The report presents the results of the survey on Green Microfinance conducted by HEDERA Sustainable Solutions, financed by the SANAD Fund for MSMEs’ Technical Assistance Facility, combined with further analysis based on the broader context and interviews undertaken with microfinance stakeholders. The report sheds light on the status of green microfinance across the MENA region, with regards to the existing initiatives and practices pursued by microfinance institutions, and their future strategies to enhance the climate resilience and transition to low-carbon economy of end beneficiaries. The research aimed to provide a better understanding of the sector’s current level of development, MFIs’ green microfinance needs, and the extent to which MFIs are aware of or complying with local and international standards and regulations and explore the opportunities for extending green microfinance services.

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Objectives

Understand the penetration of green inclusive finance practices in the region

Assess the level of understanding of sustainable finance among MFIs in the MENA region and raise awareness about the adverse impacts of climate change on business resilience, both institutionally and for end-clients

Identify MFIs’ existing environmental strategies, climate risk management practices, and current offering of sustainable financial products and non-financial services

Determine the support MFIs need to develop their environmental strategies and integrate a green inclusive finance approach into their operations

Identify local and regional stakeholders that can create an enabling environment to push sustainable finance forward among MFIs.

Results

Although some countries have begun to develop policies, regulations, and governmental strategies surrounding sustainable finance, the region is still at a nascent stage when it comes to specific support to guide MFIs in developing and integrating sustainable actions.

Established and mature institutions in the region are more advanced than the younger ones in their implementation of green inclusive finance approaches

Sustainable agriculture emerged as a key topic of interest for MFIs, with half of the MFIs interviewed showing interest in more support from their investors and partnerships to promote sustainable practices in agriculture

Microfinance stakeholders can play a decisive role in boosting sustainable finance in the region

Recommendations

Support microfinance networks as multipliers & foster digital tools for green inclusive finance

Development of capacity building programs in partnership with local and regional microfinance networks

Dissemination of digital tools and digital data management for environmental risk evaluation, sustainable product demand assessment, and impact monitoring

Development of internal capacity for environmental risk management

Provision of support to established and mature MFIs to grow their sustainable portfolios.

Acknowledgments

This report was developed on the initiative of the SANAD Technical Assistance Facility (TAF), and the research was conducted by HEDERA Sustainable Solutions GmbH.

Managed by Finance in Motion, the SANAD TAF works alongside the SANAD Fund for MSMEs that works closely with partners of the fund to conduct projects that equip the fund’s beneficiaries with the knowledge and tools needed to best serve – and improve the potential of – entrepreneurs in the Middle East and North Africa (MENA). The TAF also develops the capacity of the financial sector across the region through its network of investees. As the threat of climate crisis becomes more evident across the MENA region, the SANAD TAF has been supporting partners in shaping their path to sustainability, meeting regulatory requirements, and conceptualizing climate risk.

Cite as:

Realpe Carrillo, N. and Reviakin, A. (2022) Sustainable Finance in the MENA Region: State of Development, Challenges, & Opportunities. Report of the SANAD Fund for MSMEs Technical Assistance Facility, 2022.