The Environmental Colours of Microfinance
Theory and Practice

Hari Srinivas
Continuing Research Series E-059. June 2015.

Microfinance and the Environment
Understanding the link between environment and microfinance

During much of the last three to four decades, two parallel developmental forces can be discerned: a growing awareness of the effects of human activity on the earth and its resources, and the realization of a need for decentralized and localized decision making system that empowers ordinary citizens to decide on aspects that affect their life. Microfinance's role in these processes is no doubt important as a supportive and facilitate resource. Its role can be understood from the point of view of its ability to directly and indirectly influence and enable community- sensitive actions, which in turn affect the environment. Microfinance's viability in removing environmental problems lie in three factors:

  • externalities of credit per se - the availability of the right quality and quantity of credit at the right time, generates several externalities.
  • enablement of very local/grassroots activity that are essentially 'people-centered'
  • adoption of a poverty-eradication focus with community organizing and development as its primary gateway.

What then, are the dimensions or colours of these actions?

The following five have been identified: (descriptions below contain short overviews of each colour with respect to the environment)

  1. Microfinance and community development
  2. Microfinance and poverty
  3. Microfinance and microenterprises
  4. Microfinance and women
  5. Microfinance and macrofinance
With the inherent multidisciplinarity of environmental issues, it has to be understood that overlap in the above dimensions is inevitable. The dimensions are explored in terms of its current problems and effects on the environment, the enablement that microfinance facilitates, and positive impact on the environment. Where available, examples of microfinance initiatives, are included. As with the Homepage itself, a focus on developing countries of Asia, Africa and Latin America is maintained.

Enabling the link between Microcredit and Environment
Guidelines for Micro Finance Institutions (MFIs)

Operationalizing the above issues is of critical importance to make the environment a valid reference point for microfinance practitioners. The attraction of environmental issues lie in bringing new ideas and resources, and the potential for new forms of partnership to the microcredit field. Environmental considerations/planning can make better microfinance programmes, a safer working environment for microenterpreneurs and new programming options for microfinance institutions.

In order to operationalize the above issues, a practical toolbox has been developed, and is supported with references to pilot projects, fact sheets, networking resources, and useful links. These cover -

  1. Promoting Workplace Safety: Environmental Health and Workplace Practises for Micro-Enterprises.
  2. Finding Economically Viable Solutions to Environmental Challenges.
  3. Environmental Management Practises for Microcredit Programmes and Different sectors of Micro-enterprise Activity.
  4. Community Development and Participatory Practises to Protect the Environment and Improve Micro Credit Programmes.
  5. Technological Innovation at the Micro-Enterprise Level
  6. Promoting Environmentally Based Micro-Enterprises.
Exploring Deeper ...
addtional resources on microfinance and the environment

The contents of this section is based on contributions, personal experiences, field notes and other sources. Its primary reference publication, where a source or author is not mentioned, is Pallen, Dean (1997), Environmental Sourcebook for Micro-Finance Institutions. Asia Branch, Canadian International Development Agency.
"Environmental Colours of Microfinance" is a joint collaborative effort of - Hari Srinivas -
Dean Pallen -

Hari Srinivas -
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