Work Plan
The Environmental Colours of Microfinance
3. Environmental Management Practises for Microcredit Programmes and Different sectors of Micro-enterprise Activity

Given the enormous variety in micro-enterprise activity, it is impossible to provide environmental guidelines for every endeavour. This setion 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. These guidelines are intended to provide precise direction on the subjects covered as well as a general sense of what all environmental guidelines should focus on. In addition, it provides ideas on how MFIs can prepare their own environmental guidelines. We begin by looking at environmental guidelines at the programming level.

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A. The Practice of Environmental Assessment

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 a project planning and management tool which can be used in creative ways to enhance project performance as well as to help accomplish a variety of environmental, social and economic objectives. Good EA teaches that a project is to be understood from the larger perspective of the long-term well-being of the community and the environment.

EA is used from the beginning to the end of a project's design and implementation as a control against any harmful consequences of a project. EA can be employed to compensate for shortcomings in the project planning process such as a lack of consultation with a local community (Pallen 1996).

Historically, EA has been used to evaluate the environmental impact of larger-scale economic and infrastructure projects. Hence, many of the standard practices associated with EA work for larger projects and are not transferable to smaller-scale activity. The need to control costs, and other special circumstances related to the scale of projects like micro-enterprises, requires that a new approach to EA be developed. Elements that come into play in creating this new approach to EA include transferring existing analytic and community development skills to the EA process, relying on communities and project beneficiaries to provide expertise and guidance, and collaborating with other groups as a means to build common EA capacity and share costs (Pallen 1996).

The use of EA to evaluate MFI activity presents special circumstances, the most obvious being the large number of loans that are made for small amounts to a wide array of economic activity. Some of the projects supported by MFIs, such as agriculture and aquaculture based enterprises and small-scale industry can be individually assessed. Activities that involve a high number of loans to a large number of clients such as small poultry operations cannot be assessed on an individual basis. In such cases, a sector or community level analysis would be more appropriate. What is the socio-economic and environmental impact on a community when you introduce a thousand small-scale poultry operations? How can a community prepare for the eventual success of a livestock project that will create related industries such as tanneries, meat processing and animal slaughterhouses? These are the sorts of questions that can be answered from a sector or community level perspective.

EA involves finding tradeoffs between environmental and economic and social objectives and identifying measures to mitigate environmental impacts. In enterprise there is some environmental impact and the employment gains are relatively significant. There is also the possibility to mitigate environmental damages through protective measures at some additional cost to the entrepreneur. In the case of enterprise the environmental impacts are significant and cannot be mitigated. The employment gains are minimal. These are the sorts of scenarios that MFIs will learn to evaluate through EA.

EA is not a perfect tool. It cannot correct every imperfection in the planning process. All the same, it offers enormous potential to MFIs to generate environmental and other forms of information, strengthen communication mechanisms between MFIs and clients, and foster innovation.

Additional information on environmental assessment tools

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B. Environmental Guidelines at the Programming level

MFIs have the potential to influence the environmental impact of their lending activities both at the project and programming level. Successful environmental management at the programming level is based on making effective use of information regarding local environmental, social and economic conditions and the insight generated from the experiences of specific micro-enterprises. Local information regarding resource depletion, occupational health and safety matters, air and water pollution, infrastructure problems and population density can help establish a general planning framework. The objectives for MFIs at the programming level are the following:

  1. To understand and control the aggregate environmental impact of different types of micro-enterprise.
  2. To better understand and control the collective environmental impact a group of micro-enterprises can have on a locality.
  3. To develop effective mechanisms for providing micro-entrepreneurs with useful information and general guidance on how to improve the environmental performance of their enterprises.

The following are general ideas to guide MFIs in pursuing these objectives:

  • There are natural environmental limits to how much economic activity, or types of economic activity that a locality can support. Local water sources may be sufficient to absorb the wastewater of two micro textile operations but not five. Understand resource factors such as the availability of land and forest resources, water and sanitation services, quality of infrastructure, living density and space and the limits they place on economic activity.
  • In order to avoid the overuse of a resource or an unacceptable level of pollution in a locality, promote a mixture, and, if possible, complementary micro-enterprise activities that require different types of resources and/or can reuse each otherswaste.
  • In rural areas, where the collective environmental impact of micro-enterprises is significant, regenerative activities such as reforestation can be promoted to refurbish a resource.
  • Encourage activity that is better suited to the resource base.
  • At the sector level, work with micro-entrepreneurs and their associations to ensure that environmental health and safety standards are respected and more environmentally-benign technologies and production processes are promoted. As more is learned about environmentally-sound procedures, promote their use and implementation on a collective basis. A simple idea--such as promoting a vegetable- or flower-based colouring dye, instead of a chemical one, amongst artisans--can have a very positive impact.
  • To the greatest extent possible, anticipate dilemmas that may arise from promoting certain types of economic activity. This may include conflict over land use, overcrowding, or other unforeseen occurrences. For example, a successful livestock initiative can lead to the creation of secondary industries such as tanneries and meat processing operations that are far more polluting than the original enterprise and can accelerate environmental problems.
  • In rural areas, ensure that MFI lending activities are not contributing to any unacceptable environmental impacts from activities such as the clearing of primary forests, wetlands or critical wildlife habitat, or the unsustainable intensification of agriculture.
  • Collaborate with local land, housing, health and public services authorities to improve services and standards in support of micro-enterprise activity.

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C. Food Processing

Small-scale food processing activities employ a wide variety of processes and technologies to support a diverse array of micro-enterprise activity. The environmental impacts can be many. The major concerns in this sector are air, water and noise pollution and the possibility that food processing may contribute to the unsustainable use of local resources such as farmland and forests.

Food processing activities such as corn milling can involve discharging wastewater, which may contain effluents, suspended and dissolved solids and other contaminants, into streams and rivers. If the water source is not large enough to absorb the discharge, the wastewater can be a pollutant. Cases where the wastewater cannot be discharged into nearby waters usually lead to the formation of stagnant pools of water. Such idle waters can be highly odorous while serving as breeding grounds for mosquitoes.

Dust particles produced through many micro food processing activities can lead to breathing problems. Equally worrisome are the high noise and vibration levels of food processing machinery. In addition, there are often many safety problems related to the electric driven equipment used in many food processing procedures. The risks come from exposed wires, motors overheating, and poorly-maintained equipment.

Raw materials used in micro food processing operations may be obtained through agricultural activity such as the conversion of forest land to agriculture or pesticide- intensive agriculture. Other food processing operations such as baking kilns can make intensive use of fuelwood. Such activities contribute to a rapid decrease in natural resources which, in turn, may lead to any number of social impacts such as the displacement of people. The following measures should provide guidance in minimising environmental impacts of food processing activities generally:


  • Understand the role of the micro-enterprise in the local economy and its importance to the community as a creator of employment.
  • Address any concerns community members have regarding the micro-enterprise.
  • Ensure that drinking water sources or other productive uses of local services and resources are not compromised by the introduction of the food processing activity.
  • To the greatest extent possible, use more efficient technologies and processes. Use preventive measures such as the reuse of wastewater. Explore the possibility of using more benign energy sources such as wind and solar energy.
  • In cases where wastewater cannot be eliminated, ensure that water sources are able to absorb effluent discharges.
  • Management plans should be in place for raw materials (e.g., wood, potable water, and fuel) and adequate storage facilities. In cases where the micro food processing operation will make intensive use of a local resource such as a plant, a forest or farmland, a regenerative activity such as a reforestation project should be considered.
  • Ensure that live parts of motors are not exposed, electrical switchboards and panels are properly, wired, maintained and grounded, and regulate the heat of machinery.
  • Although a use for most waste residue in food processing activity is usually found at the micro-enterprise level, there may be exceptions. Avoid burning waste as this contributes to air pollution. Ensure that any waste residue is used in some other productive activity such as making compost or providing feed to poultry or other animals.
  • Site the operation to minimise the impacts of noise, odours, and pollutants.
  • Design work space to improve efficiency and reduce risks.
  • Do not locate the operation where it threatens wildlife, green space or sensitive eco-systems.
  • Ensure that stagnant waters do not build up around the food processing operation.
  • Ensure that micro-entrepreneurs and workers are aware of health and safety risks. Establish a workplace safety strategy with micro-entrepreneurs and workers. Promote the use of masks, gloves, and ear plugs and ensure proper ventilation.
  • Site the operation for easy access to local health facilities.
Sources: Sobotie 1995; World Bank 1991b.

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D. Aquaculture

In developing countries, the need to create employment and increase food sources for a growing population have made aquaculture an attractive option. Fish farming fish culture and aquaculture inter-changeable terms, describe the practice of raising fish and shellfish in fresh, brackish or salt waters to be harvested for human consumption or sale.

In part because of a lack of proper aquaculture knowledge and techniques, this increase in aquaculture activity often involves practices harmful to the environment. What historically has been an environmentally benign endeavour with great potential to put household and human and animal waste to good use while providing a good source of food, is increasingly an environmentally troubled sector of micro-enterprise activity. The main environmental concerns are water pollution, improper disposal of waste matter such as blood and offal, the conversion of valuable wetlands such as mangroves over to fish farms, poor construction practices allowing escape of water that leads to soil erosion and damage through salinization, impacts on the wild gene pool, and the pollution of local water supplies. Increasingly, extremely toxic chemicals such as aldrin and dieldrin are being employed as poisons to ward off predators and competitor fish. The impact of chemical use can lead to the elimination of other species in the ecosystem. These poisons are also a direct threat to public health as they easily enter into the food chain.

Aquaculture ponds are used to serve other purposes such as bathing and clothes washing. This lowers pond water quality by altering pH and increasing phosphorous concentrations, and exposure to the high levels of fertilisers, poisons and lime can pose certain health risks to humans.

As the field of aquaculture continues to grow, new practices are being introduced, often in new settings with little understanding of the long-term environmental consequences of those practices. Fortunately, however, most of the adverse environmental impacts of present aquaculture micro-enterprises can be avoided:


  • Gather information on present aquaculture activities in the area where the proposed aquaculture project will be implemented. The experiences and successes of active aquaculture projects in managing environmental problems will provide great practical guidance
  • Develop a fish farming management plan with micro-entrepreneurs that takes into consideration such environmental factors as the appropriate fish stock to raise, ideal location, and the safe level of production given the size and character of the fish pond. Collaborate with micro-entrepreneurs to ensure the management plan is feasible and will be implemented.
  • Resolve all conflicts related to common property resource ownership that characterise many aquaculture operations and may jeopardise the operation.
  • Maintain the highest construction standards possible.
  • Use preventive management practices such as refiltering water, or limiting the impact of salt water effluent by diluting it in a large water bed.
  • Where dikes are used, build them high and large enough to prevent intrusion of unwanted species. Ensure that no surface water enters the pond without passing through a meshed screen to block any unwanted species.
  • Protect against soil erosion and stabilise plant life by integrating agriculture activity, such as planting vegetation on dykes, into aquaculture operations.
  • Use minimal doses of poison or, only when predators are found in the pond. Never use poison as a preventive measure. Explore other, non-toxic, alternatives such as lime.
  • If fertilisers are used to prepare the pond for stocking, employ an appropriate mixture of organic and inorganic fertilisers.
  • Explain health and safety risk to users and take preventive steps to avoid illness and injuries. Provide training on the safe use of fertiliser and pesticides.
  • Work with entrepreneurs to limit non-aquaculture activities in ponds.
Sources: Asian Development Bank 1991; Chicoine 1996; UNEP 1990; World Bank 1991b.

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E. Urban Micro-enterprises


Although pollution is not a worry, urban based micro-enterprises involved in non-manufacturing activities can have an impact on the environment. The main impact of this sector is encouragement of the slow decay of the urban landscape. Roadside restaurants, kiosks and small shops contribute to congestion, high noise levels, impede the circulation of traffic especially for pedestrians, encroach on green space or other spaces with aesthetic and functional appeal, can cause accidents and pose other health and safety risks. They also can contribute to the accelerated erosion of local infrastructure and services such as roads, and water and sanitation facilities. Such micro-enterprises may also be high and inefficient users of energy. To the extent that MFIs can influence matters, the following guidelines will be helpful:


The choice of location should be the one for which the fewest adverse environmental impacts are anticipated, taking into account current land-use, adjacent uses and inherited problems. In choosing a site ensure that:

  • Water and sanitation services are adequate to absorb the micro-enterprise and the micro-enterprise is located close to health facilities.
  • The micro-enterprise is not located close to tanneries, electroplating operations or other highly polluting micro-enterprises.
  • The enterprise is not contributing to congestion, displacement of people, obstruction of sidewalks or other pathways, or road traffic.
  • The enterprise does not create any other safety hazards.

The micro-enterprise should be located on land that:

  • is a sufficient distance from sensitive land-uses such as housing and agriculture.
  • is unsuited or poorly-suited for housing or agriculture, or is of little aesthetic or cultural importance, or is not valued as green space.
  • take steps to ensure that the most efficient and non-polluting sources of energy are used. Given improvements in technology and price, explore with micro-entrepreneurs on both an individual and collective basis the possibility of using renewable energy sources such as wind and solar energy or more benign sources of conventional energy such as propane and natural gas.
  • ensure minimal construction and operational impact of the facilities on the environment.
  • consult the local population regarding any disagreements there may be regarding the siting, or activities, of the new micro-enterprise.


The guidelines for non-manufacturing micro-enterprise are also applicable to micro-enterprises involved in production. In addition, consider the following:

  • Locate the micro-enterprise as close as possible to waste treatment facilities. Although facilities to accommodate the hazardous waste of micro-enterprise are not widespread in developing countries, some do exist.
  • Determine how the workplace can be rearranged to eliminate resource and energy inefficiencies.
  • Explore all available avenues to recycle waste.
  • Use non-polluting raw materials such as natural dyes or other organic raw materials.
  • Use low-emission production methods.
  • In case of highly pollutant activities consider whether an alternative processes can be used to meet the productive demand.
  • Site the operation as close to health facilities as possible.
  • Take into account the activities of other micro-enterprises in the vicinity. Will locating the micro-enterprise in the selected spot further aggravate environmental problems to an unbearable point? Will the presence of the new micro-enterprise disrupt the existing cohesion amongst established enterprises?

Sources: Director General for Development 1991; German Federal Ministry for Economic Cooperation and Development 1995; Knausenberger, et al. 1996.

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F. Livestock and Poultry

Livestock and poultry activity is the best example of why one should be concerned about the collective impact of a large number of small projects. Yet, there remain many ways to minimise the environmental impact of individual livestock and poultry projects. Poorly managed poultry and livestock can contribute to soil erosion, the destruction of vegetation, and the destruction of forest by stripping trees of bark and destroying tree seedlings. Rice fields and other crops can be destroyed by stray livestock. Drinking water sources can be contaminated by loose animals. In general, animal dung can be both a nuisance and a health hazard. Intensive livestock production that relies on pesticides and antibiotics carries health risks to workers and, as the pesticides and antibiotics enter the food chain, to local wildlife and human populations.


  • Understand the role of poultry and livestock in the community. Determine why these species are valued. Gather information on their feeding preferences and grazing habits and watering habits.
  • Ensure an adequate food and water supply exists.
  • Consider developing new water sources to take pressure off existing ones.
  • Ensure that this does not have its own environmental impacts such as altering grazing habits.
  • Use simple measures to protect water sources and, if necessary, encourage the planting of local species of forage crops preferred by the animals.
  • Ensure that animal grazing does not interfere with or destroy other productive activities such as gardens or crops.
  • Biological diversity in an agricultural system means a healthy system for the environment and animals alike. Promote the raising of a mixture of livestock types. Variations in livestock eating habits and food preferences can reduce the pressure on local vegetation. At the same time, diversify the plant base to provide a more varied grazing selection to all animals.
  • Rotate grazing locations as a means to prevent overgrazing and disease buildup.
  • Do not introduce new forms of livestock into an area without being certain the local environment can support it.
  • Avoid livestock raising techniques that involve the heavy use of insecticides and antibiotics.
  • Consider improving the productivity of grazing lands by using waste products from other agricultural activities as fertiliser and compost.
  • Understand how animal dung is used traditionally. Can health problems in the area be traced to these practices? Will alternative methods create health problems or aid in eliminating health problems? Are these new methods culturally acceptable?
  • Trees can be intercropped with other crops such as grains and can be selected for their yield of food and non-food products, such as fruit, nuts, fibres, animal forage and fuel. Animals can harvest the food directly from the trees or the tree clippings, and fruit can be brought to animals in adjacent pastures or lots.
  • Plan for seasonal variance in the availability of water and food sources.
  • Provide information to beneficiaries on the nutrient requirements of individual animals.
  • Determine with loan beneficiaries how much time they are willing to commit to these livestock management activities and plan accordingly.
Sources: Director General for Development 1991; Knausenberger 1996; Volunteers in Technical Assistance 1986; World Bank 1991b.

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G. General Environmental Health and Safety Guidelines

The following are environmental health and safety guidelines that can be followed, to varying extent, by a wide variety of micro-enterprises. As noted in the previous chapter, all environmental health and safety guidelines should be developed with the direct input of micro-entrepreneurs and their employees.

  • Assess any health and safety risks to workers as a result of dust, fumes, odours, or pollutants.
  • Rearrange work space to reduce risks and facilitate order and cleanliness and improve efficiency.
  • Impress upon everyone the importance of keeping a work area clean, remove all rubbish from the work space and situate receptacles for waste and debris in convenient locations.
  • Ensure proper ventilation of indoor operations.
  • Ban smoking and drinking.
  • Reduce length of work periods to eliminate accidents caused by fatigue and health risks and annoyances caused by excessive noise and vibration of machinery; provide for rest breaks.
  • Install proper lighting.
  • Wash thoroughly after handling injurious or poisonous substances and wash before eating, drinking, smoking or using the toilet.
  • Never use gasoline for cleaning purposes.
  • Designate locations for handling and storage of effluents and waste materials.
  • Set aside special areas for storage of raw materials, finished products, tools and accessories.
  • Use pans and screens to prevent deposits of oil, liquid wastes or water on the surrounding floors.
  • Many injuries are caused by differences in the physical makeup of workers. Account for people of different heights, strengths, and ability to handle mental stress
  • Ensure the use of proper protective equipment especially when toxic substances are involved.
  • Keep hazardous materials in plastic containers with tight fitting lids (preferably the original). If the product is in a rusting or metal or breakable container, the container should be placed within a larger plastic container with a tight fitting lid. Clearly label the outside container with the contents and date. This label should be in a language or use signs understandable to people in close proximity to the workplace.
  • Store flammable products away from all sources of heat or ignition. Remember heat sources include electrical appliances, engines and motors.
  • Store toxic substances out of the reach of children and animals. If possible, place them in a separate locked cabinet or other secure structure.
  • In home-based enterprises and farming communities, keep toxic materials away from food supplies.
  • Keep hazardous products away from wells, springs and other water sites.
  • Never throw away, or bury, wastes in or around abandoned wells.
  • To prepare for possible poisoning, keep clean water nearby and tell co-workers what sort of pesticide you are using and where the label is.
  • If pesticides are inhaled, get workers to fresh air immediately.
  • Avoid using newspapers and other flammable material for packing.
Sources: ILO 1994a; ILO 1996; ILO 1997; Kogi, Phoon and Thurman 1989; Matchaba-Hove 1996; Ontario Crafts Council 1980; Stratz 1996.

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H. Developing Environmental Guidelines and Analytical Tools

In many cases, it will be necessary and more constructive for MFIs to develop their own environmental guidelines. Such guidelines will better reflect local circumstances and the scale of micro-enterprises. We once again underline the necessity to work with micro-entrepreneurs and community members to ensure that all environmental guidelines and analytical tools are properly adapted to local circumstances. In some cases, generic guidelines can be developed and shared amongst MFIs. The involvement of micro-entrepreneurs will ensure generic guidelines are relevant. To be effective, environmental guidelines developed by MFIs should concentrate, to varying degrees, on the following issues:

A: Project Setting
B: Design and operation
C: Key environmental impacts
D: Resource and energy efficiency questions
E: Relevant social and economic matters
F: Relevant policy and legal issues

Environmental guidelines should not be complex. The information obtained through the guidelines and the assessment process is meant to complement other forms of information gathered. It is important not to collect extensive social, economic and environmental data through laborious methods. In addition to slowing down the process, the data that emerges may be flawed, useless and misleading. The guidelines presented in this chapter are too elaborate for the assessment of a single activity. They are meant to cover a variety of scenarios. In many cases, information gathered through other project activities will provide details that normally would be covered through use of environmental guidelines.

After guidelines are developed, it is important to ensure that information is being collected and analysed properly. The most obvious and easy approach to doing this is to extend information gathering and analytic techniques used in other facets of MFI programming to cover the environment. If, for whatever reasons, these techniques are deemed inadequate, try to develop simple yet reliable instruments for assembling and analysing environmentally-related information.

Recent experiences in data gathering at the community level have demonstrated that relevant information can be assembled effectively through such techniques as semi-structured interviews, which are systematic yet flexible. Matrices, checklists, questionnaires and simple charts and graphs can be used to organise and interpret information. These are simple and effective tools. As Table 2 demonstrates, a matrix is a very adaptable planning and analysis tool that can be designed to analyse and differentiate amongst a wide variety of variables related to a project's impact. In this example, two potential sites are compared for suitability for a food processing operation. Each point on the matrix is assigned a value from +2 to -2. The matrix could be modified to look at the financial feasibility of the project or other environmental criteria.

Table 2: Food Processing Siting Decision Matrix
Food processing operation Impact on local resources Ability to ensure reuse of waste materials Proximity to housing settlements Availability and impact on water sources Proximity of health and safety facilities Score
Site 1
Site 2
Source: Centre for International Development, et al. 1989; Chambers and Conway, 1992; Pallen 1996b.

Plan 1

Plan 2

Plan 3

Plan 4

Plan 5

Plan 6

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Hari Srinivas - hsrinivas@gdrc.org
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