Financing Local Green Enterprises

The report identifies a significant global MSME finance gap, estimated at USD 5.2 trillion in 2017, which is exacerbated for green enterprises in developing economies. Key barriers include high informality, inappropriate collateral requirements (favoring fixed over movable assets), and information gaps regarding ESG criteria. The authors recommend establishing green taxonomies, improving credit guarantee schemes, and creating a global green MSME financing facility to leverage Development Finance Institutions (DFIs).

• A substantial global MSME finance gap existed as of 2017, estimated at approximately USD 5.2 trillion, which represents 1.4 times the current level of global MSME lending.
• The MSME finance gap is most acute in the SME segment, often referred to as the 'missing middle'—businesses too large for microfinance but too small for traditional investment financing. In case study countries, this gap varies from 4.2% of GDP in Peru to 18.4% in Uganda.
• Informality is a pervasive characteristic of emerging economies, acting as both a response to and a cause of limited financial access. In Senegal, informal employment reaches 96%, while in Peru, the informal economy represents 47.5% of GDP.
• Financial institutions' reliance on fixed assets for collateral creates a barrier because 78% of business capital stock in developing countries consists of movable assets, such as machinery and equipment, rather than land or buildings.
• There is a critical information and capacity gap where financial institutions lack data on the environmental and social impacts of MSMEs, and MSMEs lack awareness of available financial services and green practices.
• Development Finance Institutions (DFIs) are criticized for excessive risk aversion, with a tendency to prioritize middle-income countries over low-income countries (LICs) to protect their credit ratings.
• The report recommends the creation of a global green MSME financing facility, potentially as part of the Green Climate Fund or Global Environment Facility, to increase DFI risk-taking capacity for green projects in LICs.
• To prevent 'greenwashing' and attract international finance, the report argues for the establishment of national green taxonomies and mandatory corporate sustainability reporting for large and high-risk companies.
• The report suggests that 'social capital'—such as group-based lending and peer monitoring—can serve as an effective substitute for physical collateral in microfinance, as seen in Mongolia and India.

APA

Suttor-Sorel, L., & Solonakis, N. (2022). Financing Local Green Enterprises. Green Economy Coalition. https://www.greeneconomycoalition.org/assets/images/Report-Financing-Local-Green-Enterprises-2022.pdf

Chicago

Suttor-Sorel, Ludovic, and Nicolas Solonakis. Financing Local Green Enterprises. Green Economy Coalition, 2022. https://www.greeneconomycoalition.org/assets/images/Report-Financing-Local-Green-Enterprises-2022.pdf.

Wikipedia

{{cite report |last1=Suttor-Sorel |first1=Ludovic |last2=Solonakis |first2=Nicolas |title=Financing Local Green Enterprises |publisher=Green Economy Coalition |date=September 2022 |url=https://www.greeneconomycoalition.org/assets/images/Report-Financing-Local-Green-Enterprises-2022.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{suttorsorel2022financing, author = {Suttor-Sorel, Ludovic and Solonakis, Nicolas}, title = {{Financing Local Green Enterprises}}, institution = {Green Economy Coalition}, year = {2022}, month = sep, url = {https://www.greeneconomycoalition.org/assets/images/Report-Financing-Local-Green-Enterprises-2022.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }