IFC to issue first bond for microfinance programs

* IFC to raise $300 mln in bond issue in Japan market

* Bond will be listed in Australian dollars

* IFC says microfinance has become attractive asset class

WASHINGTON, Oct 27 (Reuters) - The International Finance Corp, the World Bank's private-sector lender, said on Tuesday it will seek to raise $300 million through a bond issue targeted at Japanese investors to finance microfinance programs for the poor.

It is the first time that the IFC will issue a bond to raise money to lend to commercially viable microfinance institutions which offer affordable small loans to the poor in developing countries.

The IFC, which has been a major investor in the sector since the 1990s, said the bond's listing and sale will be arranged by Daiwa Securities Group. The bond will be listed in Australian dollars and sales will be restricted to Japanese retail and institutional investors.

Nina Shapiro, IFC treasurer and vice president for finance, said the World Bank unit had limited the issue to $300 million, which is the level IFC has invested annually in microfinance over the past few years. Until now, IFC has used its own general resources for its microfinance operations.

"We're doing this now because we have the track record as a key investor in the sector and, with our credit, can create a platform for investors to support the sector," Shapiro told Reuters.

Asked why the bond was targeted at Japanese investors, Shapiro said: "There is a particular interest among retail investors in the Japanese Uridashi market, but we are also looking at other regional markets."

She said the bond would be launched within the next couple of weeks.

Shapiro said IFC was also looking at raising funding for microfinance in European bond markets.

She said microfinance had become an attractive asset class for private investors because it had performed consistently well despite recent global market turmoil.

"For us, it has been a priority sector because we think it makes sense from a financial standpoint and, importantly, is a key investor for job creation and economic activity in frontier markets," she added.

IFC has estimated that financing needs in the microfinance sector will reach some $1.8 billion a year through 2010.

"Through this bond, IFC can extend the impact of its own activities in microfinance while providing a platform for Japanese investors to create opportunities where they are needed most," IFC Executive Vice President Lars Thunell said in a statement.

While microfinance has existed in many forms for decades, the sector has burgeoned into a large market since Muhammad Yunus, a Bangladeshi economist, was awarded the Nobel Peace Prize in 2006 for his efforts to increase financial access for the poor. (Reporting by Lesley Wroughton; Editing by Jan Paschal)