The importance of green finance in the development and growth of small and medium-sized enterprises (MSMEs) cannot be overstated. These businesses often struggle to secure the necessary funding to invest in sustainable business practices and cleaner technologies. However, the emergence of financial technology (fintech) has brought about innovative solutions aimed at helping MSMEs transition towards more environmentally friendly processes.
According to Raja Debnath, Managing Director of Veefin Solutions, these solutions are designed to streamline the integration of sustainable practices into business operations and facilitate easier access to funding. An example of this is deep tier supply chain finance (DTSCF), which utilises advanced data analytics to assess the environmental, social, and governance (ESG) performance of supply chains. This provides MSMEs with the opportunity to demonstrate their commitment to sustainability and access financing at preferential rates while also managing reputational risks.
Gurjodhpal Singh, CEO of Tide in India, emphasises the importance of green finance for MSMEs, highlighting the challenges they face in securing capital for eco-friendly initiatives. The lack of affordable financing options has been a significant barrier preventing broader adoption of sustainable solutions among MSMEs.
Furthermore, stakeholders underscore the shift in perspective regarding sustainability, noting that it has now become an essential aspect of today’s corporate landscape. Integrating sustainable practices into business operations is seen as crucial for long-term success and fulfilling environmental and social responsibilities. Financial institutions are increasingly prioritising sustainability as a criterion for capital allocation, promoting ESG compliance through innovative solutions like DTSCF.
By integrating ESG factors into their operations, MSMEs can identify and mitigate various risks, such as regulatory compliance, reputational risks, and supply chain risks. This not only fosters the growth of responsible businesses but also increases their likelihood of accessing funding on favourable terms.
In conclusion, the collaboration between fintech and MSMEs in promoting green finance is a critical step towards creating a more sustainable and environmentally conscious business landscape. As the importance of sustainability continues to grow, it is essential for small businesses to embrace eco-friendly practices, and fintech is playing a pivotal role in making this transition more accessible and feasible.