In spite of demonstrated need and demand throughout Latin America and the Caribbean, many micro, small, or medium-sized enterprises are not able to access funding for clean energy or energy efficiency technologies that could reduce energy costs and improve competitiveness. In addition, finance for adaptation activities is also scarce.

The introduction of microfinance in Latin America is a groundbreaking innovation because it enables these enterprises to access climate finance for the first time. EcoMicro is building the capacity of the region’s microfinance institutions so that they have the appropriate tools and know-how to develop and offer green financial products that help clients address climate change.

Bolivia, Colombia, Dominican Republic, El Salvador, Jamaica, Mexico, Nicaragua, Paraguay, Peru

Key facts

• EcoMicro is training 12 microfinance institutions to develop green financial products for climate change mitigation and adaptation activities.
• Each microfinance institution receives a USD 280,000 grant from EcoMicro for technical assistance, which is matched with funds from the microfinance institution itself.
• Two microfinance institutions in Mexico and Peru, for example, are expected to mobilize an additional USD 5.9 million to provide clean energy and energy efficiency solutions for more than 5,000 micro, small and medium-sized enterprises in poor areas, enabling them to cut greenhouse gas emissions by up to 20%.

The problem

The Intergovernmental Panel on Climate Change (IPCC) estimates that global warming will bring significant changes to Latin America and the Caribbean, affecting crop yields, access to water, energy production and irrigation.

These climate effects threaten to undermine long-term development efforts, and will affect low-income populations disproportionately. Low-income populations often work in sectors vulnerable to climate change, such as farming, fishing, or other productive areas in which micro, small, or medium-sized enterprises are active.

Many of these enterprises are not able to access clean energy or energy efficiency technologies that could reduce energy costs and improve competitiveness. A primary cause of this is that their financial providers, mainly microfinance institutions, do not have the appropriate tools and know-how to develop and offer sustainable green financial products to finance both mitigation and adaptation activities.

The solution

EcoMicro is a USD 7 million program co-financed by the Multilateral Investment Fund and the Nordic Development Fund. Designed for Latin American and Caribbean microfinance institutions, its purpose is to develop green finance products so that micro, small, and medium-sized enterprises and low-income households can access clean energy, increase their energy efficiency, or adapt to climate change.

Helping the planet

One of the key components of the EcoMicro program is to help microfinance institutions reduce their energy consumption and carbon footprint. The program is also reducing emissions by increasing micro, small, or medium-sized enterprises’ access to clean energy and energy efficient products.

Helping people

The innovative EcoMicro programme offers solutions not only for microfinance clients, but also for the institutions themselves. EcoMicro enables microfinance institutions to green their own operations and to reduce the vulnerability of their existing loan portfolios to climate change impacts.

Two microfinance institutions in Mexico and Peru, for example, are expected to mobilize an additional USD 5.9 million to provide clean energy and energy efficiency solutions for more than 5,000 micro, small and medium-sized enterprises in poor areas, enabling them to cut greenhouse gas emissions by up to 20%.

More than 800 smallholder farmers in Bolivia, Nicaragua and the Dominican Republic are testing different models for adaptation financing. These models aim to help farmers maintain or increase their income in spite of climate change threats. In Bolivia, a US$1 million concessional loan from the Climate Investment Funds has been endorsed to scale-up the product and reach an additional 1,000 smallholder farmers.

Spillover effect

Participating microfinance institutions have committed to bringing to scale the green finance products that are being developed and tested. For example, Te Creemos in Mexico, aims to scale up its pilot project with 100 medium-sized enterprises, to reach 2.5% of its loan portfolio, equivalent to mobilizing at least USD $700,000 for green finance products for renewable energy.

The programmatic approach of EcoMicro facilitates the replicability of green microfinance products not only throughout Latin America and the Caribbean but in other developing regions, such as Africa and Asia, by facilitating South-South collaboration and knowledge transfer among relevant stakeholders.

EcoMicro dedicates significant resources to generate knowledge in the form of lessons learned, best practices and key factors for success or failure, which will be captured, synthetized and disseminated. This is expected to advance learning in this new area of green finance for climate change mitigation and adaptation.

Individual projects will be evaluated and documented, drawing practical lessons from what has worked and what has not. The case studies that result from these conclusions will be compiled and used in other countries as examples for the industry.

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