The Environmental Business Finance Program

Transcription

1 The Environmental Business Finance Program Sustainable SME Financing Hany Assaad International Finance Corporation The World Bank Group Energy Week 2005 March 15, 2005

2 EBFP Mission The aim of the EBFP is to support the development of a sustainable market of viable SMEs that benefit the global environment, including climate change and biodiversity Focus on SME Access to Finance & Capacity Building Leverage domestic Financial Institutions to provide financing to SMEs

3 Objectives of the EBFP 1. Increase the level of financing available to environmental SMEs Increase capacity of FIs to effectively target and service environmental SMEs 2. Increase the technical capacity of environmental SMEs 3. Increase the level of consumer awareness about the products and services offered by environmental SMEs

4 EBFP Background EBFP design is based on the successful IFC/GEF SME Program The SME Program demonstrated the environmental SME projects can be developed through a non-grant financing mechanism Established in 1995 the SME Program approves US$16.9 million to 25 Intermediaries in 21 countries

5 Examples Grameen Shakti, Bangladesh sells PV home systems under a consumer credit facility. Installed 29,275 systems, totaling 1.65 MW. Zaki El Sewedy and Co. Egypt electrical supplies (including CFLs) manufacturer and distributor. Completed 34 energy efficiency projects with estimated carbon savings of 47,600 tons.

6 Lessons Learned Programs focused on the SME sector are important SMEs are more likely to pursue new opportunities Lower entry costs for developing new businesses Innovative SMEs can yield significant impact There is value in working with intermediaries Local intermediaries = more sustainable in the long term Effective investing in SMEs require local presence Important to select appropriate intermediaries Need to focus on primary area of expertise Use of risk incentives and fees encourages performance and commitment to proper portfolio management

7 Pillars of Sustainable SME Development Improved Global Environment Access to finance Sustainable SME Development Enabling Environment Increased Capacity Access to Finance SMEs = high risk SME financing = New Increased Capacity Lack of know how among SMEs and those who serve them Lack of awareness as to the benefits of SME activities Enabling Environment High levels of government interference Excessive regulation

8 EBFP Design Proactive market development Market assessments, know-how sharing, best practice dissemination, activities to raise consumer awareness Technical assistance Financing and risk sharing Institutional coordination Focus on sustainability and replicability

9 Activities The EBFP is engaged in three primary activities: 1. Financing Designed to encourage FIs to finance the activities of eco- SMEs by sharing the risk Flexible financing options Direct debt Partial guarantees 2. Technical Assistance Designed to facilitate and enhance the development of the market for eco-sme activities and strengthen the capacity of FIs and SMEs to operate in this market 3. Monitoring & Evaluation Designed to monitor, evaluate and report on critical program impacts at the SME, FI and country levels

10 Sector Focus Examples of activities the EBFP may support: Renewable Energy Solar home systems Micro-hydro/run-of-the-river Wind pumps Energy Efficiency ESCOs Eco-homes Energy Efficient appliances Biodiversity Eco-tourism Sustainable fishing Non-timber forest products Sustainable forestry Sustainable agriculture Reforestation Portfolio diversification important for FIs to manage risks

11 Egypt Tripartite relationship Utility/gas distributor company A local bank (3 are interested, 1 to be selected) IFC Bank to provide energy efficiency financing to utility company s SME clients IFC to provide Risk sharing guarantee TA to bank on EE financing (e.g. new products, processes) TA to utility company to develop EE projects for SME clients TA to SMEs to be more bankable Value proposition New financing business for bank w/less risk Relationship with solid partner (utility company) Utility company increased client base

12 Brazil Relationship A local bank IFC Bank to provide environmental financing to SMEs IFC to provide Credit line TA to bank on environmental financing (e.g. new products, processes) TA to SMEs to be more bankable Value proposition New financing business for bank w/less risk SMEs get access to finance on commercial terms Better businesses resulting from locally provided business development services

13 Expected Outcomes & Benefits Increased supply and demand for environmental goods and services in targeted countries Increased financial resources from FIs to SMEs to fund the growth of the environmental SME market Increased market awareness, tools and experience of environmental SME market players, so that they can continue to operate without donor support

14 For more information on the EBFP, please contact: