LOCAL businesses can lead the green recovery but only with sufficient support to finance their needs especially after the pandemic, according to the Asian Development Bank (ADB).
In an Asian Development Blog, ADB Sustainable Development and Climate Change Department Principal Financial Sector Specialist Arup Kumar Chatterjee said countries should support small and medium-scale enterprises (SMEs) through green lending programs, including bonds.
Chatterjee said SMEs compose 96 percent of all Asian businesses and provide two out of three private-sector jobs. As a result, they also account for a large share of global resource consumption, pollution, and waste generation.
“For SMEs, access to green financing is akin to the mainspring of a clock that turns the gears and moves the hands,” Chatterjee said. “Resetting the developmental clock by focusing its mainspring on a ‘green recovery’ that builds back better is the goal. And the rethinking happening amid the current crisis offers the right timing for action.”
Chatterjee said SMEs lack awareness, technical capacity, and financial literacy to tap sustainability-related investments that can lower their costs and enhance competitiveness.
He said this can change if institutions such as state-owned development banks can help them fill the financial gaps in the market for SMEs. They can also support SMEs’ broader green banking environment by offering them low-cost credit lines to finance their green lending programs.
The ADB expert also said institutions can create public-private partnership facilities and seed clean technology funds and refinancing. They can also help unlock capital through liquidity-support instruments, such as green loan guarantees.
“Such measures can translate into the highest long-term multiplier effect available on economic growth, energy, and resource efficiency,” Chatterjee said. “Green bonds also offer a range of sustainable financing options, including from banks that aggregate SME loans, and securitization of SME loans into asset-backed securities.”
Chatterjee said SMEs can play a significant role in a country’s recovery from the pandemic. He said the pandemic crippled economic activity in the region.
Covid-19 slashed earnings, remittances, and consumption, and swelled the ranks of the poor in developing countries in Asia by 162 million.
He added that this is measured by the $3.20 a day international poverty line.
“Clearly, SME survival and resilience is essential for a green recovery.”