Kenya experiments with financing that promises social returns
By Edith Mwangi
Across Africa, governments, development banks and private sector issuers are experimenting with a new class of fixed‑income finance known as social bonds. These instruments allocate capital specifically to projects with measurable social outcomes, such as expanding access to essential services, creating jobs, and improving financial inclusion. For countries such as Kenya, where traditional sources of development finance are strained and the Sustainable Development Goals remain underfunded, social bonds offer a promising pathway to mobilise private capital at scale. But as the market grows, scepticism remains about whether these instruments deliver verifiable impact beyond investor narratives.
What social bonds are and why they matter
Social bonds are debt securities where the use of proceeds is transparently linked to social objectives, guided by the International Capital Markets Association’s (ICMA) Social Bond Principles. These principles require disclosure on how funds are allocated and a commitment to post‑issuance reporting on outcomes, aiming to avoid superficial claims of impact. Social bonds differ from sustainability‑linked bonds in that they explicitly tie funds to specific social outcomes rather than performance targets that adjust interest costs.
This structural clarity should, in theory, appeal to investors with Environmental, Social and Governance (ESG) mandates, particularly those seeking exposure to emerging markets while supporting development priorities in areas such as health, education and financial inclusion.
Supranationals lead the market
On the African continent, much of the credible social bond issuance has come from supranational development finance institutions rather than sovereign or corporate issuers. The International Finance Corporation (IFC) is among the most active. In January 2025, IFC issued a $2.0 billion social bond, its largest to date, with an order book of roughly $11 billion, illustrating deep institutional demand even amid broader market volatility. John Gandolfo, Vice‑President and Treasurer of the IFC, said: “In an era marked by rising inequality and poverty, social bonds have emerged as a crucial tool for directing investments to essential projects in emerging markets. This bond will unlock additional funding for vulnerable communities and underserved groups in areas such as health, education, and food security.”¹
IFC’s social bond programme has raised more than $12.6 billion across over 100 transactions in multiple currencies since its 2017 launch, financing projects that include affordable basic infrastructure, access to essential services and support for women‑owned small and medium enterprises.² Although IFC does not disclose country‑specific KPIs for each project, its annual Green and Social Bond Impact Report shows that proceeds target underserved populations in emerging markets, including women and low‑income communities.²
Even within this issuance pipeline, market participants highlight that effective measurement remains a challenge. One sustainable finance practitioner told Ethical Business that “investors need not just stories — they need verified outcomes tied to the capital deployed. Otherwise social bonds risk being treated as a marketing label rather than a tool for real change.”
The African Development Bank (AfDB) has also used social bonds to advance development. Its USD 3 billion “Fight COVID‑19” social bond — one of the largest social bonds ever issued — was designed to mitigate pandemic‑related economic damage and strengthen public health systems. Akinwumi Adesina, President of AfDB, said at the time: “These are critical times for Africa as it addresses the challenges resulting from the coronavirus. The African Development Bank is taking bold measures to support African countries.”³
Corporate engagement: Standard Chartered’s entry
Private sector interest is emerging but uneven. In March 2025, Standard Chartered PLC issued its first social bond, raising €1 billion, principally to support lending to SMEs, job creation and financing of essential services like healthcare and education in low‑income countries where capital needs are acute.⁴ Marisa Drew, Chief Sustainability Officer at Standard Chartered, said: “This first social bond issuance underscores our commitment to people, communities and businesses, and provides a unique opportunity to mobilise capital at scale towards inclusive growth and development across our markets.”⁵ Diego De Giorgi, Group CFO, added: “Our first social issuance is an important milestone … demonstrating our unique ability to raise capital in the world’s largest financial centres and deploy it into markets where the need for sustainable finance is most acute.”⁵ Salman Ansari, Global Head of Capital Markets, noted that “the oversubscription of this issuance indicates the continued strong global investor demand for our credit and differentiated sustainability story.”
Standard Chartered’s issuance is significant because it broadens social bond issuance beyond supranationals and aligns private capital with emerging markets development, particularly across Africa and Asia where 99 per cent of its social assets are located. Nonetheless, such corporate issuances remain rare relative to the broader fixed‑income market in Africa.
Market gaps
Despite encouraging headlines, labelled sustainable debt, including social bonds, represents a small share of global sustainable issuance. ICMA data shows that social bonds accounted for less than 7 per cent of cumulative sustainable bond issuance globally between 2016 and 2019, with most activity driven by sovereign or supranational issuers, and only a small portion by corporates. This pattern persists in Africa, where domestic issuance of social bonds remains limited. The broader sustainable finance market in Africa has grown modestly, with most labelled bonds focusing on environmental objectives. Local currency social bonds or corporate social issuances in Kenya are almost nonexistent, with the capital markets instead more familiar with sovereign and private green bonds, such as those financing renewable energy and housing projects.
A fundamental challenge remains impact measurement. While social bond frameworks require issuers to disclose expected impacts, many reports focus on outputs, such as number of beneficiaries reached or loans disbursed, rather than outcomes that can be compared across issuances. One fixed‑income strategist told us: “Unless it’s a social transaction with specific integrated metrics, we don’t measure social impact,” underscoring a persistent gap between theory and practice.
To build investor trust and unlock capital at scale, issuers and regulators must strengthen impact accountability. Standardised metrics, third‑party verification and robust data systems are central to this effort. Without them, social bonds risk being valued for their labels rather than their contributions to measurable social progress.
Implications for Kenya and African Markets
For Kenya, the growth of social bonds speaks to broader ambitions in sustainable finance. Nairobi’s capital markets have demonstrated capacity for green and sustainability‑linked bonds, signalling some investor appetite for labelled debt. Kenyan issuers could tap this momentum by developing social bond frameworks tailored to local priorities such as affordable housing, healthcare access, youth employment and digital inclusion. Public‑private partnerships, blended finance and institutional support from development finance institutions could catalyse such issuance.
Policymakers will need to strengthen regulatory frameworks to enable local currency social bond markets and reduce foreign exchange risk for domestic investors. Incentives to attract pension funds, insurers and local asset managers into the social bond ecosystem could deepen liquidity and broaden participation, addressing long‑standing financing gaps for social infrastructure.
A pragmatic path forward
Social bonds are a compelling innovation at the intersection of capital markets and development finance. Supranational leadership has demonstrated investor appetite and opened doors to sustainable capital flows. Private sector issuances, such as those by Standard Chartered, indicate that corporate participation is possible when linked to credible impact frameworks and investor demand.
Yet the future of social bonds in Kenya and across Africa depends on advancing impact measurement, aligning instruments with sustainable development priorities and building deep, transparent local capital markets capable of absorbing and stewarding social capital responsibly. Investors and issuers alike must embrace discipline and rigour, ensuring that capital aligned with social objectives convincingly demonstrates improvements in livelihoods, equity and economic inclusion.
Financing inclusion through social bonds will not occur by accident. It will require deliberate market building, policy clarity and a shared commitment to rigour that aligns capital with the social outcomes Africa most urgently seeks.
IMAGE/World Economic Forum
