Cleantech MSME Finance Forum

ACMFN CLEANTECH MSME FINANCE FORUM AND BANDUNG GREEN FESTIVAL

9-11 November 2018, Bandung, Indonesia

Unlocking MSME Finance fostering Cleantech Solutions
Financiers and MSMEs join together to: Connect. Discuss. Innovate.

Micro, small and medium enterprises (MSMEs) constitute a critical private sector-led solution to several sustainable development challenges Indonesia faces. Access to finance for MSMEs can be seen as one of the key components to promote the uptake of clean technologies in Indonesia. Thus there is a high need to assist MSMEs with getting access to finance for green investments and fuelling their growth. Financial institutions (FIs) can provide critical financing for Clean Technology and Cleaner Production through adapted instruments including cleantech investments as part of their portfolio. However, business opportunities are often not recognized by the banks and investors and the availability of such customized financing products remains limited.

The Cleantech MSME Finance Forum by the Asian Cleantech MSME Financing Network (ACMFN) aims to accelerate the development of financing products in the clean technology space by showcasing best practices and lessons learned from Indonesian financial institutions, investors and SMEs, as well as experiences from other Asian countries including China and India.

At the Cleantech MSME Finance Forum we will look to tackle questions such as: How can we develop innovative financing products and mechanisms that foster the uptake of clean technologies? How can we integrate considerations around clean technologies into lending decisions and the design of financing products? How can we accelerate the access to finance for cleantech MSMEs? How can the regulatory environment support the development of the cleantech financing market? What are possible success factors for cleantech finance?

Over the one-day event, we will bring together around 100 financial institutions, investors, MSMEs and decision makers of government and development finance institutions to discuss innovative approaches and explore essential partnerships to enable a transfer of best practices to foster the development of the cleantech financing sector in Indonesia.

The event is part of the Asian Cleantech MSME Financing Network (ACMFN), a SWITCH-Asia multi-country project in China, Indonesia and India that aims to promote sustainable products, processes, services and consumption patterns in Asia.

Highlights of the Event

The workshops will comprise two days including:

  • Inspiring Panels and Knowledge Networking catalyzing ideas and sharing best practices on how to support the uptake of cleantech financing products in Indonesia
  • Interactive Thematic Sessions providing a platform for ground-breaking cleantech financing solutions mutually developed by representatives from the financial sector, SMEs and development finance institutions
  • The ACMFN Exhibition showcasing innovative cleantech SMEs tackling sustainable development challenges in Indonesia
  • Marketplace: Get-together of FIs, investors, SMEs and development finance institutions

For further information please contact: rini.sudaryani@pupuk.or.id

Concept Note and Programme Outline

Scaling Cleantech Innovation and Financing Workshop

ADFIAP, in cooperation with its host member-institutions in India and its project partners, held a workshop on “Scaling Cleantech Innovation and Financing” on February 19, 2018 at the ITC Maurya Hotel in New Delhi, India. The event was conducted during the 41st ADFIAP Annual Meeting and was attended by 29 ADFIAP member-delegates.

Summary of Discussions

Cleantech Innovation & Financing and the role of ACMFN

Mr. Octavio B. Peralta, Secretary General, ADFIAP and Executive Director, ACMFN

  • A brief overview of the EU-funded ACMFN Project was introduced in terms of its overall objectives, organizational structure and activities on establishing a sustainable business case for clean technology financing and MSMEs in the 3 target areas in general and India in particular.
  • Key economic and climate financing statistics and the business opportunities that abound under the ACMFN project were discussed. MSMEs can exploit sustainable business operations and expanded market reach by shifting operations to cleantech or by being cleantech service providers. Financial institutions can enhance their competitiveness by creating innovative cleantech financial products that would allow SMEs easy access to finance.
  • Objective is to build and leverage a cleantech financing eco-system to spark improved access to finance for Asian cleantech MSMEs in order to enhance sustainable consumption and production patterns in Asia and establish a low carbon climate resilient economy.

Global Perspectives on Cleantech Financing – Best Practice Insights

Ms. Corazon D. Conde, ACMFN Sr.Project Manager and Country Manager –India/ Group Head ADFIAP Consulting, Philippines
Mr. Mirko Zuerker, Senior Project Manager, adelphi Research gGmbh

  • Cleantech financing models being implemented in the Philippines which include debt financing and bond flotation were discussed by Ms. Conde. For debt financing, examples of green lending programs and case studies of two government banks, (Land Bank of the Philippines and Development Bank of the Philippines) and two private banks (Bank of the Philippine Islands and Banco de Oro) were shared, highlighting the success factors adopted by said banks.
  • Another cleantech financing model that was discussed was Bond Flotation triggered by the development of the ASEAN Green Bond Standards for issuers and projects in the region. Aboitiz Power Corporation issued the First Green Bond in Asia and the Pacific for its Tiwi-MakBan geothermal energy facilities financed with $225 M local currency bond and $37.7M ADB loan with ADG guarantee of 75% of principal and interest on the bond. BPI Capital Corporation was lead arranger. Banco de Oro raised $150 M from a pioneering offshore green bond issuance boosting private sector funding for climate change mitigating initiatives with IFC as sole investor in the bond.
  • Best practices adopted by the aforementioned banks include: (1) building partnerships; (2) out of box solutions; (3) credit enhancement schemes; and (4) use of ESCOs
  • Mr. Zuerker discussed growing the cleantech market in the EU. On one side of the equation you have the Cleantech market consisting of cleantech providers and MSMEs for energy efficiency and renewable energy projects and on the other side, the Financiers consisting of private equity/venture capital, debt financing, subsidies, commercial banks, IOs, public institutions, investors and government. Interventions to match the two players include green financing mechanisms, capacity building, engagement, matchmaking, technical support, pipeline development, monitoring, reporting and verification.
  • Statistics on the cleantech finance landscape in Europe were also presented as well as the SME reaction to cleantech/green finance in Europe
  • Cleantech finance products in Europe were presented such as the KFW Energy Efficiency Program-Production Plants/Processes, the Green Initiative that support energy efficiency projects by SMEs in EU new member states and pre-accession countries through EIB loans b at attractive rates and the Pret-Eco-Energie or eco-energy loan that supports SMEs to implement programmes improving their energy efficiency
  • Also discussed was the Private Finance for Energy Efficiency Instrument or the PF4EE Scheme wherein EIB grants loans to financial intermediaries with a risk-sharing coverage of up to 80% of expected losses on a loan basis, for relending to EE investments by companies. adelphi provides expert support in developing EE loan portfolio.
  • The PF4EE eligibility criteria and how to develop a PF4EE loan portfolio from start-up, romp-up and full speed were also discussed.
  • Lessons learned are the following: (1) FI commitment to understanding the basic difference of the EE market relative to other markets is key for client ID/pipeline development; (2) Even though all partner banks laid out the potential target market in their application, the actual “sweet spot“ (where many loans can be made) in each market only develops with experience and some trial and error; (3) EE credit lines go along with the need for technical capacity/expertise that is not generic to most Fis. Support through easy and efficient tools and local technical expertise is important

Please refer to the attached PPT presentations of Ms. Conde and Mr. Zuerker.

Prototyping for Joint Actions

Mr. Mirko Zuerker explained the prototyping methodology that would allow a structured advancement of best practice instruments and programmes through peer discussion in parallel focus groups of key challenges and solutions and how to scale existing financing solutions.

Please refer to the ACMFN Cleantech Finance Lab presentation.

Cleantech Finance Lab I: Define and present key challenges in cleantech financing for SMEs and solutions to overcome these challenges.

  Challenges Solutions Selected Prototype Solution
1 (Cases from Indonesia)
  • Expensive from the SME point of view
  • Non-familiarity with cleantech which is viewed as more complicated type of technology
  • No incentive from government to go into cleantech
  • Complicated process for land acquisition for the cleantech project site
  • No coordination among environment-related agencies such that overlapping regulations are issued
  • High cost of funds and short loan tenor
  • Support from government such as tariff adjustment to favour clean technology
  • · Capacity building for SMEs and financial institutions
  • Blended finance composed of grants and loans
  • Sourcing of external funding from multilateral agencies
  • Partnership with commercial banks
  • Reporting, monitoring and verifications tools
Blended finance composed of grants and loans
2 (Cases from the Philippines and Sri Lanka)
  • Acceptance of technical knowledge is limited in cleantech in particular in the Philippines
  • Price of solar panels is high looking at microfinance
  • SMEs lack know-how on technical projects
  • Difficult to access risk-sharing facilities for FIs
  • Partnering with public institutions to solve problems for clients
  • Digital financing for clients
  • Grants or low-interest loans will be most appropriate plus technology support
  • Subsidization of solar panels
  • Government programme that supports RE technologies and implementation
  • Partnering with KIVA for low-interest projects
Sourcing of cheap money for cleantech investments for FIs in the Philippines
3 (Cases from India)
  • Some FIs don’t have a mandate for cleantech financing
  • Cleantech projects need to be more financially attractive
  • Implementation/regulatory enforcement is weak
  • Need for more government push/support
  • Lack of incentives for MSMEs from government towards cleantech projects
  • Need for separate line of credit for cleantech projects
  • Less awareness in the MSME sector regarding cleantech
  • Cleantech schemes is not for all cleantech products but only for RE
  • Clean technology is expensive and not affordable.  Incentives are needed to reduce the costs
  • Collaboration between technical suppliers and banks for increased awareness at clusters with other stakeholders
  • Capacity building to bankers on cleantech projects
  • The criteria for classifying MSMEs in India was changed from investment in plant and machinery to annual turnover.  This is attractive and can have more financing from banks to the sector
  • Pooling and creating a pipeline of projects from clusters to bankers
Clustering/pooling and collaboration of technology suppliers and banks for Indian FIs
4 (Cases from different country banks)
  • Financing – high cost of capital and undeveloped ecosystem
  • Government ministries are uncoordinated
  • Lack of technical capacity in preparing business plans and project feasibility study
  • High cost of technology/machineries
  • Complexity of access to funding
  • Improved investment climate, i.e. power purchase agreement
  • Coordination of financing, i.e. blended fiancé
  • CEO as driver of paradigm shift to cleantech through evangelization role

 

Rethinking of the role of bankers – evangelist partners/catalysts/incubators

 

Fire Safety & Prevention Seminar

Seminar
15th August 2015 at MGHRDC (Myanmar Garment Human Resource Development Centre)
A representative from WRAP – Worldwide Responsible Accredited Production – will be giving a half-day talk for interested factory owners and managers at MGMA’s training center, MGHRDC in mid-August. The topic for the August lecture is “Factory Fire Safety & Prevention”. This event is tentatively scheduled for August 15th. This seminar is free for individuals from MGMA’s member factories. Non-members can attend for 10,000 kyats. This lecture will be bi-lingual in Myanmar and English.

Follow Up Visit to Improve Compliance

Onsite Consultancy
4th-19th August 2015 at Factories (Myanmar Synergy, Maple and Shwe Sakar)
Social Compliance Experts from Systain to revisit the 3 factories that they have given an onsite consultancy during the 1st SMART Myanmar Compliance to see progress in keeping up with their individual action plan.

Monsoon meet up and Networking

Event
26th June 2015 at Padonmar Restaurant
On June 26th, 2015 at 6:00pm, the first evening of the 4th Annual Garment & Textile Machinery Exhibition, MGMA is organizing a networking event for its members to socialize with each other and with visiting overseas buyers and suppliers.

RSVP to inquiries@myanmargarments.org to reserve your spot. All tickets reserved and paid for before May 15th are just $10. From May 16th until June 19th tickets will cost $16 for non-members and $12 for MGMA members. Tickets purchased after June 19th will be $20 for non-members and $15 for MGMA members.

Social Compliance Workshop

Workshop
23rd and 24th June 2015 at Shweyi Zabe Factory
SMART Myanmar’s 2nd Social Compliance Academy has given a chance for 6 more garment factories to participate after the first academy. This time the activity will kick off with a workshop where the social compliance experts from Systain will present the Social Compliance policy and procedures followed by on site consultancy at individual factories.

Restricted Substances List on Apparel Industry

Training/Seminar
20th June 2015 at MGHRDC (Myanmar Garment Human Resource Development Centre)

MGMA is offering a free seminar on restricted substances list in the apparel sector for their members in cooperation with TUV Sud. This seminar is also opened to non-members with 5,000 MMK per person. This lecture will be bi-lingual in Myanmar and English.