Green Financing in Micro
Challenges and Opportunities
change is one of the biggest challenges of our times and is a threat to
civilization. To tackle this menace, global economies are changing
paradigm from profitability to sustainability, efficiency and minimising
carbon footprints. New innovations in green sectors are acting as
harbingers of change. India has accepted its role as a frontrunner in
achieving the 2030 agenda for sustainable development. It is estimated
that in order to achieve this commitment of reducing emission intensity
of GDP by 33 – 35% by 2030, India will require to mobilise $2.5 trillion
towards green projects by 2030.
A major stakeholder in this transformation are the MSMEs of the country
as they contribute to 45% of India’s manufacturing output and employ
close to 40% of India’s workforce. These enterprises are slowly and
steadily accepting green technologies and business models. But a major
factor inhibiting the set-up and scale-up of green models in these
enterprises is the ready access to green finance from commercial
financial institutions. While some financial institutions have turned a
deaf ear towards green financing, majority of them complain of the
absence of effective green financing mechanism.
Standalone initiatives like GIZ’s model for financing green MSMEs
involving Micro Finance Institutions has been initiated but to tackle
this problem, a number of initiatives at a larger scale need to be
taken. Amongst them, building a platform for bridging information gap in
commercial financial institutions by providing them with data and
information to assess green technology-based enterprises should be the
foremost action. Testing innovative models with smaller regional banks
and Non-Banking Financial Companies for reducing transactional cost of
commercial financial institutions can be another important way for
streaming green finance. Apart from these steps, other important
initiatives for promotion of green financing can be:
• Monitoring and evaluation of green technologies and availability of
these reports to financial
institutions for using it during credit appraisal process..
• Clean Development Mechanism like innovation which incentivises
technology providers, financial institutions and entrepreneurs instead
of the subsidy model that is prevalent currently.
• Induction of more innovative funding mechanism and blended financing
These steps can trigger off a process for mainstreaming green financing
of MSME s through commercial financial institutions in India. However,
for expediting the process and achieving the target, synergy between
commercial financial institutions, government bodies, green MSMEs and
technology providers needs to be created.
We need to escalate and accelerate the acceptance of green financing by
commercial financial institutions for a greener tomorrow, because the
time has passed when we can view our planet as a mere commodity.
Munir Ahmed Tahir
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