Griffith Asia Institute supports APEC policy dialogue to expand green financing of MSMEs

Participants of the APEC Policy Dialogue held in Tokyo 21-22 June 2023. (Photo supplied)

Micro, small, and medium-sized enterprises (MSMEs) have an important role in driving economic growth in developing economies, contributing to job creation and the development of innovative products and services. Governments, policymakers, and banks have a crucial role to play in supporting MSMEs, as they often encounter high barriers to accessing financial support, such as limited credit history and/or lack of collateral. A growing movement towards green finance mechanisms could, in principle, be supportive of the financing needs of MSMEs while also facilitating the transition to a low-carbon economy.

However, green finance and decarbonization policies more broadly can also introduce additional reporting and transaction costs which have the potential to disadvantage MSMEs. Policymakers need to be cognisant that green finance can be a risk to MSMEs if there is no appropriate alignment and support for MSMEs to be integrated with the sustainable finance ecosystem.

Participants of the APEC Policy Dialogue held in Tokyo 21-22 June 2023. (Photo supplied)

To better understand challenges and opportunities for the green financing of MSMEs, the Asian Development Bank (ADB), in partnership with the Asian Development Bank Institute (ADBI) and the Griffith Asia Institute (GAI), organised the 2023 APEC Asia-Pacific Financial Inclusion Policy Dialogue in Tokyo, Japan from 21-22 June 2023.

The meeting, which has been held annually since 2010, brought together senior government officials from 11 Asia-Pacific economies as well as 25 policy and industry experts. Under the theme “Policy Approaches to Support Green Financing of Micro, Small, and Medium-sized Enterprises”, the dialogue focused on identifying effective policy approaches to promote greater awareness and development of green finance products tailored to MSMEs; overcome the practical challenges MSMEs face in accessing green finance; address food insecurity by developing green finance opportunities for small-holder farmers; and expand green finance opportunities and effectiveness for MSMEs through innovative technology solutions.

Participants of the APEC Policy Dialogue held in Tokyo 21-22 June 2023. (Photo supplied)

As a result of this year’s Policy Dialogue, a series of recommendations have been identified for the consideration of APEC policymakers and regulators. Some of the key issues addressed by these recommendations include steps to close the knowledge gap on how to expand the supply of green finance to MSMEs; defining the unique features of MSMEs within sustainable finance taxonomies and green finance frameworks; implementing incentives and regulatory measures to promote the enabling environment for green financing of MSMEs; facilitating the development of innovative technology solutions for green finance, including fintech; and supporting the capacity development of green finance stakeholders from both supply- and demand-side perspectives.

The recommendations will be further refined and articulated in a full report to be published later in the year by the ADB. More information about the APEC Asia-Pacific Financial Inclusion Forum can be found here.

The Asia-Pacific Financial Inclusion Forum was established as a policy initiative upon the recommendation of the APEC Business Advisory Council by the APEC Finance Ministers in 2010. It aims to deliver the objectives established by APEC Finance Ministers related to financial inclusion, facilitating concrete actions for policymakers and regulators to extend the reach and value of financial services for underserved segments of the population.