Farmer Finance

Many farmers and small business entrepeneurs are not able to develop green businesses because they lack the know-how and credit. GCP works with the national financial sector building local banking capacity for farmer financing.

Credit provision will only occur once national banking sectors and rural financial institutions are on board and building their client base of Small Green Businesses (SGBs).  Credit should come from the local financial institutions. This approach leads to long-term sustainability and the use of domestic credit (both public and commercial) without relying on foreign investment.

Therefore, the GCP focuses on the following issues:

•    Partner and strengthen national financial institutions to provide their credit to SGBs as UNDP does not provide credit directly to SGBs.  The credit and the financial expertise, systems and regulations then originates from the participating financial institutions (FIs) and new systems and institutions do not need to be developed.  As such, map out national financial sectors and asses capacity and interest of FIs to partner with UNDP on such programs.

•    Reduce risk to financial institutions through providing partial credit risk guarantees. The capital for guarantees can be placed in a Fund.  This Fund can sit and be managed within a government agency or a second tier FI (see institutional arrangements).  Need to determine level of interest of FIs for guarantees in order to approve credits for SGBs.  CAMBIO found limited interest whereas COAST only lent with guarantees.  The terms and conditions of the guarantees should be based on a sound assessment of the financial sector, levels of risk and demand from FIs.

•    Train FI credit officers in green investing and strengthening the enterprises applying for loans. The training can include: risk management, information on green markets, and project appraisal of green investments.

•    Where credit lines are provided by second tier FIs they need to be highly competitive with the commercial credit and credit lines from other donors.

•    Review and approval of all loans to SGBs is to be undertaken by the FI credit officers as part of their daily work.

Models of Engagement

Central American Markets for Biodiversity Project (CAMBio) provides funding to MSMEs (Micro, Small and Medium Enterprises) that integrate the protection and conservation of biodiversity in their business, products and services. Visit the project website

The COAST -Conservation and Sustainable Use of Biodiversity in the Dalmatian Coast through Greening Coastal Development- Project objective was to effectively transform the current practices of the tourism, agriculture and fishery sectors in these four coastal counties to include elements of biodiversity and landscape conservation. Direct as well as indirect influence through the banking sector would be used in order to achieve these goals Visit the project website