Why a report on “green” MSMEs
Debates on the transition to a more sustainable economy often overlooks the role of Micro, Small, and Medium enterprises (MSMEs). Whilst they represent the backbone of developing and emerging economies and have great potential to conduct sustainable activities, they often lack supportive legislation and face particular barriers to their development. Access to formal sources of finance varies among countries, but is one of the most stringent issues faced by MSMEs in their journey towards sustainability.
This report aims to contribute to the support of “green” MSMEs and local green enterprises (LGEs) in developing and emerging countries. This includes:
- Firstly, sketching the economic and institutional context in which MSMEs and LGEs operate in our case study countries;
- Secondly, diagnosing the key barriers faced by green MSMEs and LGEs in developing and emerging countries;
- Finally, identifying financial and economic reforms which could support green MSMEs and LGEs in developing and emerging countries.
This synthesis report builds on findings from a set of developing and emerging countries which includes raw statistical data, literature, and further evidence collected with partners in each of the following countries: India, Peru, Trinidad & Tobago, Senegal, Uganda, South Africa, and Mongolia.
National policymakers and international donors, such as the EU and its Member States, could help overcome the above mentioned barriers, fix mismatches and close the related gaps.
Our key recommendations
Supported by the European Union, its Member States and development finance institutions (DFIs), national policymakers should develop dedicated green MSMEs master plans as part of their development and/or inclusive green economy strategies. These plans would include, at least, the following reforms:
Bridging the trust gap
1. Ensuring MSMEs can pledge movable assets as collateral.
2. Improving & greening credit guarantee schemes (CGSs).
Bridging the information and capacity gap
3. Creating a robust, but simplified chain of ESG information.
4. Making credit information sharing more granular and green.
5. Establishing MSMEs agency as a one-stop-shop.
Bridging the financing ecosystem gap
6. Unleash DFIs’ potential.
7. Improve consumer protection to reduce irresponsible lending.
8. Improve the quality of public spending and reduce the cost of debt.