AFI’s IGF and SMEF Working Groups join forces for a greener future at the foot of Mount Everest

AFI members from nearly fifty financial institutions across the globe have set foot in the Nepalese capital Kathmandu this week to kick start the 2023 Inclusive Green Finance (IGF) and Small and Medium Enterprise Finance (SMEF) working group meetings. Envisioned as a collaborative exploration, the event will offer members a chance to explore the potentially pivotal synergies between IGF and SMEF in battling climate change. And what better place to do this than in a valley, filled with historic shrines and ancient tales, and surrounded by the majestic Himalayan Mountain range – a powerful reminder of why creative collaboration is so key to saving our planet.

In her welcoming remarks, Acting Governor of Nepal Rastra Bank, Dr. Neelam Dhungana Timsina, thanked AFI for facilitating such a valuable peer learning opportunity and stressed its importance at a time when the world economy remains on the backfoot of the current poly-crisis:

“The post-COVID repercussions, emerging geo-political tensions, food and energy crises, and climate change, among others, are expected to pose further risks and challenges to policymakers in managing macroeconomic stability… We are passing through hard times and have a lot of policy priorities to ensure macroeconomic stability and build an inclusive and sustainable society. Ensuring finance to promote a green economy and SMEs is one of those priorities. I believe that international cooperation and the exchange of ideas through a platform like AFI would be of great help in our journey going forward. I wish all of you a very productive and fruitful discussion for the next five days [and] a pleasant stay in Kathmandu.”

As the co-host of this year’s event, Nepal Rastra Bank (NRB) joined the AFI global network in 2010. Itself a frontrunner in the inclusive green finance revolution, NRB established its very own Environmental and Social Risk Management (ESRM) guidelines in 2018 to support Nepalese banks and financial institutions in monitoring, evaluating, and managing their clients’ social and environmental impact. NRB is also in the process of developing a national green finance taxonomy aimed at channeling resources to Nepal’s low-carbon initiatives and micro, small and medium enterprises (MSMEs). These and other green initiatives will set Nepal on course to meet targets set in its joint declaration on Green, Resilient, and Inclusive Development (GRID) and contribute to the 2030 Sustainable Development Goals (SDGs).

Working group meetings play a significant role in achieving AFI’s aspiration as a global policy leadership alliance. They are the primary mechanism for generating and hosting knowledge within the AFI network and provide a platform for knowledge exchange and peer learning that allows policymakers to share and deepen their knowledge of key financial inclusion issues. Nearly 80 percent of AFI’s 83 member institutions form part of at least one of the network’s seven working groups.

In the next four days, WG members from 41 developing and emerging economies will share insights and strengthen policy discussions on IGF’s vital role in improving MSME’s resilience to and impact on the climate crisis. MSMEs form the backbone of many emerging economies, yet climate change and the consequent frequency of extreme weather conditions and natural disasters have left the sector more vulnerable than ever before. MSMEs’ very survival thus depends on inclusive green finance policy initiatives while, in return, the sector plays a vital role in lowering global carbon and greenhouse gas emissions. This co-dependency is what has led AFI to host this year’s IGF and SMEF working group meetings in conjunction, explained the Alliance’s Execute Director, Dr. Alfred Hannig in his opening remarks:

“Inclusive green finance and MSMEs are two thematic areas that cohesively synergize. As the latter create employment and provide livelihoods, they have the potential to make low-income populations adapt and build their resilience to climate change. To ensure that knowledge translates into action, working group members play an instrumental role in supporting each other through in-country technical assistance, peer learning, and capacity-building initiatives. I urge everyone to leverage this meeting to your utmost benefit and invite you to share your thoughts and reflections to optimize the working group platform. Our voice and action are needed to demonstrate again what we have learned in the aftermath of the 2008 global financial crisis: that financial inclusion is a complementary and not a competing objective to monetary stability and financial stability and plays a significant role in crisis mitigation, economic recovery and building resilience.”

The event will include dialogue sessions with selected AFI global partners, including Mastercard, the Smallholder and Agri-SME Finance and Investment Network (SAFIN), and Ecobank, as a way to further collaboration and knowledge sharing between AFI members and regulators from developed countries, the private sector, knowledge partners, and donors worldwide. Exchanging tried and tested policies, regulatory guidance, and thought leadership from around the globe and across sectors, will also provide an opportunity to better define the role MSMEs play in strengthening climate resilience while identifying solid strategies through which inclusive green finance can help further this goal.

Already in its 8th addition, the IGFWG meeting is bound to break new ground this year with members set to develop several knowledge products (KPs), including the widely anticipated “Greening the SME Sector”. The latter forms part of a newly launched collaboration between AFI and Canada’s International Development Research Center aimed at supporting members in conducting research on inclusive green finance policy guidance for MSMEs. Meeting priorities include the creation of an IGFWG Task Force aimed at allowing more advanced members to provide guidance on IGF policy implementation; identifying new ways of strengthening the IGF agenda during AFI’s annual regional initiative meetings; approving a Guideline Note on IGF’s role in advancing Environmental and Social Risk Management (ESRM) among regulators and lending institutions, as well as electing a Gender Focal Point for the IGFWG. The meeting will also include sessions on how to design gender-sensitive IGF policies, assess countries’ vulnerability to climate change, and measure IGF policies’ impact on MSMEs.

In his introductory remarks, IGFWG Chair Paul Oluikpe from the Central Bank of Nigeria expressed his gratitude to WG members for keeping IGF at the top of the agenda, adding that this week’s WG meetings are aimed at keeping it there:

“We have seen a lot of progress across member countries exploring and instituting green finance initiatives. Credit for this increased adoption goes to this working group for driving awareness… We want to continue along the path of deepening expertise around IGF amongst members, building capacity, enabling coordination and collaboration, supporting in-country capacity of members, strengthening peer learning, and exploring opportunities to keep IGF at the front burners of issues.”

As part of its 20th meeting this week, SMEFWG members will have a chance to explore new and existing regulatory approaches to greening the MSME sector. Convergence sessions with the IGFWG will help members identify the main challenges still facing MSMEs in transitioning to low-carbon businesses, securing green loans, coping with climate disasters, and building climate resilience. Participants from both working groups will have the opportunity to share knowledge and experiences on how to develop IGF solutions that can boost MSME operations while mitigating climate change.

Gender inclusive finance (GIF) will also take center stage at this year’s SMEFWG meeting, with discussions centered exclusively on women-led MSMEs. Accounting for roughly a third of global MSMEs, women-owned businesses contribute significantly to the world’s emerging economies, yet they still face challenges in obtaining legal business ownership rights, securing funding, and accessing training and resources – all due to existing social and cultural barriers. During the meeting members will address the importance of women-led MSMEs and potential financial inclusion policy solutions to their remaining challenges, while sessions on innovative finance will provide suggestions on how to bypass traditional financing channels in exchange for fairer, faster, and more efficient digital financial products and services such as NDFI services, digital payments, factoring, and platform financing.

Celebrations are also at the order of the day as the SMEFWG marks its 10th anniversary this year! Created in 2013, the WG actively drives MSME access to finance through knowledge sharing, policy guidance development, and in-country implementation. It has completed over 58 percent of its 71 Maya Declaration targets and continues to support MSMEs with initiatives including legislation, regulation, infrastructure, capacity building, and education.

In her introductory remarks, SMEFWG Chair Dr. Emma Haiyambo from the Bank of Namibia thanked WG members for all the “hard work, passion, and enthusiasm” they’ve dedicated to the growth of MSMEs worldwide and stressed the critical role the sector plays in the world economy. Today, MSMEs represent more than 50 percent of employment and approximately 90 percent of businesses worldwide – one-third of which are run by women – while contributing to 35 percent of global GDP.

“This is why our work here today remains so very vital and why I hope that in the next 10 years, we’ll take even greater leaps toward making the MSME sector thrive!”, added Dr. Haiyambo.

About NRB                                                                                                      

Founded as the nation’s central bank in 1956, Nepal Rastra Bank is entrusted with overseeing the country’s economic stability, ensuring sustainable economic development, increasing access to financial services, and developing secure and efficient national payment systems. NRB pursues policies aimed exclusively at its principal priority, which is to ensure sustained progress and continued reform of Nepal’s financial sector.

A founding member of AFI’s newly launched Asia Region Financial Inclusion Initiative (SARFII), NRB has been one of the alliance’s most active members in promoting financial inclusion since joining the network in 2010. As a principal AFI member, NRB participates in six working groups with a specific focus on consumer empowerment, market conduct and digital financial services, and has committed to seven Maya Declaration targets in the areas of financial literacy, financial education, and national financial inclusion strategies.

About AFI

AFI is the world’s leading organization on financial inclusion policy and regulation. The global alliance is made up of 83 member institutions including central banks, ministries of finance, and other financial regulators from 75 developing and emerging economies. AFI works on empowering policymakers to increase access and usage of quality financial services for the underserved through formulation, implementation, and global advocacy of sustainable and inclusive policies.

The AFI Resource Centre

AFI working groups are the key source of policy development and trends in financial inclusion and serve as “communities of practice” on key financial inclusion issues. To this end, AFI recently launched the AFI Resource Centre – a web page primarily dedicated to showcasing a non-exhaustive list of high-level financial inclusion documents, policies, and initiatives developed and implemented by member institutions within the AFI network and beyond.