Promoting green microfinance products in Peru

(c) Willian Justen de Vasconcellos
(c) Willian Justen de Vasconcellos

The Federation of Municipal Savings and Credit Banks (FEPCMAC) of Peru, with the technical support of BIOFIN, has developed a new green microfinance product called “BioCredito” which aims to promote sustainable business practices that help protect the environment and biodiversity.

This is the first finance instrument focusing on promoting sustainable agricultural, livestock, fishing, and industrial production systems, while at the same time protecting biodiversity and helping to mitigate and adapt to the impacts of climate. It is part of FEPCMAC’s Environmental Credit Policy, which aims to incorporate business practices that benefit both companies and the environment.

“BioCredito” is a financial product that companies can tap into to unlock funds to finance technologies and equipment and sustainable production systems that both reduce harm to biodiversity and help restore it.

“We welcome the efforts and leadership of the Peruvian Ministry of Environment and the Peruvian Federation of Municipal Savings and Credit Banks to create innovative financial products that benefit nature as well as people’s livelihoods,” said Xavier Gordillo, National Coordinator, BIOFIN Peru.

A joint effort

The Ministry of Environment, the FEPCMAC, the Bank Association (ASBANC) and the Microfinance Association (ASOMIF) signed the green protocol for the Peruvian financial system in 2020. This aims to further the green economy, support financial institutions in creating new lines of business to finance renewable efficiency projects and impact investment for biodiversity conservation.

In parallel, the FEPCMAC and UNDP signed a memorandum of understanding to promote and strengthen the participation of Municipal Saving and Credit Banks (CMACs) in the implementation of the 2030 Agenda and the SDGs. One of the opportunities is to develop financial instruments that facilitate and extend the participation of the microfinance sector in the implementation and monitoring of the SDGs.

Thus, in October 2020, with the technical support of BIOFIN Peru, the FEPCMAC developed a new set of guidelines, incorporating biodiversity conservation in the sectors of agriculture, livestock and fishing. Currently, CMACs have approximately USD$364 million of existing credits in agriculture.

The CMACs recognizes the importance of working with different stakeholders to redefine business strategies and incorporate environmental considerations in the work of small and medium sized enterprises, over 60 per cent of which are covered by CMACs, especially during a time of economic recovery after the pandemic.

It is expected that later in the year, FEPCMAC will officially launch “BioCredito”, as this mechanism is part of a wider strategy by FEPCMAC to spur the transition to a sustainable future and will join other financial products like “Ecoahorro” developed to reduce greenhouse gas emissions by promoting the use of clean technologies and renewable energy for their customers.