Financing Sustainable Consumption and Production (SCP) Practices — SwitchMed

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Financing Sustainable Consumption and Production (SCP) Practices

Fostering SwitchMed - SWITCH Africa Green Dialogue

 

What kind of green financial instruments can facilitate the investment in SCP solutions?


Whereas interest in SCP practices has increased in the last few years, also in light of the United Nations’ Sustainable Development Goals, access to finance can be a bottleneck, as financiers and entrepreneurs often do not speak the same language when discussing financing opportunities.

 

The starting point for the discussion was the project “A Revenue Generation Approach for SCP Dissemination in Kenya�, under the SWITCH Africa Green programme. You can see the session presentation here.

 

What did we aim at?

The objective was to be a catalyst for an exchange between experts from the MENA and Sub-Saharan regions, discussing best practices, challenges and opportunities when devising solutions for the financing of SCP practices.

The concrete outputs of the session were:

  1. Gathering feedback on challenges and opportunities when financing SCP solutions
  2. Fostering south-south peer learning and knowledge transfer
  3. Sharing ideas on how to create a sustainable financial mechanism for green entrepreneurs


Panel Discussion & Outcomes 

 

Co-host and Moderator:

 

List of speakers:

  • Wissam Mansour, Switcher
  • Fabio Petroni, Director of Programmes, E4Impact
  • Davide Libralesso, Head of Programmes and International Relations, Etimos Foundation
  • Paolo Pastore, Director, Fairtrade Italia

 

Davide Libralesso, Etimos Foundation

 

Davide started his intervention by presenting Etimos, a foundation funded 26 years ago promoting access to finance for SMEs and rural and social economy, and the project “A Revenue Generation Approach for SCP Dissemination in Kenya� under the SWITCH Africa Green Programme.

 

The overall objective of the action is to contribute to reducing the environmental footprint of Kenyan Micro Small and Medium Enterprises (MSMEs) in agribusiness and with specific regard to the mango, coffee and dairy sectors, while strengthening their ability to compete in local and international markets.

 

Through the project they aim to provide SMEs with capacities and business opportunities to implement SCP practices while at the same time improving the value of their own products. In parallel, it also provides them with better access to markets. First action has been the identification of already existing SCP practices; secondly, the training of the companies and; third, the set-up of a local working group on finance.

 

The speaker highlighted that in order to really implement SCP practices it is key to partner with other organisations and programmes, especially financial actors.

 

At the end, he raised two questions: how can we enable access to finance to implement SCP? And how can we enlarge the partnership to ensure its success?

 

Wissam Mansour, Lili’s Farm

 

Wissam Mansour, one of Switchers incubated, said that, a part from knowledge and capacity building, entrepreneurs need money to prototype. He remarked that that environment itself could be considered as capital.

 

He briefly explained the support he has received from SwitchMed within the Training and the 8-month Incubation Programme thanks to which he could better define his business model and plan. He also received kind support from Mercy Corps.

 

The Switcher explained that from his point of view an entrepreneur has to be able to develop a convincing case for financing. To do so the entrepreneur has to be able to show the impact, so therefore he/she has to be able to measure it, to demonstrate the potential to scale-up and the need from the market. In this line, he said that SwitchMed helped him to write the business plan and to seek for financial support.

 

Wissam said that it’s important to understand how the value chain of investors works to be able to match it with the inputs and outputs of the business.

 

Finally, he made a reflection on the negative impacts that might be created by alternative financial tools such as microcredits and that they have to be taken into account when developing and implementing them.

 

He raised two questions: Is circular economy a mutually growth model where both financial institutions and green businesses can grow together? What measures are taken to “decontaminate� the green and circular economy from the brown economy?

 

Download the presentation here.

 

“The impact investor needs to identify the right way to be sustainable and to have profit from the investment.� - Fabio Petroni




Fabio Petroni, E4Impact

 

First, Fabio presented E4Impact, a project launched in 2010 by ALTIS, the Graduate School Business and Society of the Università Cattolica del Sacro Cuore of Milan, to train impact entrepreneurs in Africa. As part of this mission they are one of the partners of the project “A Revenue Generation Approach for SCP Dissemination in Kenya�.

 

Fabio explained in more detail the strategic pillars of the project: first pillar is "Linking SCP to competitive advantage by sparking emulation and easing access to finance"; second pillar is “Focusing on local SCP� by ensuring sustainability and guarantying availability and; third pillar is “Embedding financial instruments� with a limited investment and with the view of a long term ownership.

 

The expected impact of the project is that 100 MSMEs are trained and exposed to SCPs and that thanks to this training 50% of the MSMEs reduce their environmental footprint by 30% or that 50% of them increase their turnover by 30%, among others. In terms of access to finance, the expected impact is that 80 MSMEs join the Local Green Finance Community and that the 50% out of the 80 MSMEs increase SCP investment by 70%.

 

So far, they have developed a Mango SCP Manual for MSMEs and 55% of Mango MSMEs have been shortlisted to receive the training and coaching, including farmers/producers (65%) and processors, cooperatives, propagators and aggregators.

 

Last, Fabio shared with the audience some discussion points such as: are we missing any key segment of the value chain?, are MSMEs balanced across the value chain?

 

Download the presentation here

 

Fabio Petroni, Fairtrade Italia

 

Fabio started by explaining the difference between the common concept of “fair trade, a trading partnership based on dialogue, transparency and respect, that seeks greater equity in international trade and, the certification system FairTrade operated by Fairtrade International.

 

He explained that Fairtrade is unique because of its capacity to set stable prices (producers receive a fair price for their products; the Fairtrade Premium initiative which can be invested in social, environmental and economic development projects to improve their communities;  the empowerment of farmers and workers through requesting a democratic structure and transparent administration of farmer groups in order to be certified.

 

They have several standards which are based in 3 pillars: economic, social environmental development. In Africa they are active in 32 countries and they work with more than 500 producer organisations. In Mediterranean they work in Morocco, Tunisia and Egypt. 

 

Download the presentation here

 

 

After the presentations the moderator opened the turn for Q&A from the audience.

 

A key issue discussed was the price of organic/fair trade products which are more expensive than the “normal� products. Some participants said that this is a barrier although the experts said the price is not that different if you compare the quality. The issue according to the experts is a matter of culture/education: they have to decide if they consume organic products or toxic products.

 

Another participant shared her concern about the difficulties to access to small loans from World Bank projects and the unclear criteria used to select the granted projects and, she asked if a common procedure for all banks could be designed. The experts said that microfinance is not still a right tool for long term basis because the cost is very high. The solution would be doing a micro-venture between the investor and the entrepreneur through which they could share capacities and risks. However, this option involves much more work and effort. Other options are a loan from the bank or the risk capital and equity funds, but these have difficulties at times when dealing with small businesses. 

 

It was also mentioned that there’s an increasing number of investors interested in impact funding and they referred about few initiatives gathering impact investors such as the Global Impact Investment Network.

 

 

 

Another topic addressed was the lack of support to more advanced start-ups, specially when it comes to access to market. There is a difficulty to access to market for producers from certain African countries. In some sub-saharan countries it’s very difficult to import/export with other African countries and on the contrary it’s easier to export to European countries. It was said that countries should promote this regional exchange and create connections between African markets.

 

To conclude the discussion, Gian-Lucca said that we should see business not only as a tool to make money, but they have to take into account all impacts created and, that impact investing can hold this new approach that can support the development of businesses with this approach.

 

 

Next Steps Mentioned at the End of the Session 

The main conclusions of the seminar will benefit the SWITCH Africa Green project “A Revenue Generation Approach for SCP Dissemination in Kenya�, as one of the main outputs of the project will be the drafting of the first SCP dedicated financial instrument in Kenya.

 


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