Greening Microfinance Banks in Nigeria: Environmental Sustainability Plans (ESPs)
As the global population continues to recognize the negative implications humans have inflicted on our environment, organizations such as MEDA remain committed to environmental sustainability. The YouLead (Youth Leadership, Entrepreneurship, Access and Development) project is just one of MEDA’s many projects with crucial environmental objectives. MEDA and Cuso International are partners for better financial inclusion for youth on this project. YouLead has a mandate to promote economic growth by increasing the number of green income opportunities for youth in Cross River State, Nigeria.
One way in which the project is supporting youth entrepreneurial capacities is by providing training and small grants to young entrepreneurs working in the natural resource sector (to read more on this objective, please visit this blog). Another project activity involves close collaboration with key partner microfinance banks to ensure their operations follow ecological and sustainable due diligence.
Over the last year, the project’s financial inclusion team has invested in the development of environmental sustainability plans (ESPs) with each partner bank. The ESPs were developed in a participatory manner - an expert was contracted by MEDA and worked extensively with the bank’s staff in the field to develop ESPs that were grounded in their operational realities.
"ESPs include energy audits, green finance products and services, and action plans for implementation."
The project has three partner banks - UNICAL, OGOJA, and CSD microfinance banks. All have adapted ESPs with MEDA’s assistance by working closely with a green finance consultant. Key components of these ESPs include government environmental regulations, environmental risks and proposed solutions, green office guidelines, board responsibilities, employee trainings on green finance, plans for developing a green loan product, and a communication strategy for the bank’s green focus. All these initiatives are outlined in the banks’ environmental action plan (EAP) – arguably the most important aspect of the ESPs. The EAP takes all the initiatives and breaks them down into measurable categories. Each one has an activity, time frame and responsible person assigned. Measurement metrics are also recorded to ensure accountability.
Green financing is becoming essential in the development world. Many governments now offer financial incentives to banks promoting green products and services, making their adoption an easy choice. In addition to tapping into government funding, green products can attract more customers, as the eco-conscious community continues to grow. A lot of these new customers can be entrepreneurial youth, who tend to be more innovative and progressive when it comes to a sustainable future and adopting new technologies.
"When a bank goes green, it also builds their public reputation and extends their marketing reach. Green initiatives can also assist companies in meeting their corporate social responsibility (CSR) goals. Having clean and energy-efficient workplaces also attracts and retains more aware and committed employees."
Green finance includes loans to assist in purchasing environmentally sound products, including solar lanterns and clean cook stoves (to read more about green finance and its available products, please visit this blog). Usually loans consist of a client making a down payment on the product (in this case, products that are certified to be environmentally friendly), then the client makes repayments over a stated amount of time before fully owning the product. The loans help clients transition from traditional technologies to green technologies, while often adding incentive with a discounted interest rate.
In addition to the loans, a comprehensive list of approved vendors (i.e. those supplying renewable and/or energy efficient products) was made available to the banks. Renewable energy products, such as briquette facilities are also of interest in Cross River State and to YouLead. Briquettes are an alternative to firewood and kerosene for cooking. They emit less smoke, making them less hazardous to the environment. They are also produced using recycled agricultural waste, making them very sustainable. These facilities are available to clients with a solid business plan and equity contribution.
Ahead of developing the ESPs, the project facilitated energy audits of each partner bank to measure their energy efficiency and identify areas to reduce carbon emissions. In collaboration with Winrock International and USAID’s Power Africa initiative, the energy audits took into account both qualitative and quantitative data from the banks with a special focus on the use of solar energy. Some suggestions from the energy audits included using more LED lighting, replacing air conditioning units with energy-efficient units, and careful consideration of lighting and air conditioning usage (remembering to turn off when not in use).
All three banks were also educated on available solar systems (such as solar panels) for their offices. Although these solar systems are expensive, the return in investment could benefit the bank in the long run, providing greater reliability and reducing the risk of fuel shortages. The energy audits were a first step in building awareness among bank staff and helped lay the foundation for ESPs and subsequent action plans/EAPs.
The project’s engagement with its partner banks on the ESPs is a vital step toward supporting green growth in Nigeria. In the coming months, MEDA intends to follow up with its partner banks and provide technical assistance for the development of one or two green loan products that could benefit youth entrepreneurs in Cross River State.