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Economics and Environment

According to the Microcredit Summit Report (2012) – the amount of microloans very poor families worldwide received has increased from  7.6 million in 1997 to 137.5 million in 2010. These figures are attributed data received from 3,600 microfinance institutions worldwide. In the last decade, as the momentum of microfinance has picked up – there has also been a an increase in the availability of data and information on the tool. Sites such as The Mix and it’s excellent Social Performance Indicators Blog provide analysis, research and business information on microfinance institutions as does Syminvest and the Centre for Financial Inclusion blog.

Love Earth is particularly interested in the potential of microfinance in reaching the triple bottom line of 1) sound financial, 2) social, and 3) environmental performance. Generally Microfinance Institutions (MFIs) tend to focus on sound financial and social performance however through The Mix  – albeit a small data set –  we were able to ascertain a growing interest by MFIs in including environmental performance.

Graph 1: MFIs with Socially Responsible Environmental  Policies Directed at Supported Enterprises (n=163) – Source: the Mix

Microfinance remains an old concept, practised under different names throughout the world. Essentially it is an umbrella term that encompasses the multitude of methods utilised to provide banking services to the poor. Largely popularised by Muhammad Yunus in the 1970’s, microfinance has enjoyed an exponential growth. Whilst there are many critics of microfinance, it seems it is a development tool that is here to stay. Indeed in the last several decades microfinance has begun to take on a green tinge, with organisations using it in addition to its environmental objectives. The lesson that is being learnt through these organisations is that microfinance can indeed be a powerful tool to use in conjunction with others, but without strong regulation and stringent monitoring, it can do more harm then good.

On 17th March 2011, Professor Lord Stern gave a lecture on the low-carbon industrial revolution which you can find here. His insightful and eloquently delivered message was this – a) The defining challenge of our age is that of the environment and poverty. These are inextricably linked. b) we need a revolution on an industrial scale to shift away from our carbon hungry ways. These ways are no longer conducive to economic growth.  c) Public policy must correct the multiple catastrophic market failures that have led us to our current position. d) The scale of change required means change needs to be addressed across the board.