Green is the new interest zone in the microfinance space. Several microfinance companies are going “Green,” aligning their financial services and products with the three Ps – People, Planet and Profit. They incentivize the disadvantaged groups with short-term loans for income generation through environmentally friendly practices. This unique arrangement, known as Green Microfinance, is sustainable, practical and profitable – a big plus for an impact investor. However, the benefits only come by if the choice of Green Microfinance is right. Here’s a checklist of factors to consider for a profitable Green Microfinance investment.

A viable plan:     

Your bottom line is to generate profits while advancing the cause of poverty elevation and ecology. Many microfinance institutions (MFIs) share your bottom line but only a select few have the plan to realize it. Conventionally, Green Microfinance focused on lending money for sustainable and cost-effective energy solutions, notably the solar. The focus has gradually shifted from “do not harm” strategies to the “positive impact” ones. Now, your job is to identify the viability of the strategies that a particular microfinance company follows. Since the MFC will be typically serving as a distributor, it’s advisable to determine the distribution model.  

Drive: 

Often, MFIs pilot green projects enthusiastically but cannot sustain it for long. The reasons can be non-feasibility of the project, lack of fundamental renewable energy infrastructure or the unwillingness on the MFI’s part to go through the grind. Many do not even bother to follow up on the project and continue with traditional lending activities. Successful green microfinance is all about the drive to work out solutions, invest in necessary resources, and stay in for the long haul. You are better off finding the top microfinance in India that can go the distance without loss of enthusiasm. That’s critical to safeguard the investment and achieve inclusive growth.  

Read the market: 

The alternative energy market is changing rapidly. Now the microfinance companies have stiff competition from utility companies offering end-to-end energy solutions – from distribution to financing. For instance, the green micro-financing project involves cross-selling and financing solar products. The utility companies are better equipped to deliver efficient and cost-effective solutions compared to a micro financer that’s doing it for just more than reputation dividends. The micro-financing model is threatened in this case, exposing investors to losses in the long run. So, stay abreast of market changes and base your investment decisions accordingly.