Three virtual seminars were organised in September by the Andes Resilient to Climate Change project, which were attended by more than 300 participants from Bolivia, Ecuador and Peru. They were geared to generating more knowledge about the role and opportunities for the microfinance sector in the fight against climate change, at a time when climate finance is in the spotlight of the world. The Andean region must give priority to adaptation measures, and international and domestic finance is key to achieving this.
The scope and effective implementation of climate measures for combatting the effects of climate change depend greatly on the access to finance of all the main players in climate action, including not only central governments, but also local governments, the private sector, non-governmental organisations and direct beneficiaries, including small-scale farmers in the Andean region.
Hence the participation of the microfinance sector is crucial for making available to the general public financial instruments that promote environmentally-friendly action, and specifically those that contribute to the fight against climate change and the fulfilment of national commitments in this area.
In response to this, SDC promoted a series of three virtual seminars entitled «The Role of Microfinance in Adaptation to Climate Change in the Andean Region»:
Seminar 1: Climate Change and Finance, held on 1 September 2021.
The first seminar was attended by authorities from the climate departments of Bolivia, Colombia, Ecuador and Peru and the representative of the United Nations Framework Convention on Climate Change (UNFCCC). The discussion focused on the framework policies and progress on regulatory frameworks in each country.
The UNFCCC representative highlighted that there is a total climate finance commitment of US$100 billion at the global level, framed in the UNFCCC. Despite this, there is still no consensus on what can be considered climate action and what is not. This makes it difficult for decisions to be taken on where to direct financial flows and for accurately determining global climate finance ambition for meeting real mitigation and adaptation needs. He also mentioned that the largest allocation of resources from the various international funds continues to be geared to mitigation measures.
It is important to note that the countries of the Andean region are now on the way to updating and strengthening their management instruments. Nevertheless, some countries have still not defined national climate finance strategies. In this regard, one of the biggest gaps identified is that of inter-agency and inter-level liaison. There are still disconnects in action between the national and sub-national levels and the private sector. To close these gaps the various key actors need to have a better understanding of the climate risks that may affect them at their level and in their areas of work. They also need to develop sufficient capacity to carry out the transitions required for climate action.
If these knowledge and capacity gaps are to be addressed, there must be sufficient information to do so. However, there is still a lack of detailed information for agricultural activities, such as meteorological information and estimates of the impacts of climate variables on the productive sectors, the profiles of the different groups of family farmers, their financial needs to achieve resilience, and so on.
There are the additional challenges of including vulnerable communities. Climate action faces the traditional asymmetry of rural communities in terms of access to key services such as technical assistance, information and financing. To achieve real adaptation, it is not enough that the financial services they receive be geared towards sustainability, they need to be adapted to the heterogeneity, scale of work and productive characteristics of the most vulnerable groups, which face different pressures and threats in comparison with urban areas.
Seminar 2: Microfinance initiatives in Latin America in a climate change framework, held on 15 September 2021.
The second seminar focused on regional initiatives and strategies that promote the role of microfinance in Latin America for developing micro-scale climate change solutions. The guests were Yapu Solutions, a financial social enterprise which works in Ecuador and seeks to strengthen family farming; the BBVA Microfinance Foundation that currently serves over 2.6 million small entrepreneurs in Latin America; and the BIOFIN Global Initiative administered by UNDP that mobilises funds to financial solutions for biodiversity conservation.
Seminar 3: Microfinance Barriers and Opportunities for Climate Resilience, held on 30 September 2021.
The third seminar focused on the experiences of private microfinance institutions: Bolivia’s Fundación Profín, Ecuador’s Cooperativa de Ahorro y Crédito (CACPECO), Colombia’s Bancamía and Peru’s Fondesurco; and in addition, the experience of the public sector AgroRural’s Sustainable Territorial Development project.
Below is a summary of the contributions of these private, public and international cooperation actors in the last two seminars:
- The microfinance institutions’ long experience in rural areas in the Andean region has enabled them to develop their own quantitative and qualitative know-how, which helps them adapt to the new and growing needs of climate resilience, competitiveness and productivity.
- In the medium term, the financial clients that are best adapted to climate variables will also be those that generate the highest profitability and involve the least risk, which underscores the importance of investing in adaptation. For this reason, financial education in climate change is also necessary, using the appropriate channels for each reality and key actor.
- For microfinance institutions to promote the demand for financial products for climate action, they must understand the individual needs of each actor need, transfer knowledge with appropriate language and build the capacity of both clients and financiers.
- One factor that increases the likelihood of success for adaptation and contributes to the positive impact of microfinance is the promotion of partnership, networking, and the integration of key actors in value chains in the microfinance institutions’ financial schemes.
- Most cooperatives do not have sufficient knowledge, installed capacity or resources to integrate climate variables into their work or to invest in technological solutions. This hampers them in timely decision-making and reporting on their contribution to climate and biodiversity conservation goals.
- The amount of resources mobilised to address rural vulnerability is still insignificant compared to those provided for other issues. It is estimated, for example, that only 5-6 per cent of the investment portfolio of municipal savings and credit banks in Peru goes to agriculture, livestock and fisheries. However, there has been a trend of exponential growth over the last decade.
- Policy instruments for promoting the flow of climate finance at local level are still insufficient. For example, there are insufficient incentives for agricultural product producers and final consumers, and the public investment gap for biodiversity conservation and climate action is not being addressed..
Resilient Andes will continue to support and encourage strong collaboration between international organisations, national and sub-national governments, civil society, academia, indigenous peoples, the financial sector and other sectors of society to facilitate the design of decentralised climate finance mechanisms that promote resilience and locally-led adaptation, empower local stakeholders and bring the most vulnerable communities to the fore.
The regional project «Andes Resilient to Climate Change», promoted by Swiss Cooperation (SDC) and facilitated by the consortium Helvetas Swiss Intercooperation-Fundación Avina in partnership with the International Institute for Sustainable Development (IISD) and the International Fund for Agricultural Development (IFAD), is part of SDC’s Global Programme on Climate Change and Environment. Resilient Andes is part of SDC’s Global Climate Change and Environment Programme. Its first phase runs from May 2020-April 2024.
Fuente: Andes Resilient to Climate Change
Useful links:
Factsheet Regional Project «Andes Resilient to Climate Change»
Video Regional Project «Andes Resilient to Climate Change»
Brochure Andes Resilient to Climate Change Regional Project – Ecuador
Brochure Andes Resilient to Climate Change Regional Project – Peru
Brochure Regional Andes Resilient to Climate Change Project – Bolivia
