diokno said that the problems include limited access to credit and poor digital adoption due to lack of access to digital and financial infrastructure. In response, the BSP has employed a wide range of regulatory relief measures to assist MSMEs,” he said. Most digital banks, he stressed, have tailored digital financial solutions to assist MSMEs in their recovery from the pandemic.
Filipinos are due to go to the polls on 9 May for presidential elections. According to Nicholas Mapa, senior economist for the Philippines at ING: “Although most candidates have expressed the desire to continue the programs of the incumbent, a relatively high debt-to-GDP ratio suggests that the eventual Presidential winner will not enjoy much fiscal space to pursue an aggressive spending strategy to fulfil campaign promises.”
Inflation, which until recently was steady at 3%, jumped to 4% in March and the figure for April is expected to come in at 4.6%, within the central bank’s estimate range of 4.2% to 5%. “The BSP Governor has remained steadfast in his guidance to keep rates unchanged to support the economic recovery but he has recently signalled he would be open to hiking by June,” Mapa added.
Last week Diokno confirmed that the BSP, which has kept interest rates at a record low of 2% since November 2020, would consider hiking rates at its June policy meeting to keep inflation in check.
Two Argentine banks offer crypto trading
Two of Argentina’s biggest banks have this week launched Bitcoin and crypto trading on their platforms.
Until now, Argentinians were only able to buy cryptos through wallets or directly from holders, but customers of Banco Galicia, the country’s largest private bank by market value, as well as the digital bank Brubank SAU, are now able to purchase cryptos such as Bitcoin, Ether and USDC.
Marcus Sotiriou, analyst at the UK based digital asset broker GlobalBlock, said that the launch followes a poll by Banco Galicia, in which 60% of respondents asked for more access to crypto. “This may not come as a surprise to some, as Argentina has the sixth largest crypto adoption rate in the world, according to data and survey firm Statista, who estimate that 21% of Argentines used or owned crypto by 2021.”
Banco Galicia’s online interface shows that it has begun supporting Bitcoin (BTC), Ether (ETH), USD Coin (USDC), and Ripple (XRP) purchases. “The fact they have included XRP is interesting, as it suggests significant confidence in Ripple winning the lawsuit with the US Securities and Exchange Commission, who have deemed XRP a security,” said Sotiriou
At last week’s Crypto Bahamas conference, Ripple CEO Brad Garlinghouse confirmed: “Ripple has partnered with several central banks around the world, some we've announced, some we haven't yet announced.”
Sotriou commented: “As the XRPL is the cheapest and easiest solution for cross-border payments, I am confident that many CBDCs and the like will be built on XRPL sidechains. Data from Kiffmeister shows that the jurisdictions where retail CBDCs are being explored is accelerating dramatically. I think CBDCs will be a major growth catalyst for XRP over the coming years as CBDCs gain more traction.”
Two Banco Galicia executives, Ariel Sanchez, manager of investment products and Nicolas de Giovanni, senior product manager said that the bank’s move into crypto was in response to particularly strong demand from younger investors. “They motivated us to push this project,” the confirmed.
In the face of Argentina’s recurring currency crises and rampant inflation – consumer prices in March rose 6.7% from a month earlier, bringing the annual rate to a 20-year high of 55.1% – two in three Argentines who invest in crypto say they do so to protect their savings from shrinking purchasing power.
Sidetrade reveals B2B global payment trends
Sidetrade, the artificial intelligence (AI)-powered order-to-cash platform has released its global payment trends findings drawn from the Sidetrade Data Lake and based on the payment behaviour of 20.7 million buying companies worldwide and more than 593 million transactions worth a combined US$4.6 trillion.
Global payment trends over the past three years suggest that US companies rank tenth in the world for lengthy payment delays, while UK and Ireland rank in the top five of Europe’s worst offenders. On average, companies around the world pay supplier invoices 21 days late – taking the length of time between an invoice being issued to getting paid, to a total of 53 days on average. Scandinavian businesses tend to pay the quickest overall, in particular Sweden, with a delay of just seven days, well below the global average.
According to the Sidetrade Unpaid Invoice Tracker, over two years on from the start of the Covid-19 pandemic, the US, France, and Italy still haven’t fully reverted back to their pre-pandemic unpaid invoice rates Conversely, Belgium, Spain, the UK, and the Netherlands now have better unpaid invoice ratios than before the start of the pandemic. France holds the title for the worst amongst the seven countries tracked, with 25% of the value of all overdue invoices as of mid-April 2022.
With a mean of 27 days for payment delays, the US ranks tenth globally: the US industry with the shortest payment delays being manufacturing with 22 days, while the worst industries are financial services and insurance (30 days) and leisure and hospitality (31 days). Across Europe, there are significant disparities in payment delays from country to country, ranging from Sweden’s seven days to Ireland’s 26 days late. On average, it takes companies in Europe 45 days to collect payment – a mean delay of 16 days.
Companies in the UK and Ireland are among the top four worst in Europe for payment delays – with means of 21 and 26 respectively – despite both countries having higher payment terms (34 days in the UK, 31 days in Ireland) than the European average of 29 days. The UK industries with the shortest payment delays are utilities/energy at 19 days, and retail/CPG at 20 days. Industries in the UK with the longest payment delays are financial services and insurance at 25 days, and public services, HR services and transportation/logistics at 24 days.
Sidetrade’s tracker suggests that most UK industries appear to have recovered from the pandemic in terms of late payments, most showing pre-pandemic unpaid invoice rates. The exceptions are public services, other srvices and the Food industry. The latter has risen from 14% at pre pandemic levels, to 21% of invoice values being deemed late (10+ days after their due date) as of mid-April 2022.
France is amongst the worst performing European countries for late payments. Their sectors with the shortest payment delays are retail/CPG, and manufacturing, both at 17 days. The worst industries in France for late payments are leisure and hospitality, and public services at 24 days. France still hasn’t recovered from the Covid-19 crisis when it comes to late payments. The rate of unpaid invoices across every industry in France is still above pre-pandemic level, at 22.7%.
Sidetrade’s CEO, Olivier Novasque commented: “Protecting and accelerating cash flow has never been so critical as bad debt risk and inflation are dramatically increasing everywhere. This can best be achieved if companies harness enough customer behaviour data and become more forward-looking. Data science and AI are essential to fighting against late payment. Since each buyer’s payment behaviour is different, a dedicated and automated collection strategy is needed to be efficient.”
Commenting on the findings, Josie Dent, Managing Economist at the Centre for Economics and Business Research (Cebr) said:“After the hit businesses took during the pandemic and lockdowns, which caused a significant rise in late payments, the global economy is now experiencing a new source of pressure.
“Across the world, inflation is accelerating, driven by energy prices and supply chain disruptions. While both of these factors were already at play at the start of the year, the conflict in Ukraine and sanctions on Russia, as well as recent lockdowns in key Chinese cities have further added to the inflationary environment and the outlook for price growth. These increasing costs for fuel, energy and raw materials add to businesses’ financial strain at a time when many are still recovering from the pandemic, making late payments more likely.
“Therefore, as businesses’ bills come due, often at higher prices than previously, many will find themselves having to prioritise which they can afford to pay immediately, and which will need to wait.”
Blockchain shipping group plans digitally enhanced trade finance
Global Shipping Business Network (GSBN) has announced its development of two trade finance products that will harness trusted data direct from the shipping industry.
GSBN, an independent, not-for-profit technology consortium developing a blockchain-enabled operating system for global trade, said that its Trade Finance Advisory Group (TFAG) has reached a milestone, with its first proofs-of-concepts for trade finance products since its inception last September.
Comprised of Bank of China (Hong Kong) Limited (BOCHK), DBS Bank and The Hongkong and Shanghai Banking Corporation Limited (HSBC), GSBN’s TFAG aims to build upon blockchain technology to digitally enhance trade finance, by improving the end-to-end operational efficiency as well as the transparency of data in the supply chain.
Following six months of close collaboration with the group’s partner institutions, GSBN has reached proofs-of-concepts for two trade finance products, Open Account and Letter of Credit, that harness trusted data direct from the shipping industry via GSBN.
For Open Account, applicants can authorise their bank to directly inquire Bill of Lading data via GSBN’s blockchain-enabled platform for their proof of shipment. Similarly, for Letter of Credit, applicants can authorise their bank to use an electronic Bill of Lading (eBL) application built on GSBN’s platform to acquire relevant eBL information and instruct a title transfer.
“Trade finance solutions are among the first banking focused solutions under development in GSBN’s growing suite of products,” the consortium announced. “For small to medium sized enterprises (SMEs), these digitally enabled solutions enable accessible, fast and equitable access to trade finance.
“Meanwhile for financial institutions, this translates into better risk management, cost efficiencies and an overall better customer experience. GSBN has the long-term vision of integrating all products including its shipping product Cargo Release which cuts the time for cargo to be document-ready for release from days to hours, on its blockchain-enabled platform to deliver a one stop and unified user experience.”
Bertrand Chen, CEO at GSBN, said, “The global trade finance gap is set to reach US$ 2.5 trillion unless we harness technology to cut through the complexities and siloes between supply chains. Reaching proofs-of-concepts of trade finance solutions is a testament to the commitment and momentum of this group, that we are accelerating the development of scalable, real-world solutions to bridge this gap.”
Ajay Sharma, Regional Head of Global Trade and Receivables Finance for Asia Pacific at HSBC, added: “The need to further digitise trade has been made abundantly clear by the pandemic. By stripping out inefficiencies and removing friction, we can increase the volume and velocity of trade, decrease time to cash, and deliver other benefits that will improve the overall customer experience. HSBC is pleased to work hand-in-hand with GSBN and other partners to advance trade digitisation.”
DBS and Xero partner on working capital solutions
Singapore financial services group DBS Bank and global small business platform Xero announced that they are working together to provide a simpler way to apply for loans and gain access to working capital for small- and medium-sized enterprises (SMEs) in Singapore and Hong Kong.
“The collaboration will enable Xero customers the option to share their transactions from Xero’s platform to DBS. In turn, DBS will be able to offer Xero’s customers hyper-personalised credit terms and working capital limits that are tailored to their needs,” a release stated
According to the DBS SME pulse check survey published in March, over 85% of the SMEs surveyed indicated that ensuring consistent cash flow and managing costs was a key priority for them in 2022.
Joyce Tee, group head of SME banking at DBS said: “Our regular engagement with SMEs has consistently shown that cashflow needs continue to be top of mind for our clients, even as business owners seek new growth opportunities.
“We will continue to integrate our touchpoints seamlessly into the customer journey, so as to offer our SMEs more intelligent and intuitive lending solutions. DBS has been sharpening our digital lending capabilities by leveraging ecosystem partnerships and advanced data analytics to roll out solutions that are hyper-personalised to each business’ needs.”
“Digital tools and solutions have been a significant driver in empowering SMEs to become more resilient and competitive, but working capital is the lifeblood of small businesses everywhere,” added Joseph Lyons, managing director, Australia & Asia at Xero.
“With DBS – our first banking partner in Singapore to offer API integrated bank feeds – we are excited to extend new offerings to our shared customers through SME financing. We look forward to continuing our work to further support SMEs with their financing needs, particularly in ensuring small businesses have the support they need to thrive”.
Citi launches SEPA instant payments in Europe
Citi has announced the launch of Single Euro Payments Area (SEPA) instant payments in Europe, expanding the bank’s global instant payments offering and enabling clients to pay to and receive from 36 SEPA countries instantly.
“The offering allows SEPA Credit Transfers to be made within seconds, 24/7 and funds available to recipients immediately,” said Citi. Payments can be made to and received from SEPA Instant participating banks located anywhere within the SEPA zone.
The new offering provides clients with a single point of access through Citi’s platforms, CitiConnect for Files, CitiConnect API and CitiDirect, for executing instant payments. With standardized connectivity platforms, clients will benefit from a scalable solution that can facilitate rapid global expansion within a consistent architecture.
Citi’s clients will be able to transact instantly with immediate settlement of funds and the capability can support new business models and ensure our clients can operate effectively in an increasingly real-time 24/7 digital economy. Businesses will be able to use SEPA Instant Payments for a wider range of use cases to drive business growth and efficiency, including on-demand payments.
Citi said that the continued growth of e-commerce business and direct-to-consumer business models make Instant Payments more relevant than ever. The new solution “offers corporates greater choice and flexibility in payment methods, with a frictionless and real-time payment instrument.”
Elena Gomez, Global Head of Domestic Payments, Treasury and Trade Solutions, Citi, commented: “We are seeing an increasing number of countries advance their digital capabilities and introduce local instant payment schemes. Citi has built a globally consistent solution that provides uniform connectivity to all key domestic instant payment systems.
“We have taken a single point-of-entry approach, utilising API connectivity, to enable clients to make payments in multiple markets, and access key real time services such as payment status or balance enquiries, as well as instant notification of incoming credits and outgoing debits.”
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