MicroCapital: Would you please tell us about the European Microfinance Platform (e-MFP) Microfinance and Environment Action Group?
Marion Allet: The e-MFP Microfinance and Environment Action Group was officially launched in February 2013. It is an initiative of various organizations that were already involved in “green microfinance,” such as MicroEnergy International, ADA, PlaNet Finance, Enclude, PAMIGA (the Participatory Microfinance Group for Africa), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) etc. A few years ago, there were very few actors addressing the issue of the environment within microfinance, so we thought there was a real need for sharing experiences. We also wanted to provide some practical tools to help stakeholders understand what green microfinance is and how to get involved.
This is why the Action Group developed a directory that soon will be published on the e-MFP website. It will allow organizations to announce what they are doing in terms of green microfinance, the countries they work in and the specific areas of environmental management in which they are involved. This will help others interested in this area to get in touch with organizations that already have some experience in it.
We have also created a second tool, a catalog of around 10 fact sheets on renewable energy and energy-efficient devices, such as solar water pumps, improved cook stoves, and “pico” solar solutions for lighting and mobile phone charging. These fact sheets are specifically written for microfinance institutions (MFIs) that may be interested in offering loans for purchasing these products.
MC: Are you also working on how to assess environmental performance?
MA: Yes, we have also designed another tool called the Green Index, and right now we are working on a short publication to present it. It is a pedagogical tool that shows a range of strategies that can be implemented by an MFI to improve its environmental performance.
The tool is built along three dimensions. The first one relates to the formal environmental strategy of the MFI, including indicators such as having a formal environmental policy, appointing a specific person to manage environmental issues or reporting publicly on the organization’s environmental performance. The second dimension involves looking at the MFI’s environmental risks. In terms of its internal ecological footprint, an MFI might seek to reduce the consumption of paper, water and energy at its offices. External risks include the environmental risks of the activities that an MFI finances, which might be addressed through an exclusion list, by which certain activities are ineligible for funding; by raising clients’ awareness of mitigation solutions; or by requiring borrowers to reduce environmental risks as a condition for accessing subsequent loans. The third and final dimension focuses on how MFIs can foster green opportunities, for example by offering loans or training specific to promoting environmentally-friendly practices (such as within agro-forestry), businesses (such as recycling), or technologies (improved cook stoves, for example). There is a wide range of possibilities here.
The Green Index has been included in the latest version of the Social Performance Indicators tool, SPI4, which was developed by CERISE (Comité d’Echanges de Réflexion et d’Information sur les Systèmes d’Epargne-crédit). It is currently being tested, and we look forward to receiving feedback and suggestions on how to improve it.
MC: Can you offer an example of a specific problem an MFI experienced in entering this arena?
MA: Yes, I have many examples! Getting involved in environmental management is actually rather challenging for an MFI. Some years ago, I worked with an MFI in El Salvador, which tried to assess the environmental risks of its clients’ activities and raise awareness on mitigation solutions. They had developed practical tools for that and provided some training to their staff. But loan officers found it very difficult to provide useful advice to the clients, since they were not “technicians” of environmental risk mitigation. They also felt it took up too much of their time. A better solution might have been possible by partnering with an environmental NGO.
MC: Can you share a success story?
There are various MFIs today that offer products that are specific to financing clean energy access, such as solar solutions, biogas digesters or improved cook stoves. By doing so, they contribute to the livelihoods of their clients while reducing health risks linked to traditional sources of energy and preserving the environment.
MC: Do you have any comments on the European Microfinance Award, which this year is specific to microfinance and the environment?
MA: I think the award will give us a great opportunity to discover some inspiring initiatives in this field and reflect on how to improve environmental management in microfinance. Poor people are the most affected by environmental issues and by climate change; as microfinance actors, there is a link here that we cannot dismiss.
In addition to serving on the e-MFP Microfinance and Environment Action Group, Marion Allet serves as the Senior Programme Officer for the Environment & Microfinance at PAMIGA (the Participatory Microfinance Group for Africa), which is based in France.
This description of the work of one of the eight Action Groups of the European Microfinance Platform (e-MFP) is sponsored by e-MFP, a 130-member network located in Luxembourg.
Additional Sources and Resources:
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