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> Posted by Jeffrey Riecke, Communications Associate, CFI
In addition to its other benefits, microfinance can be a vehicle for promoting environmentally sustainable development. Small-scale finance, when bundled with other services, can improve access to clean energy for people at the base of the pyramid, and can assist them to protect ecosystems, conserve biodiversity, and adapt to climate change. And for the poor, climate change mitigation and adaptation is critical. Although poor people have contributed the least to climate change, according to the United Nations, they will suffer its effects in the biggest way. Though still a burgeoning area, a number of microfinance institutions are effectively pairing microfinance and environmental action, including Kompanion Financial Group in Kyrgyzstan, ESAF Microfinance in India, and XacBank in Mongolia. A few weeks ago at European Microfinance Week (EMW) these three institutions were acknowledged for their work in this area, with Kompanion winning the 5th European Microfinance and Environment Award, and ESAF and XacBank placing as runner-ups.
The Microfinance and Environment Award, launched in 2005, recognizes institutions committed to serving the poor while contributing to environmental sustainability. It’s jointly organized by the Development Cooperation Directorate, the European Microfinance Platform (e-MFP), and the Inclusive Finance Network Luxembourg in collaboration with the European Investment Bank. Below is a snapshot of the environmental efforts of the three institutions, featuring the videos that were shown at EMW.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Client protection needs to be at the core of the microfinance industry in order to maintain sustainable growth, a recent report from Deutsche Bank asserts. “Microfinance in Evolution: An Industry Between Crisis and Advancement” explores the current state of the industry—including its present challenges—and offers insight into how it can sustainably achieve its social and commercial goals.
The report is based primarily on individual MFI financial and social performance data from The MIX and concludes that a new balance between social development and a commercial approach is needed to “rehabilitate microfinance as a development tool.” A new approach is needed due to widespread MFI performance deterioration since 2008 (increases in client delinquency, declines in MFI profits, and decreases in asset growth), stemming largely from market growth, and changes in the MFI client base and lending methodology. To put the industry on the right track, the report’s authors call for an overhaul of practices that have proven to be unsuccessful and more specifically, instilling client needs as the focus of all MFI operations.
> Posted by Holly Padgett
As a former student of Environmental Science and a strong advocate for environmental (as well as economic and social) sustainability, I am constantly striving to align my work and experiences with the precepts of sustainable development, defined by the UN World Commission on Environment and Development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
While I, and probably many others, would argue that microfinance and financial inclusion are undeniably a part of sustainable development, it is often hard to see the direct connection. For this reason, it is especially exciting when I run across an event or report that directly exemplifies the link.
For example, in the recent climate negotiations at the 2011 UN Climate Change Conference, in Durban, South Africa, several initiatives were agreed upon that support the triple bottom line (economy, society and environment) in developed and developing countries. One major decision that came out of the summit was the establishment of the Green Climate Fund, which will channel money from developed nations to developing and vulnerable communities to assist with clean energy programs and adaptations to climate change and extreme weather events. Read the rest of this entry »
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