Increasing MSME access to climate finance

This report, commissioned by the Climate and Development Knowledge Network and drafted by Dalberg Global Development Advisors, provides design options for the Green Climate Fund's (GCF) MSME Program. It identifies barriers preventing micro, small, and medium enterprises (MSMEs) in developing countries from accessing climate finance and proposes solutions across policy, knowledge, and financial product design. The report emphasizes the need for intermediaries to deliver finance efficiently and suggests a pilot phase to test these approaches before full-scale implementation.

• MSMEs are critical for climate action in developing countries, accounting for 90% of private businesses, yet they face significant barriers to climate finance including weak policies, limited awareness, and financial products that are poorly suited to their needs.
• The informal sector represents a massive portion of the MSME landscape, with almost 300 million businesses in developing countries. These entities struggle with traditional finance that requires property collateral or extensive credit histories, necessitating alternative credit worthiness assessments.
• To manage high transaction costs associated with small ticket sizes and large volumes, the GCF MSME Program should channel finance through intermediaries such as multilateral development banks, local financial intermediaries, or specialist foundations.
• Improving the enabling environment requires national strategic plans for climate change, the reduction of counterproductive fossil-fuel subsidies, and the implementation of pro-MSME or pro-green investment policies, such as the Priority Sector Lending policy used in India.
• Knowledge gaps can be addressed through matchmaking platforms that link investors with investees and technical assistance (TA) programs that build the capacity of intermediaries and MSMEs to manage and report on climate investments.
• Financial risks can be mitigated through risk-sharing instruments, including concessional finance, first-loss investments, and guarantees, which reallocate risk from commercial partners to public sector institutions.
• The report estimates a total annual greening finance need of USD 45 billion for MSMEs across developing countries, with the trade, agriculture, and manufacturing sectors having the highest number of MSMEs.
• For MSMEs providing climate technologies, the credit gap is estimated at approximately USD 4-5 billion. The largest opportunities for MSME participation are identified in the wastewater, small hydro, and water technology sectors.
• The GCF MSME Program should utilize a pilot phase to test and refine its approach, specifically focusing on maximizing reach to informal MSMEs and conducting detailed country-level sector analyses before scaling up.

APA

Climate and Development Knowledge Network (2015). Increasing MSME access to climate finance. https://cdkn.org/sites/default/files/files/CDKN-Dalberg-Access-to-Finance-for-MSMEs_-final-1.pdf

Chicago

Climate and Development Knowledge Network. Increasing MSME access to climate finance. 2015. https://cdkn.org/sites/default/files/files/CDKN-Dalberg-Access-to-Finance-for-MSMEs_-final-1.pdf.

Wikipedia

{{cite report |author=Climate and Development Knowledge Network |title=Increasing MSME access to climate finance |date=September 2015 |url=https://cdkn.org/sites/default/files/files/CDKN-Dalberg-Access-to-Finance-for-MSMEs_-final-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climateanddevelopmentknowledgenetwork2015increasing, author = {{Climate and Development Knowledge Network}}, title = {{Increasing MSME access to climate finance}}, institution = {Climate and Development Knowledge Network}, year = {2015}, month = sep, url = {https://cdkn.org/sites/default/files/files/CDKN-Dalberg-Access-to-Finance-for-MSMEs_-final-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }