MIF partners with Nordic Development Fund to finance a green microfinance initiative
The Multilateral Investment Fund (MIF) is partnering with the Nordic Development Fund (NDF) to launch an innovative program to pilot green microfinance products for both mitigation of and adaptation to climate change
Despite demonstrated need many micro, small and medium-sized companies (MSMEs) and low-income households are not able to access clean energy, energy efficiency technologies or adaptation products in Latin America and the Caribbean (LAC). A primary reason for this is that financial providers for MSMEs and low-income people, particularly Micro Finance Institutions (MFIs), often do not have the appropriate tools and know-how to develop or offer sustainable green financial products.
The purpose of the ECOMICRO Regional Microfinance and Climate Change Program is to implement a comprehensive strategy whereby MFIs will receive training: (i) to provide sustainable green finance instruments in order to capitalize on new opportunities in clean energy financing, (ii) to adjust their risk management models to climate change risk, and to (iii) incorporate climate impact into their internal policies and operations.
The innovative, US $7 million, four year program will be implemented at a regional level and responds to the need of developing private sector initiatives to combat climate change. The international climate change movement has called on the private sector to take a leadership role on mitigating, and helping to adapt to climate change, yet few donors and projects have been directly targeted at smaller private sector actors. MIF’s successful track record in conducting pilot projects with MFIs, MSMEs, and household clients, as well as its ability to extract lessons and replicate models throughout the region, leave the MIF well-positioned to boost clean technology markets and to pilot adaptation finance.
This program is well-timed for multiple reasons. There is increasing interest in clean technology in the region, which is trickling down to small private sector actors. Furthermore, many LAC countries are establishing favorable policies towards clean energy installations and CO2 emission reductions. Many lessons have been gathered from earlier MIF project lending for clean technology, which this program has incorporated into its design. This program will also be the first to pilot microfinance products for adaptation to climate change.
MFIs are extremely well positioned to leverage their networks, clients and reputation to provide financing for both demand and supply of clean technologies. MFIs have proven to be successful at adopting new financial products that were initially perceived as complex and unprofitable.
One aspect of the value added by NDF’s participation is the possibility to disseminate the lessons learned not only among partners in this program but also between other NDF financed programs operating between the public and private sectors. “NDF’s participation in the program through an experienced partner like MIF leverages this opportunity effectively”, states Leena Klossner , Deputy Director of NDF.
More information
Inter-American Development Bank: Green Microfinance in Latin America
Multilateral Investment Fund
