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Empowering MSMEs in Asia: Report Highlights Urgent Need for Gender-Smart Climate Financing

Micro, small, and medium-sized enterprises (MSMEs) are the economic backbone of South and Southeast Asia, yet research shows businesses are struggling to obtain the financing they need to sustain or scale their climate solutions. This is especially true for women small business owners.

SecondMuse Capital, an impact-focused investment company, supported by Visa Foundation and social investor AVPN, has released a report from its Future Economy Lab in Asia, focusing on Financing Gender-Smart Climate Businesses in Asia.

The lab aims to address financing barriers encountered by MSMEs in the region, particularly in India, Indonesia, and Vietnam – findings include:

  • Climate vulnerability and financing gap

South and Southeast Asian nations are among those most vulnerable to climate change. However, there is an undervalued, interconnected relationship between climate change and gender inequality. In India alone, there is an unmet credit gap of over $11.4billion for women-owned businesses.

  • Importance of MSMEs

MSMEs play a vital role in the region’s economies and impact climate. In Indonesia alone, MSMEs account for approximately 99 per cent of existing businesses and employ over 97 per cent of the workforce, with more than 65 per cent of these employees being women.

  • Preference for loans

Loans emerge as the preferred source of external finance for MSMEs. Surprisingly, in Vietnam, 80 per cent of women-owned MSMEs surveyed by the Asian Development Bank first looked to borrow from a bank.

  • Funding disparities for women entrepreneurs

The funding gap is particularly stark for women entrepreneurs. In India, women entrepreneurs receive only 5.2 per cent of outstanding credit granted by public sector banks and less than 0.5 per cent of VC funds.

Through the Future Economy Lab, we are designing financial mechanisms, utilising blended finance and equipping gender-smart MSMEs so they are able to actively contribute to climate solutions,” said Natalia Arjomand, senior director of SecondMuse Capital.

“Women-led MSMEs are one of the most promising drivers of economic development in South and Southeast Asia, yet the lack of funding continues to stand in the way of them positively impacting communities. Providing these women with the resources they need for their businesses will help solve climate issues and bridge the gap for women business owners.”

Payal Pathak, program officer, Visa Foundation, also added: “The financing gap for women-led businesses and fund managers advancing climate-smart solutions is significant. Visa Foundation is proud to work alongside our partners, like SecondMuse, to address this imbalance. Equipping women entrepreneurs with the necessary capital and tools will help amplify positive and long-lasting impact on our environment and communities.”

The Future Economy Lab is a comprehensive initiative aimed at reshaping how we develop financial mechanisms and collaborative strategies to foster inclusive and resilient economies. Through a collaborative approach, it engages various stakeholders including investors, governments, entrepreneurs, and support organisations.

SecondMuse Capital, the driving force behind this initiative, has conducted seven iterations globally, focusing on diverse sectors and economies. Notably, this marks the first lab in the Asian Pacific region. To prepare, the team conducted extensive research, workshops, and over 25 stakeholder interviews, particularly with experts in gender-smart businesses. Leveraging its partnership with AVPN, SecondMuse Capital tapped into its regional network, facilitating thorough research and engagement with key stakeholders.

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