Green Loans for Micro and Small Businesses in Colombia
Micro, small and medium enterprises play a fundamental role in Colombia`s economy in terms of their substantial number as well as with regard to their contribution to job creation and economic output: More than 95% of the around 1.6 million Colombian companies are micro, small and medium-sized enterprises that make up 38% of GDP and generate around 70% of employment. These companies are rarely eligible to receive long-term loans for capital investments. Since few of them can afford energy efficient equipment on the basis of their own resources, their monthly electricity costs tend to be very high. As a result, their excessive operating costs reduce their ability to offer competitive prices and services, and thus, to generate profits, consequently jeopardizing their chances of survival.
EcoMicro is a comprehensive technical cooperation program launched by theMultilateral Investment Fund (MIF) and the Nordic Development Fund (NDF) in 2012 that is designed to tackle this problem. The project is aimed at training twelve microfinance institutions (MFIs) in Latin America and the Caribbean to develop "green" financial products.
MEI has been selected to provide the technical assistance to Bancamía. MEI assists Bancamía in developing and providing a “green loan” that helps its micro and small enterprise (MSEs)clients finance renewable or efficient energy technologies for their businesses. By reducing operating costs through energy savings the program helps to improve the beneficiaries` financial situation as well as the competitiveness of their businesses.
Partnering for Microfinance and Renewable Energies
In addition to the development of "green" financial products, the project aims at developing green organizational processes within Bancamía to reduce their environmental footprint, and to increase the responsiveness to its clients’ vulnerability to climate change by assessing their exposure.
For these purposes, MicroEnergy International, AnalistasFinancierosInternacionales(AFI), myclimate (MYC) and Perspectives Climate Change (PCC) have formed a consortium in order to combine their expertise in the fields of microfinance and renewable energy, with MEI holding the project lead and coordinating the activities of all stakeholders involved. Each member of the consortium carries out one of the tasks related to the three components.
Developing a Green Finance Product
The project started in August 2015, with an assessment of Bancamía`s current client base structure, which resulted in a list of ten main economic activities to which the bank caters. Using a filtration process based on a number of criteria including the number of potential clients, the application of energy related technologies and the energy saving potential, this list wasfurther reduced to five economic activities for an in depth evaluation: Stock breeding, Agriculture, Food production, Restaurants and Small shops (Kiosks).
The subsequent market analysis focused on the specific characteristics of each of the preselected economic activities. In order to prepare the field research the existing processes and required technologies had to be assessed with regards to their energy needs as well as energy saving potentials. A list of processes and technologies was established for each economic activity, which serves as a basis for the elaboration of questionnaires and the preparation of interviews.
The field research, which has been carried out from December 2015 to January2016,included personal interviews and visits to factories and customers. 100 interviews were conducted with a sample of managers of micro and small businesses from the different economic activities mentioned above in Cundinamarca and Boyacá. The results of these interviews provided a better understanding of the clients` energy requirements and costs, their economic situation,their perception towards renewable and energy efficient technologies andtheir access to traditional financial services. It also gave a clear first indication of their willingness to use a micro credit for the purchase of “green” technologies.
As a result of the investigation, a final selection of technologies as well as suppliers has been elaborated to ensure a successful implementation of the pilot project, in which Bancamía will offer a customized green credit in selected regions. Future Progrss Currently the project is in a phase that comprises the design of the supply chain together with technology suppliers, thereby laying the foundations for the implementation of the pilot project.
Finally, MEI will assist Bancamía in developing the business plan for the scale up phase in which the program will be launched in other branches of Bancamía. Additionally, new microenergy products will be evaluated for incorporation to the energy loan portfolio.The project will be concluded by January 2017, with an evaluation being carried out.
Project Start Date:08/2015
Completion Date: 01/2017
1) Bancamía portfolio segmentation
2) Demand side market analysis
3) Ranking of potential technologies
4) Supply side market analysis
5) Identification of green technologies to implement
6) Identification and assessment of suppliers/energy efficiency standardization processes
7) Supply chain design
8) Product Design and Operating Procedures
9) Institutional Training
10) Implementation of Pilot
11) Pilot Evaluation
12) Scale up
- Legal Status: Bank
- Year of foundation: 2008
- Number of active borrowers (2014): 365,648
- Avarage Loans Size (2014):1233.7 USD