INSIGHTS FROM BOLIVIA
Curious to know how one EcoMicro project adopted climate-smart microfinance practices to reach the most vulnerable and leverage US$7 million for scale?
Diaconí
a FRIF-IFD's EcoMicro project in Bolivia recently closed in June, 2018 with impressive results. Alone, the value of the 300 new finance products
placed in the market for small-scale agricultural producers
was surpassed by 170%, reaching a total of US$1.1 million against the initially anticipated US$400,000!
Under the project, Diaconía designed and piloted green finance products aimed at improving the climate resilience of over 300 small rural producers in the municipalities of Sorata, Palos Blancos and Batallas in the La Paz Department. This included the development of guidelines, policies and a procedures manual for the financial product as well as a software tool for credit evaluations focusing on climate risk by crop and by region. Notably, the software tool allowed the institution to: i) identify and quantify their business exposure to climate risks; and, ii) implement measures to reduce this exposure.
In Bolivia, the rural sector encompasses one of the most vulnerable segments of the population to climate change. Cognizant of this reality, Diaconía - through its EcoMicro project - was able to respond in a direct way to the identified needs of small-scale agricultural producers, as well as to the communities that depend on these producers for food security, particularly in the face of the adverse effects of climate change such as heavy rainfall and drought.
Upon completion, project impact was measured by 2 key dimensions:
economic well-being of the target beneficiaries and carbon footprint of the institution. Here, agricultural producers demonstrated an 8.12% increase in productivity (simple average) and an 15.85% increase (weighted average), according to the level of sales. Similarly, 273 out of the 300 clients were able to maintain or improve their earnings. With respect to the institution's carbon footprint, greenhouse gas emissions diminished by 8% (11.6 tonnes CO2
equivalent) and energy costs decreased by 19% (US$5,786).
As featured in our earlier
November newsletter, an additional US$7 million for scale was mobilized - even as the pilot phase was still ongoing - from the Pilot Program for Climate Resilience of the Strategic Climate Fund, the Foundation for Productive and Financial Development, Fundación PROFIN, and the IDB/MIF, enabling Diaconía to scale up their
innovative resilient agriculture loan product to as many as 4,000 additional small-scale agricultural producers, across eight rural branch offices.
So, what is the secret to Diaconía's success? In other words, how can climate resilience be incorporated into credit risk management?
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Fortunately,
Diaconía
leaves us with two key lessons learned:
- Flexible climate-smart credit methodology - while the software tool is a vehicle for climate risk assessment, it must be accompanied by a flexible credit methodology that adjusts to client vulnerabilities in the face of climate impact. This involves continuous data collection and analysis (e.g. on localized weather patterns) and constant adjustment of software functionalities that take into account new variabilities to better inform future credit decisions. Financial Institutions (FIs) must remain committed to constant learning on the realities of its clients - understanding that adaptation is more of a process than a one-time intervention is critical.
- Formation of strategic alliances - the success of the green finance product is contingent on clients' ability to access relevant advisory services (e.g. agricultural extension support) that enable them to maximize on-farm impacts of their investment. The formation of these strategic alliances is perceived by the client as a value-added. For FIs, this helps to market the product more strategically, reduce risk, and enhance relationships with clients by improving product value. As a bonus, it facilitates new client acquisition and expands market coverage.
Small-scale producers represent an important client segment for Diaconía, not only for their market potential but also for their fulfillment of the vision and social mission of the institution.
Through its experience with the EcoMicro Program, Diaconía has reinforced its presence as an innovative leader in the microfinance space both in Bolivia and Latin America. Not only have they taken steps to mitigate their own exposure to climate risk in productive and financial terms, but importantly, have helped small-scale producers to achieve climate resilience.
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The
Inter-American Development Bank (IDB)
,
through its
Multilateral Investment Fund
, Natural Capital Lab, and Sustainable Islands Platform, and the multi-donor
Compete Caribbean Partnership Facility
, is pleased to announce the launch of the Blue-Tech Challenge, a call for proposals that aims to pilot and scale commercial models rooted in cutting-edge technologies that contribute to the sustainable management of oceans and coastal resources (or marine ecosystems) as the basis for livelihoods, food security and economic development of the Caribbean region.
The challenge will identify the most innovative blue economy models to be developed in 14 target countries: Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname, Trinidad and Tobago, Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines. Qualifying projects from the Organization of Eastern Caribbean States will be financed by the Compete Caribbean Program.
See the requirements and learn more about the awards
here
.
Entities from the 48 member countries of the IDBG are invited to participate in the challenge, as well as those Compete Caribbean beneficiary countries which are non-IDB members (i.e., Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines). Proponent entities located outside the Caribbean region will only be considered if in partnership with local or regional organizations registered to carry out the project activities in the Caribbean region. Qualifying entities can submit their proposals starting today September 17 until November 30, 2018. Selected proposals will be announced early 2019.
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Private-sector action in adaptation: Perspectives on the role of micro, small and medium size enterprises
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The Paris Agreement has set ambitious targets for international climate action and there is a need to identify mechanisms through which private sector actors can be engaged in both adaptation and mitigation efforts – especially in developing countries.
This new publication in the
UDP Perspectives series shares diverse and original perspectives, insights and reflections on the role and prospects for the private sector to build climate change resilience. It focuses especially on the perspectives of micro-, small and medium-size enterprises (MSMEs) in developing countries, which are particularly vulnerable to climate change, and presents thirteen individual articles from a wide range of experts and practitioners dedicated to this emerging but growing area of work.
The articles draw particular attention to the needs, current state of knowledge, critical gaps and mechanisms through which we can build the capacity of MSMEs in developing countries so that they can adapt to climate change and contribute to the creation of climate resilient pathways.
Read the full publication
here.
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Financing of new digital technologies in the agricultural sector in Latin America and the Caribbean: Guide for regional public development banks
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Nowadays, the range of available technologies resulting from the digitization of the economy, has opened new opportunities for investment in agriculture. At the same time, this broadens the debate on the criteria for selection of these new digital technologies, support instruments, and elements that should be taken into account in their design.
This publication collects relevant information to promote dialogue and debate around policies for financing technologies in the agricultural sector. The analysis adopts a double view: from the perspective of financing the agricultural and livestock production sector as adopter of technologies and from the perspective of financing and supporting the innovation sector as a developer of value proposals adapted to the characteristics of the regional agricultural sector.
The objective is to serve as a practical guide for public development banks when defining and justifying lines of action, programs and interventions for financing the development and adoption of new digital technologies in the agricultural sector in Latin America and the Caribbean.
Read the full publication (Spanish)
here
.
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Welcome to the first issue of The Next Wave Magazine!
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This first issue of
The Next Wave Magazine
features how the IDB Caribbean Country Department is dedicated to creating vibrant and resilient economies in the Caribbean and how the IDB is focused on improving lives. The Next Wave highlights new trends, current news, and on-going projects that are transforming the future of the Caribbean region. We hope that you enjoy reading our magazine.
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Foromic
, the leading event in Latin America and the Caribbean focused on issues related to financial inclusion and enterprise development, returns for its 21st edition to Barranquilla’s Puerta de Oro Center from October 29-31.
This year, different activities will delve into how innovation, driven by emerging technologies and disruptive business models, is transforming the concept of inclusion in financial services, entrepreneurship and news skills development. Foromic will also offer innovative ways to create networks, experience innovation and establish business contacts in a single collaboration space.
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CREF 2018, the largest annual gathering of the Caribbean energy market, will take place at the JW Marriott Marquis, Miami, from November 7-9, 2018. This year’s CREF will be sharply focused on what resiliency in the energy sector looks like – and who’s going to fund it.
The Caribbean is transitioning away from a decade-long discussion around how to enable a sustainable energy matrix, to one focused on how to finance and build grids that are independent, economic, reliable - and resilient. Join stakeholders from across the region at CREF 2018 as they map out the next ten years of investment in a clean, resilient and competitive Caribbean.
Click
here
for further details.
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EcoMicro partners with
Financial Institutions to create Green Finance Products that build resilience of
Micro, Small and Medium Enterprises (MSMEs) and
low-income households to climate change. This is an innovative approach to developing products that
facilitates access to sustainable, low-cost energy or adaptation technologies for MSMEs and low-income households.
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EcoMicro is a Technical Cooperation Program by the
Inter-American Development Bank’s Multilateral Investment Fund (MIF), co-financed by
Global Affairs Canada,
the MIF and
Nordic Development Fund. The
Global Affairs Canada contribution supports t
he
EcoMicro Caribbean Program
.
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Inter-American Development Bank | Multilateral Investment Fund (MIF) | (246) 627-8500 ecomicro@fomin.org | www.ecomicro.org
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