Green Finance for SMEs: Asian country studies
The SWITCH-Asia Network Facility has recently initiated a new publication series on the topic of "Enabling SME access to finance for sustainable consumption and production in Asia". As a first step, two country study reports have been published by SWITCH-Asia Network Facility partners: The Association for Sustainable & Responsible Investment in Asia (ASrIA), covering Indonesia, Malaysia, and Thailand (volume I), and the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP), covering the Philippines and Sri Lanka (volume II).
The reports provide an overview of SME finance opportunities, trends and barriers in these five countries, focusing particularly on renewable energy and energy efficiency financing in these five countries. These new studies also include recommendations on how to overcome the identified barriers. Furthermore, they feature detailed databases and up-to-date contact lists of the most relevant financial actors in the countries.
These reports will be useful for SWITCH-Asia projects and other stakeholders in Europa and Asia working on green climate finance solutions to approach financial institutions, support their project SMEs in finding solutions to their financing needs, or develop new SWITCH-Asia grant projects with a focus on improved access to finance.
Key insights of the reports:
· "Green finance" - funding for sustainable consumption and production - represents only a small fraction of total commercial lending and financial products available, and is sold at a premium to non-green finance. Nevertheless, leading financial institutions in all countries are starting to implement green lending initiatives.
· Available financing solutions typically focus on expanding existing or adding new sources of finance through public support initiatives, such as funded facilities that target SMEs or green finance.
· In-country research and interviews with subject matter experts and practitioners have revealed a wide variety of structural, supply-side and demand-side barriers that all stakeholders face in enabling SME access green finance.
· One key issue merits continuing attention: the need for capacity building and awareness of banks on SCP and how to handle green accounts to overcome institutional aversion to risk in new projects.
· Governments have an important role to play. A government-led, top-down approach will be essential to enforcing and stimulating greater SME access to green finance, and raising awareness of sustainable consumption and production.
· The high cost of Overseas Development Assistance (ODA) funds, which provide long-term tenors needed for green investment and green projects needs to be addressed to make these funds work for SMEs.