Is Green Microfinance back?

Microfinance Institutions (MFIs), thanks to their large distribution networks, their long-term engagement with the poor, and their efficiency have been seen as a significant part of the solution to stimulate behavioral changes and help finance models and devices that are more environmental friendly, on a large scale, at the bottom of the pyramid. In fact, low income segments of population through the transition to “green” practices and devices can also contribute effectively to the protection of their ecosystem, the adoption of more sustainable farming, the preservation of water resources and the energy saving.
Many of these end-devices or practices are actually cost-effective and can help the microfinance client realize savings. These cost savings are generally the main motivator for the household or the micro-entrepreneur contracting a green loan from an MFI.
So called “green” microfinance interventions and tools can include: financing water supply management structures, financing the purchase of renewable sources of energy for cooking, lighting, charging and so on. Alternatively, they can finance dealers/suppliers of renewable energy sources to expand their business and reach the poor (such as through large micro-franchise networks). Risk management products against climate uncertainties can also be included. On the other hand, the MFI benefits mainly by expanding its portfolio into new segments, mitigating its risks, improving its E&S policy and practices, reducing its footprint and getting access to green line credits.
Many MFIs and players have been interested in the topic, starting pilots and plans to start and expand green portfolios, from Bangladesh to Peru. Much momentum started 4 years ago, especially with respect to the potential carbon offset credits generated by such portfolio. With the collapse of credit trading, this has been decreasingly relevant. Many of these initiatives are still very subsidies and TA driven and various questions are still to be answered:
–       Is it the role of an MFI to become a distribution channel of environment friendly devices and push clients toward it?
–       Is the MFI actively targeting “green” micro-businesses or is it labeling clients it already finances?
–       Isa green portfolio increasing or decreasing the risk profile of the MFI?
I am happy to notice that the topic is back on the table again with the recent launch of the Green Microfinance by the  Social Performance Task Force, that aims at promoting and advancing environmental responsibility in the microfinance sector

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