Support to the Development Finance Corporation in Developing an ESCO Financial Mechanism for MSMEs

The Caribbean EcoMicro Program is funded by the Government of Canada through Global Affairs Canada and the Inter-American Development Bank Laboratory (IDB Lab). The program objective is to implement green finance projects through microfinance institutions (MFIs) in the Caribbean. The program has been running for several years in Latin America and the Caribbean.   In consortium with Développement international Desjardins (DID), Econoler was selected by the Development Finance Corporation (DFC), one of the FIs admitted to the program by the IDB Lab, to carry out the following two main components: (1) Provide assistance in strengthening a green credit product to finance the purchase of energy efficient and renewable energy (EE/RE) equipment for micro, small and medium enterprises (MSMEs) under an energy performance contracting (EPC) approach; and (2) Reduce the environmental impact of DFC by providing a diagnosis of their carbon footprint and assisting with the development of internal policies to ensure environmental sustainability through the implementation of EE/RE measures in DFC facilities.

To carry out the first component, which was the most important for this assignment, Econoler and DID assisted DFC in the following tasks:

• Carry out a market analysis including a gender analysis that involved interviews and focus groups with local EE/RE players and technology providers, IFIs and other donors, other financial institutions, government agencies, relevant business associations, DFC staff and DFC MSME clients;
• Analyze DFC capacities and procedures as well as its gender equality policy;
• Issue improvement recommendations to strengthen the current green finance product offering as well as the finance product offering to women-owned MSMEs;
• Design a flexible EPC model adapted to the local environment, including all relevant templates;
• Structure a financing vehicle to support the ESCO model;
• Develop training and guidelines on EE/RE and adapted EPC for DFC staff;
• Deliver capacity building to EE/RE technology providers and ESCOs on EE/RE financing and EPC;
• Carry out awareness-raising activities for MSMEs;
• Support the development of EE/RE projects and EPC demonstration projects;
• Create an ESCO registry;
• Evaluate the performance of the ESCO business model;
• Design a scale strategy for leveraging funds.

  To carry out the second component, Econoler provided DFC with assistance in: (1) Establishing a baseline to determine DFC energy consumption and its carbon footprint; (2) Identifying energy saving measures in DFC facilities; and (3) Revising and recommending improvements to the DFC climate policy and greening action plan. Econoler also supported DFC in preparing project dissemination materials throughout the project.