Green Loans for Micro and Small Businesses in México
EcoMicro is a comprehensive technical cooperation program launched by the Multilateral 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.
Micro, small, and medium enterprises play a fundamental role in Mexico’s economy in terms of their substantial number as well as with regard to their contribution to job creation and economic output: 99.8% of the 4.15 million Mexican companies are micro, small and medium-sized enterprises that make up 52% of GDP and generate 72% 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.
MEI has been selected to provide the technical assistance to Te Creemos, the first selected MFI among all candidates. MEI assists Te Creemos in developing and providing a “green loan” that helps its micro and small enterprises (MSEs) clients finance renewable or efficient energy technologies for their business, allowing like this the reduction of operating costs through energy savings. The businesses’ competitiveness is thereby increased through an improved management of their energy-related costs.
Partnering for Microfinance and Renewable Energies
In addition to the development of "green" financial products, the project aims at developing green organizational processes within Te Creemos 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, Analistas Financieros Internacionales (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 February 2013, with a comprehensive analysis of the current customer base of Te Creemos, segmenting the MFI’s current clients by income, activity and energy costs. In addition, twelve municipalities in the state of Chiapas and six in Sonora were selected as potential regions to carry out the pilot project.
The subsequent market analysis of the demand side determined the branches and economic activities in which major energy savings could be achieved with the energy efficient technologies available. The analysis allowed for assessing the potential for saving electricity and thermal energy in different business branches and of the potential demand on part of the businesses in selected regions. As a main outcome, three business branches including (1) Shopping Centers, (2) Tourism (hotels and restaurants), and (3) Food, beverages and tobacco were identified to have the highest potential for energy saving and demand for energy efficient technologies. Also, six out of 53 clean, energy efficient technologies, including (1) air conditioning, (2) refrigeration, (3) Tortilla Machines, (4) thermal insulation, (5) Solar Heaters and (6) lighting were pre-selected for the subsequent field research phase.
Once MEI had quantified the demand by business branches and identified the most promising technologies, a pre-analysis of selected technology providers served as a basis for a technical mission. The field research from May to July 2013, included personal interviews and visits to factories and customers. Fifty interviews were conducted with a sample of managers of micro and small businesses (hotels, mini supermarkets, restaurants and tortilla makers) in the two capitals of the states chosen for the pilot - Tuxtla Gutiérrez (Chiapas) and Hermosillo (Sonora). The results of these interviews provided a better understanding of the requirements, the ability to pay, their access to traditional financial services, the potential to be customers of TCR as well as about the demand for the most adequate technologies for a green microloan.
As a result of the field investigation, a final selection of suppliers and technologies was elaborated to ensure a good integration into the supply chain of Te Creemos.
Currently the project is in a phase that comprises the design of the supply chain with the energy suppliers, thereby laying the foundations for the implementation of the pilot project.
Finally, MEI will assist Te Creemos in developing the business plan for the scale up phase in which the program will be launched in other branches of Te Creemos. Additionally, new microenergy products will be evaluated for incorporation to the energy loan portfolio. The project will be concluded by April 2014, with an evaluations being carried out.
Interview between the e-mfp Aciton Group Microfinance and the Environement & José Manuel Gonzalez, Co-Founder and CEO of Te Creemos is presented here.
Project Start Date: 10/2012
Completion Date: 04/2014
1) TCR portfolio segmentation
2) Demand side market analysis
3) Supply side market analysis
4) Identification of green technologies to implement
5) Identification and assessment of suppliers / energy efficiency standardization processes
6) Product Design and Operating Procedures
7) Institutional Training
8) Implementation of Pilot
9) Pilot Evaluation
10) Scale up
Legal Status: NBFI
Year of foundation: 2005
Number of Clients (2011): 70,593
Avarage Loans Size (2011): 398.6 USD