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MSMEs & green finance: How fintechs can help small businesses adopt sustainability

MSMEs & green finance: How fintechs can help small businesses adopt sustainability


MSMEs are major contributors to economic growth, employment as well as exports. But they also have a significant environmental footprint and no real solutions to tackle it.

Green finance is one of the most fundamental requirements to make MSMEs more climate-friendly. Many small and medium businesses face challenges in raising capital to run and expand their businesses. So their challenge becomes steeper when it comes to raising funds to invest in cleaner technologies, energy efficiency upgrades and sustainable business practices. But now, fintech is working on developing innovative solutions for MSMEs to make the transition to greener processes.

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“The solutions aim to simplify the process of integrating sustainable practices into business operations and make it easier to secure necessary funding. For instance, deep tier supply chain finance (DTSCF) leverages advanced data analytics to provide visibility into the environmental, social and governance (ESG) performance of supply chains. This allows MSMEs to effectively demonstrate their sustainability efforts and access preferential financing rates while mitigating reputational risks,” says Raja Debnath, Managing Director, Veefin Solutions.

Gurjodhpal Singh, CEO, Tide in India, says while MSMEs form the backbone of the country’s economy and are also important contributors to job creation, these businesses also have a significant environmental footprint, for which they require green finance.

“It is one of the most fundamental prerequisites for making MSMEs more climate-friendly. Many of these businesses face challenges in raising the capital needed to invest in cleaner technologies, energy efficiency upgrades and sustainable business practices. Lack of access to affordable financing options is another key barrier preventing wider adoption of climate-smart solutions among these MSMEs,” adds Singh.

MSMEs & ESG criteria

Stakeholders say that sustainability has evolved from a mere catchphrase to an essential component in today’s corporate landscape. Integrating sustainable practices into business operations is the key to achieving long-term success, as well as fulfilling our environmental and social responsibilities, they add.“Financial institutions today are increasingly prioritising sustainability as a criteria when allocating capital,” says Debnath. “Veefin’s DTSCF solution is promoting ESG compliance by enabling financial institutions to ensure sustainability and ethical business practices. Through DTSCF, there is greater visibility into the practices of corporate borrowers and their extended supply networks. By integrating ESG factors into their operations, MSMEs can identify and mitigate various risks, such as regulatory compliance, reputational risks and supply chain risks, ensuring that sustainable finance fosters the development of responsible businesses.”

Stakeholders say MSMEs that are working in tandem and prioritising sustainable practices are more likely to access funding on favourable terms.



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