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Inclusive Green Finance Policies for MSMEs

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Climate change poses a significant risk to the performance, competitiveness and sustainability of MSMEs, who are the backbone of developing countries and play a vital role in providing employment, goods, and services.

Climate-sensitive sectors such as fisheries, agriculture and food processing are typically the most severely affected. As such, MSMEs in particular do not have the financial means to recover, adapt or mitigate against these shocks, especially when they are severe or occur frequently. This may lead to long-term disruption of operations or even bankruptcy, which carry negative consequences for the national economy.

While financial regulators have taken a variety of approaches to addressing climate change, existing policy tools and techniques for low-income populations and MSMEs can be refined and repurposed with a green focus. This will allow policymakers to act swiftly while at the same time lay the groundwork for innovative policies that may require more preparation. A specific policy framework has been identified by the Alliance for Financial Inclusion (AFI) network presented in the special report Inclusive Green Finance: A Survey of the Policy Landscape.

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