Market Study and Partner Scoping in the Caribbean in the Context of the Green Finance for MSMEs and Low-Income Households EcoMicro Program

EcoMicro is a technical cooperation program undertaken to help Latin American and Caribbean microfinance institutions (MFIs) develop green-finance products so that micro, small, and medium enterprises (MSMEs) and low-income households can access clean energy, increase their energy efficiency, or adapt to climate change.   Most Caribbean countries depend heavily on imported oil and lack access to modern energy services. This situation affects MSMEs and low-income households disproportionately, traps them in energy poverty, and often results in low productivity. At the same time, the Caribbean countries are highly vulnerable to the impact of climate change. The investment in green technologies, including renewable energy and energy efficient (RE/EE) and adaptation technologies, can help reduce their energy dependence as well as climate change vulnerability. However, such investments by MSMEs are often inhibited by the lack of knowledge about these technologies, technology supply constraints, and a lack of access to financing.   In this context, the MIF commissioned Econoler to conduct a market and partner scoping study and identify potential local financial institutions (FIs) to be supported by EcoMicro in the development of loan products, facilitating access to RE/EE and adaptation technologies for MSMEs and low-income households at a later stage. The assignment was also intended to provide the basis for developing a green finance ecosystem.

Econoler was commissioned to provide a guide and actionable inputs for the implementation of the EcoMicro program in the Caribbean. To this end, Econoler conducted a market study by carrying out the following tasks:

• Identified the challenges faced by women when accessing green finance;
• Outlined the green finance-enabling environment in each country;
• Identified the challenges hindering the development of green finance products and suggesting solutions;
• Identified potential partner FIs for the implementation of green finance pilot projects. FIs included not only microfinance institutions, but also other financial institutions such as commercial banks with a regional presence, insurance companies, leasing companies, etc., that serve MSMEs and low-income households;
• Outlined the identified FI capacity building, training, and financing needs;
• Outlined the main green finance opportunities in each country in terms of financial products, needs, market size, local incentives, existing and potential partnerships with EE/RE, and adaptation technology providers;
• Suggested technology companies, investors, and other capacity building actors to be included in the EcoMicro program to create and maintain a green finance eco-system.

  The assignment involved conducting in-country missions and in-person interviews with potential partner FIs, RE/EE and adaptation technology providers, and other relevant actors. This study was intended to help foster demand for the EcoMicro program in the Caribbean region. The main conclusions of the study were: (1) The enabling environment varies considerably from country to country, the role of government is considered important, and energy prices are generally very high when compared internationally; (2) with a few exceptions, high energy prices offer an incentive for investing in RE/EE and adaptation technologies, the most common technologies are available on most islands, and adaptation technologies are less well-known and rarely financed; (3) green financing products are currently being offered but only in a few countries; however, most FIs are very interested in entering the market; (4) the most common barriers are a lack of awareness and knowledge about RE/EE and adaptation technologies among clients (and FIs) and, in some countries, there is limited availability of these technologies, high prices, and/or an unfavorable regulatory framework.