MSMEs in the Driver’s Seat for Sustainable Development

Convenience store owner in Nepal.
Convenience store owner in Nepal.

By Christine Engstrom

It’s not just about businesses directly involved in sustainability, but how existing MSMEs can adapt their businesses to support sustainable solutions in Asia.

The Paris Agreement on climate change, signed last week by over 190 countries, has brought renewed momentum for sustainable development. Adapting to and mitigating the effects of climate change will require that national governments work together and honor their commitments. But the real key to implementation rests with the private sector – the engine of economic growth and job creation.

Up to this point, the conversation has centered largely on how big government and big business will act. But equal attention should be paid to how micro, small and medium-sized enterprises (MSMEs) can take a lead in finding and implementing sustainable solutions.

At this year’s ADB Annual Meeting in Frankfurt, we will bring together some of the most important voices from developing Asia, Europe, and the rest of the world to discuss how MSMEs, bankers, and investors can collaborate to finance and implement sustainable business solutions. 

Many MSMEs are already paving the way. The last few years have seen the implementation of off-grid renewable energy solutions that have been driven in part by smaller businesses and climate-friendly innovations that have improved productivity for small-scale farmers in India. These are but two among hundreds of solutions that smaller businesses are driving around the world.

Access to finance for MSMEs, however, remains a crucial constraint in many parts of the world, including developing Asia. Fortunately, financial institutions as well as impact investors are seeing that the returns on sustainable business investments can be commercial.

Working with MSMEs requires a commitment to innovation, flexibility, and an ability to think beyond the short-term. Financial institutions such as Commerzbank have vital experience to share from Europe, where finance to MSMEs has fueled a range of business models that are now being tried in Asia and the Pacific.

Crucially, it is not just about businesses directly involved in sustainability, but how existing MSMEs can adapt their businesses to support sustainable solutions.

For its part, the ADB has made funding MSMEs one of its priority areas in scaling up its private sector operations. This financing is combined, wherever possible, with capacity building that can help make MSMEs work in a more sustainable way. 

MSMEs employ over 90% of workers in developing Asia – they also need to be part of the sustainable solutions that will be required from the Paris Agreement commitments. The future depends on it.

ADB will host its first ever Private Sector Day at its 49th Annual Meeting in Frankfurt. Sustainable Solutions for Micro, Small and Medium-sized Enterprises is a seminar, organized along with Commerzbank, which will take place on May 2 and discuss solutions for MSMEs.