European Microfinance Week 2020

INTRODUCTION

This working session was organised by the e-MFP Green Inclusive and Climate-Smart Finance Action Group. It focused on the challenges and opportunities to fund green inclusive finance through an innovative networking session. During the meeting, three MFIs presented their track record in green finance, as well as their concrete plans for the future in terms of types of products and practices, required funding, and feasible financial and reporting conditions. After the three pitches, three MIVs presented their funds, experiences in the field, and future perspectives on funding FSPs’ green initiatives. This was followed by breakout sessions to discuss main obstacles and opportunities, followed by a joint session on ways forward.

PRESENTATIONS

Natalia REALPE CARRILLO kicked of the session by introducing the main theme and issues. The Action Group was established in 2013 with multiple stakeholders in the sector. It has now evolved into a multi-stakeholder thinktank for environmentally responsible and inclusive finance, with over 60 members. Realpe Carrillo is the lead facilitator of the Action Group, together with Davide Forcella from YAPU Solutions & CERMi.

This year, the GICSF AG has had a very packed agenda, with an in-depth analysis of more than 600 environmental performance assessments, further developing the Green Index Tool, and a series of studies on how to assess environmental performance of MFIs. The Action Group aims to bring the green finance actors together, and to facilitate networking and dialogues in order to jointly develop an inclusive green market. This session was meant as an example of such dialogue among stakeholders.

The first MFI presentation was by Peter MARCHETTI from Gruppo FDL-Nitlapan in Nicaragua. They are financing small-scale farmers and cattle raisers, who usually do not have access to financial service providers. FDL has over 45,000 clients and an outstanding portfolio of almost 59 million US dollars (USD); to date they have disbursed almost 93,000 green loans, with a total value of more than 140 million USD. Over the past 20 years, FDL has invested 22 percent of its own profits in green technical assistance for its clients, who also pay for part of the technical assistance. They provide bio-awards to clients whose loans include environmentally intelligent investments, and whose practices register improved sustainability of natural resources and increased producer resilience. FDL adjusts interest rates according to environmental performance of its clients. The group works with key performance indicators and scaling-up models for green finance. One of the main challenges in scaling up green products is the lack of confidence of investors in Nicaragua, but FDL is confident that the quality of its portfolio can overcome the perceived country risk.

The next presentation was by Nataly CADENA-PALACIOS from CACMU, a medium-sized MFI in Ecuador. They have a strong focus on gender, social inclusion and environmental objectives. CACMU has more than 30,000 clients and an outstanding portfolio of some 28.6 million USD, of which 52 percent is granted to women. In total they have disbursed almost 3.4 million USD since 2014, with more than 880 green loans for green products and technology related to energy, sustainable agriculture, carbon emission reduction, and waste management. CACMU uses key performance indicators to monitor their green portfolio.

The third pitch was by Carlos MARQUEZ MOSCOSO from FONDESURCO in Peru. With more than 12,000 clients and an outstanding portfolio of more than 25 million USD, they provide a wide range of financial and development services. With respect to green inclusive finance, FONDESURCO provides loans for climate change adaptation, renewable energy technologies, and energy efficiency. Part of their finance stems from deposits, and they use key performance indicators to monitor their green portfolio. Two of the major challenges are the high operating costs and the absence of appropriate suppliers for the right inputs.

Next in the working session were three investor pitches. Alain LEVY presented the case of BNP Paribas (France). With respect to green inclusive finance, BNP Paribas has portfolios with investments in environmentally sustainable activities, including agriculture. When they are present in a country, they provide loans between 1 and 10 million USD, with a maturity of 1 to 3 years. He listed the key performance indicators they require for green finance, and explained that technical assistance can also be proposed. Challenges include the limited number of actors in this field, limited data collection capacity, and lack of proper institutional frameworks.

Estelle MARCOUX from SIDI (France) presented their portfolio, comprising equity, loans and technical assistance. SIDI is working in 37 countries, with approximately 45 million USD invested in microfinance. With respect to green finance, they invest in sustainable agriculture, climate change adaptation and renewable energy. They provide loans from 100 USD up to 1 million USD, with a maturity of 1 to 5 years. Their challenges are mainly related to the limited technical skills to meet clients’ demands, robust activities to diversify their portfolio risks, along with client objectives. Their institutional objectives for the coming years 2021-23 are focused on environmental performance management, renewable energy, and climate change adaptation products.

Joel HERNÁNDEZ MARTINEZ from BBVA Microfinance Foundation in Spain presented how they support 6 MFIs, with a total of more than 2 million clients and a portfolio of more than 1.2 billion USD. They have a strong focus on gender and supporting women entrepreneurs. They are focusing their post-COVID recovery strategy on environmental services and green inclusive finance. In that respect, he referred to their publication “Measuring what really matters”. Challenges include the need for digitalisation of environmental indicators and alliances with green technology providers and international partners. After his presentation he showed a video on their activities in Latin America.

DISCUSSION

Subsequently, participants had the option of joining one of the 3 break-out rooms to discuss challenges, technical assistance needed, and funding requirements and structure for FSPs.

From the audience, Professor Davide Castellani from the University of Bergamo (Italy) observed some recurrent challenges concerning green investments, such as deciding on the size and criteria of green investments, and who will define such criteria. Is it possible to go beyond piloting? This relates much to working with local structures, and awareness raising and information management to address risk perceptions and to counter risks. He believes that green investments can counter risks of clients, but it is important to identify specific roles of actors.

In the breakout sessions, participants discussed how to overcome the challenges faced by both parties to acquire funding and invest in green inclusive finance through financial service providers. Participants shared their experiences, views, and interest in following up through further meetings, to discuss and establish partnerships for collaborations in green finance.

It is very important to learn from existing practices and have regular (e.g. monthly) meetings on particular topics. Realpe Carrillo invited participants to join upcoming meetings hosted by the Action Group from 2021 onwards. The aim of these meetings will be to improve the visibility of financial institutions, and bring together investors and FSPs working in green inclusive finance.