IFC approves up to $110M for First Circle

The International Finance Corp. (IFC) has approved up to $110 million in financing for fintech company First Circle in a transaction that could become its first securitization deal in the Philippines backed by small and medium enterprise (SME) loans.

IFC documents showed that the board of the World Bank Group's private-sector arm approved the investment in First Circle SPV on 10 September, with the project now classified as “pending signing,” meaning the investment has been approved but the IFC and First Circle have yet to sign the required legal agreements.

“Commitments are envisaged to be executed in multiple tranches, with IFC’s participation in the first tranche of up to US$15 million across both senior and mezzanine tranches,” IFC said.

“The proposed investment is anticipated to be structured as an up to four-year securitization facility, with a roll-over option available at the end of each of the first three years.”

First Circle is a financial technology (fintech) company in the Philippines founded in 2016 that provides business loans, credit lines, and financial services to SMEs. The transaction involves an asset-backed securities (ABS) structure that will pool a diversified portfolio of SME receivables originated by First Circle.

Under the arrangement, IFC will participate in the senior and mezzanine tranches of an off-balance-sheet ABS to be issued by a newly formed special purpose vehicle (SPV).

Securitization involves pooling loans or receivables and converting them into securities that can be sold to investors. For lenders, the structure can free up capital that can then be used to extend additional credit.

The approved package consists of up to $30 million from IFC's own account and as much as $80 million to be mobilized from other lenders.

IFC's own financing will comprise a senior tranche of up to $20 million and a mezzanine tranche of up to $10 million, with commitments expected to be made in multiple tranches.

“The most significant expected project-level outcome is increased access to finance for SMEs, including key economic sectors like agriculture, healthcare, tourism, construction, and value-added manufacturing that will help create jobs in the Philippines,” IFC said.

IFC expects the transaction to give SMEs access to longer-term financing for working capital, inventory and business expansion. It also aims to demonstrate the viability of SME-backed securitizations to other investors.

“IFC’s participation will demonstrate the viability and risk return profile of such securitizations, mobilizing up to US$80M from local and institutional investors, diversifying First Circle's investor base, and contributing to the development of a Philippine SME backed securities market.”

The transaction builds on IFC's existing relationship with First Circle. In 2024, IFC invested $7 million in the fintech company to support the expansion of its SME lending business in the Philippines.