Environmental Sourcebook for Micro-Finance Institutions: Executive summary
Environmental Sourcebook for Micro-Finance Institutions
The document entitled The Environmental Sourcebook for Micro-Finance Institutions was presented for the first time at the Micro-Credit Summit, which was held in Washington, DC (USA) from February 2 to 4, 1997. An executive summary of this document is provided below. To obtain a full copy of it, please contact info@acdi-cida.gc.ca or CIDA's Public Enquiries,
tel.: 1-800-230-6349; tel.: (819) 997-5006; fax: (819) 953-6088.

1. The Environmental Sourcebook for Micro-Finance Institutions is designed to help micro-finance institutions (MFIs) improve the environmental performance of their lending activities. While MFIs are the target audience, it is hoped the Sourcebook will be of use to anyone involved in micro-enterprise development. Specifically, the Sourcebook will help MFIs:
   
   • To understand the importance of a healthy environment to the success of micro-enterprises;
   • To develop and implement techniques and approaches for improving the environmental performance of micro-enterprise projects and programs; and
   • To understand how MFIs can turn current environmental challenges into opportunities to improve the quality and expand the range of MFI activities.
   
   It is hoped that the Sourcebook will serve as a resource tool for MFIs to develop management techniques and programming options based on environmental motivations.
   
   
2. CIDA has several reasons for promoting higher environmental standards for micro-enterprises. In Canada, there is growing domestic pressure to ensure that all development initiatives receiving support from the federal government adhere to the highest environmental standards possible. From a policy standpoint, new environmental legislation, such as the Canadian Environmental Assessment Act (CEAA), and CIDA's own Policy for Environmental Sustainability are the impetus for this Sourcebook.
   
   Growing international concern and consensus about threats to our environment, manifested in environmental agreements, laws and standards, together with the need to ensure a sustainable, healthy environment, make a stronger concern for the environment imperative. Also, CIDA, like all donors, must respect the efforts of partner countries to establish or improve their own environmental standards.
   
   
3. From a professional standpoint, it is important that environmental factors be given primary consideration in all forms of economic planning.
   
   
4. The good news is that the environmental aspect of micro-enterprise management is not only key to environmental sustainability and worker health and safety, but also, if judiciously applied, it can actually improve the economic performance of micro-enterprises.
   
   
5. CIDA recognizes that most micro-enterprises do not have serious negative impacts on the environment. Our concern is with the 10 to 25 percent of projects that do require some form of environmental management. Several sectors of micro-enterprise activity can have substantial negative effects on the local environment. These include micro-enterprises that can carry significant health and safety risks for micro-entrepreneurs, their families and local communities, unless certain measures are taken.
   
   
6. There is enormous potential at the micro-enterprise level to promote environmentally sustainable patterns of economic activity. MFIs could play an important role in this promotion as they are often the key institutions involved in improving the economic well-being of a population.
   
   
7. This Sourcebook has been designed to prepare MFIs in a general manner for improving environmental management. It is meant to encourage thought and reflection, rather than provide a set of checklists or questionnaires for dealing with the environmental problems of every micro-enterprise. The Sourcebook is simply a starting point.
   
   
8. The Sourcebook suggests a working definition of a micro-enterprise, encompassing both urban and rural businesses that employ fewer than eight people, including the entrepreneur. The definition also includes small-scale agricultural activities.
   
   
9. Although the extent of the negative impact micro-enterprises have on the environment remains unknown, there is sufficient evidence to conclude that there are problems in certain micro-enterprise sectors. The following are the main environmental problems associated with these micro-enterprises:
   
   • The negative environmental impacts of micro-enterprises often pose a direct threat to human life. This includes, primarily, the improper disposal and unsafe use of hazardous substances such as pesticides and chemicals.
   • The growing use of pesticides, chemicals and other polluting technologies.
   • Pollution and waste resulting from the inefficient use of resources and outdated technologies.
   • An ever-increasing number of micro-enterprises competing for diminishing resources and space.
   • In urban areas, the inappropriate location of micro-enterprises and their subsequent contribution to overcrowding and pressure on infrastructure such as water and sanitation services.
   
   
10. Currently, the following micro-enterprises are considered to be the most notorious in terms of their environmental impact: chemical-intensive agriculture and aquaculture; metalworking and electroplating; textiles and crafts; automobile and motor repair shops; brick manufacturing; tanneries; small-scale mining; and foundries.
    
    Other activities that have a pronounced environmental impact include:
    
    • Paint and printing shops
    • Food processing operations
    • Wood processing
    • Cotton ginning
    • Livestock pens
    • Coral reef mining
    • The production of chemicals for domestic use in the manufacture of pesticides
    • Small-scale transportation systems, such as motorized rickshaws.
    
    
    Direct environmental impacts are not limited to manufacturing activities. Non- manufacturing sectors, such as roadstand shops and restaurants, can contribute to environmental problems through the inefficient use of natural resources such as firewood.
    
    
11. As the number of micro-enterprises continues to grow, micro-entrepreneurs are becoming involved in a wider variety of economic activities. This raises the possibility of new, potentially harmful practices. It can be expected that the environmental impact of micro-enterprises will become more varied and diffuse over time.
    
    
12. The explosion of micro-enterprises in urban areas has been phenomenal. It has occurred in a context of growing congestion, a rapidly increasing population, a housing crisis, and a reduction in basic services such as transportation, health care and sanitation. Micro-enterprises do not cause these problems but they can certainly complicate matters, since they typically use outdated technologies and lack knowledge about, and are unable to invest in, cleaner technologies. Too rarely do micro-enterprises operate in locations and facilities where the environmental impacts can be properly managed.
    
    
13. In addition to excessive pesticide and chemical use by small-scale farmers, a host of other environmental concerns are associated with rural areas. The overall environmental challenge is similar to that of urban areas in that land and resources are disappearing. Small-scale farmers contribute to this problem by employing resource-degrading agricultural practices. Small-scale aquaculture practices in Asia and Africa are also coming under increasing scrutiny, not only because of the excessive use of chemicals but also because of other environmental risks to wildlife and the inappropriate use of good farmland. The environmental impacts of urban and rural micro-entrepreneurial activity are related to an array of legal, political, economic and social factors over which micro-entrepreneurs have little control. The need to work with national and local governments to change laws and improve environmental standards is emphasized.
    
    
14. The majority of micro-enterprises generally engage in environmentally sustainable business practices. In addition, certain micro-entrepreneurial activities actually benefit the environment. The most documented example is the work of the informal sector in recycling.
    
    
15. Meanwhile, evidence suggests that the environmental performance of many of the environmentally troublesome micro-enterprises can be improved. In order to be in a position to assist micro-entrepreneurs, it is necessary for MFIs to begin to build their environmental capacity.
    
    
16. The process of assessing environmental capacity can begin by asking basic questions about environmental resources and needs. Many of the skills and knowledge developed in other aspects of MFIs' work are transferable to environmental management.
    
    
17. Each MFI must decide how it wishes to strengthen its environmental management capacity and take the necessary internal measures to ensure that there are proper support mechanisms to do so. The Sourcebook stresses that it is important for MFIs to collaborate with other groups. However, collaboration should not detract from building in-house environmental knowledge.
    
    
18. One of the key environmental management skills for MFIs to develop is the capacity to undertake environmental assessments. Environmental assessment (EA), sometimes referred to as environmental impact assessment (EIA), is the practice of evaluating and anticipating the environmental impact of a project, identifying mitigation measures and, if necessary, mapping out alternatives. EA is used from the beginning to the end of a project's design and implementation as a control against potentially harmful consequences.
    
    
19. Every ecosystem has a threshold for absorbing deterioration and a certain capacity for self-regeneration. These thresholds are defined by the World Bank as follows:
    
    • Waste emissions from a project should be within the assimilative capacity of the local environment to absorb without unacceptable degradation of its future waste absorptive capacity or other important services.
    • Harvest rates of renewable resource inputs should be within the regenerative capacity of the natural system that generates them; depletion rates of non-renewable inputs should be equal to the rate at which renewable substitutes are developed by human invention and investment.
    
    
    
20. The importance of information as well as information management should not be underestimated. When properly managed, information will greatly enhance environmental management capacity.
    
    
21. Although much can be accomplished independently, more can be gained by working with partner groups. Partnership presents the possibility of using knowledge and expertise from a number of fields, which is necessary for tackling environmental problems.
    
    
22. Working with both micro-entrepreneurs and communities will enable MFIs to differentiate between environmental protection practices that are essential for environmental and community well-being and those that interfere unnecessarily with the operations of micro-enterprises.
    
    
23. Micro-entrepreneurs may be reluctant to participate in activities to improve the environmental management of their enterprises. The challenge for MFIs is to identify and work with factors that encourage the involvement of micro-entrepreneurs. Micro-entrepreneurs will almost certainly not show an interest if there is no financial payback or if the payback is only long term. Fortunately, much can be done in the short term to facilitate the achievement of both environmental and business goals.
    
    
24. Training can be used to develop the environmental skills and knowledge of staff, partner groups and micro-entrepreneurs.
    
    
25. Promoting technological change in the production practices of micro-entrepreneurs is the most direct way to eliminate environmental problems.
    
    
26. The strength of MFIs in promoting environmental change is in their ability to reach and influence a large number of micro-entrepreneurs.
    
    
27. MFIs should consider facilitating the creation of a public space that could act as a centre for networking, sharing ideas, and promoting innovation and research and development.
    
    
28. New possibilities can be opened up through collaboration with mid-sized and large companies to develop and promote environmentally sound technologies and products for use in the micro-enterprise sector. Mid-sized and large companies can contribute knowledge and technology at different stages of micro-enterprise production or can produce complementary products.
    
    
29. To the greatest extent possible, the principles of cost-effectiveness and financial self-sufficiency should govern approaches to covering the cost of training or of facilitating the purchase of environmentally sound technologies.
    
    
30. The limited research examining micro- and small-scale enterprise indicates that the environment, worker health and safety and profitability are often jeopardized by poor workplace environmental health and safety standards.
    
    
31. The primary environmental health and safety concerns are:
    
    • the constant threat to workers from the presence of hazardous substances;
    • dangerous working conditions and unsafe work practices;
    • the inadequate use, or non-use, of protective equipment;
    • inappropriate work site location;
    • the lack of health facilities such as first aid clinics and proper sanitation services;
    • deficient information;
    • the low priority given by entrepreneurs and workers to problems;
    • diminished productivity due to sickness and injury.
    
    
    
    
32. It is widely recognized that chemicals play an important and productive role in many areas of urban and rural economic activity. However, the use of chemicals and pesticides carries enormous risks and responsibilities that are not always fully appreciated. The concern is not so much with the chemicals, but rather with how they are handled, stored, transported and used. Each year, there are hundreds of thousands of mishaps related to chemical use in the workplace that result in injury and death.
    
    
33. Before hazardous substances enter the informal sector, there may be reasonable controls in place to ensure their safe use. However, the regulation and enforcement of chemical use is non-existent in the informal sector.
    
    
34. Even in the absence of reliable statistics, it is generally agreed that the incidence of chemical poisoning is highest in agriculture, meaning that the rural entrepreneur is typically working in the most hazardous context.
    
    
35. There is clearly a significant absence of leadership in promoting a healthy working environment. Workers and entrepreneurs are being denied basic rights guaranteed to them under international conventions such as the Chemicals Convention 1990 (No. 170) and the Industrial Accidents Conventions 1993 (No. 174).
    
    
36. Environmental health and safety planning for micro-enterprises will be made easier if undertaken within a planning framework. The overall emphasis of this framework should be to devise simple interventions that will prevent, rather than control, accidents and other mishaps.
    
    
37. MFIs can benefit from a worldwide interest in occupational health and safety and chemical research. There is an enormous amount of information and a large number of institutional sources of information available to MFIs.
    
    
38. Given the enormous variety in micro-enterprise activity, it is impossible to provide environmental guidelines for every endeavour. Chapter five presents environmental guidelines for food processing, aquaculture, poultry and livestock, urban-based micro-enterprises, and general environmental health and safety guidelines applicable to a wide range of micro-enterprises.
    
    
39. In many cases, it will be necessary and more constructive for MFIs to develop their own environmental guidelines. Such guidelines would better reflect local circumstances and the scale of micro-enterprises.
    
    
40. Environmental problems can be turned into opportunities to diversify the economic base of the micro-enterprise sector. The necessary transformation of both urban and rural environments can be accelerated through more environmentally centred, small-scale enterprise activity.
    
    
41. For many years, environmentally based economic activity has been one of the few bright spots in the stagnating economies of the industrial world. The Canadian environmental industry, for example, has been growing at an annual rate of 10 percent, well ahead of the rest of the economy.
    
    
42. The development of greener markets by micro-enterprises in the developing world will share some of the characteristics of Western environmental industries. This includes the development of new markets and technologies, the provision of environmental goods and services, the promotion of the refinement of existing production processes and techniques, and the development and use of new and more efficient energy sources.
    

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