Greening Small Businesses through the Microfinance Sector

Published on April 25, 2009

A diverse segment of economic drivers called micro, small and medium enterprises [MSMEs] needs to join the fight to save the environment.

BY MIRIAM AZURIN-ABAJA
Contributor
Bulatlat

When the largest corporations began taking about the green agenda by introducing eco-friendlier products or by reducing their operations’ environmental impact, many marked this as a victory in the environmental front.

There is, however, a diverse segment of economic drivers called micro, small and medium enterprises [MSMEs] who have an innate vision for improving the plight of their local economies but are also generators of environmental wastes affecting ecological issues such as climate change, hazards, water availability, among others.

“There’s a powerful segment that we need to collaborate with if we are to significantly reduce the negative environmental impacts from business activities.” says Foundation for a Sustainable Society (FSS) Executive Director Emma Lim-Sandrino. This she says in the context of a country where 99.6 percent of establishments are categorized as MSMEs that produces a third of total domestic production.

As early as 1991, Lawrence Kent, author of the study entitled, The Relationship Between Small Enterprises and Environmental Degradation, has already provided evidence to suggest that small-scale economic activity can be more harmful on a per unit of output basis than large enterprises.

Today, more development planners are taking the view that whether big or small, it is sensible that environmental considerations be present in all forms of economic planning, even at the humblest and neophyte enterprises.

Microfinance Institutions as windows

Haunted by financial crunches, taxes and competition, MSMEs would have difficulties to consider their social and environmental bottomlines. “To survive, it seems logical that we have to put our focus on our financial bottomline,” explains Christopher Castillon, Manager of Siargao Bank in Surigao del Norte.

Such focus proved to be shortsighted for microfinance institutions wishing to develop sustainable local economies. Natural hazards from climate change, for instance, could erode all the gains in agri-entreprises to nothing.

Policies and financial institutions have a lot to do in shaping how enterprises run their operations. ”It is later that we understood that greening our operations builds the resiliency of families in times of disasters and that I think is the way to sustainability,” Castillon says.

Microfinance institutions (MFIs) support a diverse range of MSMEs with equally diverse levels of potential impacts on the environment. Without efforts to build the awareness of MFIs on environmental management, they would perhaps continue to extend support to enterprises with environmentally-harmful impacts.

MSMEs are important engine for economic growth and employment throughout the country. While there is no local study providing evidence for MSMEs contribution to environmental pollution, industry reports indicate that MFIs are into supporting, mostly vending and small scale-processing dependent on environment for raw materials.

The absence of regulatory requirements for financial sector organizations to integrate environmental management and protection programs in their operations contributes to the lack of interest among MFIs. But there’s more.

A series of studies and consultations conducted by FSS revealed that most MFIs are not aware of the economic and environmental benefits that can be derived from adopting these new tools. They have the impression that the implementation of an environmental management system is a costly undertaking and that the nature of their operations are not hazardous and does not, in any way, pose a danger to the environment.

This is bad news in a business environment where MFIs extend support to most MSMEs in the country.

MFIs providing financial support to chemical-intensive agriculture or textile and crafts industries, with unmanaged wastes that may deposit or produce harmful particulates and chemicals that may find their way to water bodies or blend in the air, contribute indirectly to environmental degradation. Mining, regardless of scale, affects the quality of a community’s resources and lifeways and by providing financial support, MFIs may just be a guilty party as well. Other enterprises like food processing, tricycle services are supported by MFIs have their specific impacts to the environment as well.

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