Summary 

MSMEs in the Maldives struggle to reach critical mass, but incubation services can help upscale these enterprises. Available data shows that the MSME financing ecosystem is largely failing to convert micro and small enterprises (both public and private) into medium and large entities. Nearly 93% of all enterprises are classified as micro and small employers (1-99 employees), while only 7% are considered medium to large employers (above 100 employees). This indicates a significant bottleneck in enterprise development, commonly referred to as the “missing middle,” where MSMEs fail to scale up and achieve critical mass, resulting in a poor success rate. This issue is particularly prevalent in high innovation sustainable industries where capacities remain underdeveloped, and bank lending is uncertain. This project intends to address these issues through a three-pronged approach focusing on blended finance, evidence-based policy formulation and business incubation. 

Background 

The Maldives’ expansionary growth fuelled by debt and concentrated on infrastructure development, has exerted significant pressure on the nation’s natural capital, threatening the health of its critical ecosystems. This project addresses the need for sustainable resource management through a Blue Economy approach, recognizing that Micro, Small, Medium Enterprises (MSMEs) can play a pivotal role in this transition. By establishing a Blue Economy capacity building programme, the project aims to foster innovation and diversify economic activities with a specific emphasis on fostering investment against climate change adaptation by the private sector. The pilot blended finance program, developed through formal partnerships with financial institutions, seeks to service the financing gap for MSMEs, enabling them to scale and contribute to impactful interventions such as engaging in sustainable fisheries and marine biotechnology. Additionally, by strengthening research capabilities and implementing targeted policy reforms and guidelines, the project will create an enabling environment for MSMEs to thrive, ensuring that the Maldives’ economic development is both resilient and aligned with the sustainable management of its natural resources. The project also emphasizes capacity-building for MSME development agencies and integrates global best practices, ensuring long-term sustainability and alignment with international environmental standards. Ultimately, it aspires to not only mitigate the environmental impacts of past growth models but also to position the Maldives as a regional leader in sustainable Blue Economy practices. 

Project Outcomes 

Outcome 1: An established Blue Economy Incubation and Acceleration Service accelerates innovation and strengthens MSME growth through strategic partnerships with MSME mandate holders in the Maldives  

Outcome 2: A pilot blended finance program for the Blue Economy is established to leverage financing for scaling up MSMEs, with formal partnerships with financial institutions in the Maldives to create enabling conditions for large-scale financing instruments. 

Outcome 3: Strengthened Blue Economy research capabilities and targeted reforms foster an ecosystem conducive to the growth of a thriving MSME sector. 

GESI/GEWE Component 

This project has specific targets in place to ensure that its support and financial resources are made available to women, youth, PWDs and entrepreneurs in the peripheries. A minimum 40% target for the aforementioned groups is set for all support programmes applied in this programme. 

Major Achievements 

A Joint Financing facility has been formally established with the Capital Market Development Authority to enable bank lending to Sustainable Blue Economy MSMEs and derisk the issuance of thematic bonds for Blue Businesses. 

A partnership has been formalized with the Ministry of Economic Development and Trade to enhance research capacity of the UNDP supported economic research center.   

National Partner: 

Capital Market Development Authority 

Ministry of Economic Development 

Donor and Funding: 

Government of UK - Foreign Commonwealth and Development Office 

Project Duration: [2024-2026]