South African alternative lender Preference Capital (PrefCap) scooped the social loan of the year award for its inaugural ZAR280 million ($15 million) deal, in particular for its focus on demonstrating the social impact of its micro-, small- and medium-sized enterprise (MSME) financing.
One Sustainable Debt Awards judge said the focus on using the funds to provide loans to micro and small enterprises – which have high barriers to finance access – provides “deep social impact,” especially in a country where a third of the population is unemployed and smaller businesses employ up to half the population.
A novel element of the social loan included PrefCap setting up new systems and permissions in its legal agreements to ensure further social impact data is gathered from borrowers. Rand Merchant Bank – which acted as sustainability agent and lender on the deal – said this intended to provide a better understanding of the “on-the-ground” social impact of PrefCap’s lending to help further build its strategic social impact focus through MSMEs, in particular within key groups such as black-, youth-, and women-owned businesses.
The judge said this “innovative structure” of the social loan demonstrated a “recognition of the need to conduct appropriate impact measurement in order to drive broader systems progress”.
