Thursday, June 20, 2024

Support to green enterprises a catalyst for sustainable development


How can we lift millions out of poverty, create more than 600 million jobs, reduce inequalities, protect the environment and grow the economy? This question is what government leaders, innovators, civil societies, private sectors, development organizations, media and the general public are trying to find a solution to across the globe.  I can confidently say that Small and Medium Enterprises (SMEs) are pivotal in tackling this critical challenge. According to the World Bank, SMEs play a massive role in the private sector, particularly in emerging economies. Formal SMEs are responsible for up to 60 percent of total employment and up to 40 percent of national income (GDP). When informal SMEs are added, this number is even higher.

SMEs are presently offering innovative solutions in response to local social, environmental and economic challenges. With these innovative business cases, enterprises are driving the inclusive and sustainable economy forward. One major problem hindering the growth of SME is access to finance. This disproportionally affects new and small enterprises. Closely tied to this hurdle is information asymmetries in the credit market; Lack of collateral and fixed costs for banks in processing loan applications are well-known problems affecting access to bank finance for SMEs. To ensure SMEs meet their full potential, support should be accorded to them from all angles.

Enterprise financing continues to be the grease. One example of an initiative that is likely to make a tremendous change in this space is the GreenBiz programme that is ran by the Kenya Climate Innovation Centre (KCIC) and funded by the Ministry of Foreign Affairs of Denmark (Danida). It is a programme that has been identified as one of key support systems for SMEs in renewable energy and energy efficiency, agriculture, commercial forestry and water and waste management sectors as it projects to support 300 businesses to create more than 3,000 job opportunities in Kenya. The uniqueness of this programme is that besides grants and loans facilities that will be offered to successful applicants, it goes an extra mile to provide technical assistance that is expedient to the successful growth of these SMEs.

Besides financing, technical challenges of business operations have become a bedeviling factor in the survival many businesses. It is true that a number of entrepreneurs venture into industries that they deem quite familiar to them. They however get to meet the challenges of mismanagement, certifications, legal issues, products testing, market penetration, branding and research. Such challenges are mostly unforeseen during the onset of the business. These barriers are even more pronounced for eco-inclusive SMEs as they are pioneering new business models that challenge conventional perceptions of business.

To avert this challenge, SMEs ought to find a mentor who will assist them with services like business incubation and acceleration, technology transfer and IP policy advice, capacity building and mentoring services, international networking and collaboration, policy advocacy and market intelligence services. The GreenBiz programme provides such a platform where SMEs stand to benefit, with no cost attached, from the services of experts who will assist them move to the next level of commercialization with much ease.

To increase this commercialization and scale-up of climate-smart innovations that create decent jobs, increase access to low carbon energy sources, increase societal resilience to climate change, and other environmental and social benefits, GreenBiz targets to reach to climate-smart innovations that have developed a prototype and which are confident of the capacity of their innovations to scale up. In addition, the innovation needs to be unique to address an identified problem in the market with a broad impact on the community and the environment. To add onto this, the business models have to show a clear and compelling mission to grow sustainably.

The place of the Sustainable Development Goals cannot not down-played. It is essential to acknowledge that contributing to the growth and development of the SME sector has both crucial economic and social impacts, and these businesses, both formal and informal, play a significant role in achieving the SDGs. For each enterprise that seeks to reach out to new markets or sustain the existing ones, it is important identify which goals it will be addressing. This can also be tied closely with the Big Four Agenda in Kenya for example and other country-specific development blue prints. Communities are most likely to trade with enterprises that are cognizant of a sustainable future that offers quality life as opposed to those who do not.

Despite the tremendous contributions to green and inclusive economies, SMEs too often remain unseen champions that continue to face extreme challenges to reach their full potential. As with every young startup enterprise, but even more so for SMEs in developing and emerging countries, the risk of failure is high every day.

Green enterprises need recognition and the support of the private and public sectors to scale their businesses and increase their beneficiaries. Governments, development organizations and financial institutions need to collaborate and ensure that tailored financial instruments for SMEs are available. This will successfully close the early-stage funding gap that weighs heavily on SMEs challenge list. With organisations like KCIC working directly with aspiring SMEs to strategize, optimize and finance achievements in green entrepreneurship, sustainable development especially in the field of green enterprises is an achievable goal.

This article was first published on Business Daily

Dr. Edward Mungai
Dr. Edward Mungai
The writer, Dr. Edward Mungai, is a global sustainability expert. He is the Lead Consultant and Partner at Impact Africa Consulting Ltd (IACL), a leading sustainability and strategy advisory in Africa. He is also the Chief Editor at Africa Sustainability Matters. He can be contacted via

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