Bodnar Olena, PhD (Economics), Assistant Professor of the Department of Finance, Banking and Insurance, Mykolayiv National Agrarian University, Mykolayiv, Ukraine

ORCID ID: 0000-0002-0152-4290
e-mail: bodnarolena1606@gmail.com

Green microfinance in Europe: regulatory trends and current practices

Abstract. Introduction. Climate change requires actions that must be directed at both mitigation and adaptation. Many sectors of the economy will feel the impact of this process, so they will need comprehensive measures to successfully conduct operational activities in new conditions. This generates great needs for financing, which in turn provides great opportunities for the MFIs.

Purpose. The main purpose of the academic paper is to study the peculiarities of regulation and practical application of “green” microfinancing in EU countries, which will contribute to faster adaptation of Ukraine to European requirements and practices in the field of green “microfinancing”.

Results. For European microfinance institutions (MFIs), which are in close contact with vulnerable groups and specialized in supporting them with financial and non-financial services, the integration of green practices and products into their business models is an opportunity to meet the needs of vulnerable populations by pursuing a triple bottom line (positive social & environmental impact and financial sustainability).

At the EU and global level, we are witnessing a growing societal and political interest in sustainability and climate change, which is expected to shape the microfinance sector’s activities.

The EU has accelerated the pace of the green transition in recent years with several regulatory developments, such as the Action Plan on Sustainable Growth, EU taxonomy, and European Green Deal. Bringing green finance to the forefront will have concrete impacts and provide opportunities for the development of the sector. Other initiatives that will soon impact MFIs include the adoption of new green standards by he inclusive finance sector (e.g., Green Index 3.0) or the introduction of an environmental clause in the European Code of Good Conduct for microcredit provision, which might have an effect on investor reporting requirements, as well as material opportunities available to MFIs.

Conclusions. The research conducted makes it possible to argue that in recent years the EU has accelerated the pace of the “green” transition with the help of several regulatory developments, such as the Sustainable Growth Action Plan, the EU Taxonomy and the European Green Deal. Bringing green finance to the fore will have concrete results and create opportunities for the sector to grow. Other initiatives that will soon affect MFIs include the adoption of new environmental standards in the inclusive financial sector (e.g. Green Index 3.0) or the introduction of an environmental clause in the European Code of Conduct for microcredit, which may affect investor reporting requirements as well as facilities available to MFIs.

Constant monitoring of the evolution of the initiatives summarized in the work is key to supporting the sector in preparing for the future stimulation of innovation and the use of financing opportunities in EU countries, as well as the introduction of green microfinancing in modern Ukrainian realities.

Keywords: climate change; microfinance; microcredit; European Green Deal; green taxonomy; green index; MFIs.

References:

1. European Commission (2023). Official web-site. Retrieved from : https://commission.europa.eu/index_en [in English].
2. Forcella, D, Benaglio, N, Vial, M., Realpe Carrillo, N. & Caiazzo, A. (2022). Green microfinance in Europe, first steps and forthcoming opportunities. Retrieved from : https://www.european-microfinance.org/publication/green-microfinance-europe-first-steps-and-forthcoming-opportunities [in English].
3. Halushkina, T., Mucina, L. & Potapenko, (2017). Ocnovni zacady vprovadzhennia modeli «zelenoi» ekonomiky v Ukraini : navchalnyi pocibnyk. [The main tasks of the implementation of the “green” economy model in Ukraine: a study guide]. Kyiv : Inctytut ekolohichnoho upravlinnia ta zbalancovanoho pryrodokoryctuvannia [in Ukrainian].
4. Dubko, A. (2022).Vprovadzhennia ta rozvytok zelenykh finansiv v Ukraini: yevrointehratsiinyi kontekst ta pravove pidgruntia. [Implementation and development of green finance in Ukraine: European integration context and legal basis]. Nove ukrainske pravo, 6, 1. Retrieved from : https://doi.org/10.51989/NUL.2022.6.1.15 [in Ukrainian].
5. Reznikova, N. (2021). Zeleni finansy yak tryher staloho rozvytku. [Green finance as a trigger for sustainable development]. Tsili staloho rozvytku: priorytety dlia Ukrainy : materialy Vseukrainskoi naukovo-praktychnoi konferentsii [Goals of sustainable development: priorities for Ukraine: materials of the All-Ukrainian Scientific and Practical Conference]. Natsionalnyi universytet kharchovykh tekhnolohii. 30–34 [in Ukrainian].
6. Skorokhod, I. &Horbach, L.M. (2019). Development of the “green” economy in the countries of the European Union. Vcheni zapysky TNU imeni V. I. Vernadskoho. Seriia : Ekonomika i upravlinnia. 30 (69), 2. 17-21 [in Ukrainian].
7. Totieva, E. (2022). Green taxonomy in Ukraine: report. UNDP. Kyiv, 114 [in Ukrainian].
8. European Commission (2017). The European Pillar of Social Rights in 20 principles. Retrieved from : //commission.europa.eu/strategy-and-policy/priorities-2019-2024/economy-works-people/jobs-growth-and-investment/european-pillar-social-rights/european-pillar-social-rights-20-principles_en [in English].
9. OECD/European Commission (2021). The Missing Entrepreneurs 2021: Policies for Inclusive Entrepreneurship and SelfEmployment, OECD Publishing, Paris, 327. https://doi.org/10.1787/71b7a9bb-en. [in English].
10. European Microcredit Whitepaper (2019). Retrieved from: https://www.european-microfinance.org/sites/default/files/activity/paragraph/file/paris_europlace_whitepaper_on_microfinance_july_2019.pdf [in English].
11. European Parliament (2021). Regulation (EU) 2021/1057 of the European Parliament and of the Council of 24 June 2021 establishing the European Social Fund Plus (ESF+) and repealing Regulation (EU)( No 1296/201). Official Journal of the European Union. Retrieved from : https://eur-lex.europa.eu/eli/reg/2021/1057/oj [in English].
12. Vandenberg, Paul (2009). Micro, small and medium-sized enterprises and the global economic crisis : impacts and policy responses; International Labour Office, Sustainable Enterprise Programme. Geneva : ILO, 2009. 46 p. Retrieved from : https://www.ilo.org/wcmsp5/groups/public/—ed_emp/—emp_ent/documents/publication/wcms_108413.pdf [in English].
13. Ruesta, C., &Benaglio, (2021). Commission Staff Working Paper “Microcredit for European small businesses”. 21 p. Retrieved from : https://www.european-microfinance.org/sites/default/files/document/file/mr_2021_FP.pdf [in English].
14. European Parliament (2021). Commission Delegated Regulation (EU) 2021/1078 of 14 April 2021 supplementing Regulation (EU) 2021/523 of the European Parliament and of the Council by setting out the investment guidelines for the InvestEU Fund. Official Journal of the European Union. Retrieved from http://data.europa.eu/eli/reg_del/2021/1078/oj [in English].
15. Pytkowska, (2020). Microfinance in Europe: Survey Report (2020 Edition): 143 MFIs from 29 European countries surveyed. Retrieved from : https://www.european-microfinance.org/publication/microfinance-europe-survey-report-2020-edition [in English].
16. UNEP (2023). Definition from the UN Environment Program. Retrieved from : https://www.unep.org/ru/programma-oon-po-okruzhayuschey-srede [in English]
17. The European Microfinance Platform (e-MFP). (2023).THE GREEN 3.0: MAINSTREAMING GREEN INCLUSIVE FINANCE. Retrieved from https://www.e-mfp.eu/green-index [in English].
18. Hedera (2023).The Green Index 3.0 Digital Solution. Retrieved from https://hedera.online/gicsf_ag_tools/green-index-digital.html [in English].
19. Adie (2023). Official web-site. Retrieved from : https://www.adie.org [in French].
20. FONDI BESA SH.A. (2023). Official web-site. Retrieved from : https://fondibesa.com/ [in English].
21. Agro & Social Fund (2023). Official web-site. Retrieved from  : https://asf.al/en/ [in English].
22. MI-BOSPO (2023). Official web-site. Retrieved from : https://www.mi-bospo.org [in Bosnian].
23. Partner (2023). Official web-site. Retrieved from  : https://www.partner.ba [in Bosnian].