Latest news with #DFIs
Barnama
6 days ago
- Business
- Barnama
SME Bank And BSN Forge Strategic Partnership To Spark Innovative Growth For Malaysian Entrepreneurs
KUALA LUMPUR, June 16 (Bernama) -- Small Medium Enterprise Development Bank Malaysia Berhad ('SME Bank') and Bank Simpanan Nasional ('BSN') have entered a strategic partnership through a Memorandum of Understanding ('MoU') to empower Malaysia's homegrown entrepreneurs. Aligned with the MADANI economic framework and the National Entrepreneurship Framework ('NEF'), this collaboration aims to catapult the growth of entrepreneurs through improved financial access, capacity building and digital enablement—reinforcing the role of Development Financial Institutions ('DFIs') in nation-building. Datuk Dr Mohammad Hardee Ibrahim, Acting Group President/Chief Executive Officer of SME Bank, said 'Reaffirming our developmental mandate, we are committed to fostering inclusive and sustainable national growth by forging strategic partnerships that enhance access for SMEs to embrace innovative digital solutions. Central to this collaboration, BSN's extensive pool of microfinance customers can leverage SME Bank's robust suite of digital tools tailored for MSME development. In particular, is through our ScoreXcess, a one-stop business financing application portal for small and micro financing operated by our capacity building and training arm – Centre for Entrepreneur Development and Research ('CEDAR'). By leveraging our combined expertise, this partnership signifies a strategic collaboration between two DFIs, reflecting our shared commitment to accelerate entrepreneurial growth and deliver tailored support that addresses the dynamic needs of today.'
Business Times
05-06-2025
- Business
- Business Times
Is blended finance the panacea for addressing sustainability issues in developing Asia?
BLENDED finance has been widely championed as a key pathway to decarbonising developing Asian countries, not least among policymakers in the region. However it has been noted of late that this innovative avenue of financing has 'fallen short of its promise'. Over the past 15 years, annual volumes of blended finance have been stagnant at around US$15 billion, with only 38 per cent sourced from private financing. Given the projected need of around US$9 trillion by 2030 for climate finance alone, the concern raised is not unfounded, as achieving this lofty target needs significant involvement from private financiers. Convergence, the global network for blended finance, defines the approach as 'the use of catalytic capital from public and philanthropic sources to increase private-sector investment in sustainable development'. The Organisation for Economic Co-operation and Development sees it as 'the strategic use of development finance to mobilise additional finance towards sustainable development in developing countries', due to the challenges in attracting private capital as the risk premium is usually too high, particularly for longer-term projects. Hence, entities such as development financial institutions (DFIs) and philanthropies are crucial to provide the initial cushion needed for private-capital participation. However, as the International Finance Corporation notes, it is crucial to ensure that the development finance provided uses the least amount of concessional funds necessary to mobilise private resources. This is in line with Principle 2 of the DFI blended finance principles, that the concessional finance should act as only a catalyst to help develop the market. This has been borne out in practice, where around US$2.5 billion of concessional capital helped finance more than US$13 billion of project costs, according to a March 2023 update by a group of DFIs. However, the promise of scale has yet to be borne out, with no significant dent as yet on the global needs for sustainable finance, and, in particular, climate finance. That would require active involvement with institutional investors, such as sovereign wealth funds, global insurance entities, asset managers, pension funds and private equity and credit funds, that invest on behalf of their clients. They manage over US$70 trillion of investable assets, and are hence the most relevant segment for private-sector mobilisation. A NEWSLETTER FOR YOU Friday, 12.30 pm ESG Insights An exclusive weekly report on the latest environmental, social and governance issues. Sign Up Sign Up An important requirement is a rapid improvement in the financial markets infrastructure of developing countries. Second, there is a need to design portfolio investment structures instead of lending at individual project levels, so that the investments are meaningful. Finally, to ensure that the capital flow is sustainable and repeatable, it is critical to set up credible monitoring and verification mechanisms that ensure the integrity of the underlying projects. Let us look at these requirements in detail. The financial markets in developing countries have become increasingly aligned to international standards over the last two decades. The 1997 Asian financial crisis as well as the 2008 global financial crisis highlighted the need for robust market infrastructure. To encourage capital flows, regulators have taken a more pragmatic view on foreign exchange and fixed-income markets. Derivative instruments such as non-deliverable forwards, which were previously anathema to many central banks, are now being embraced as efficient hedging mechanisms. Government bond markets have also deepened with more offshore participants, following their inclusion in global bond indices. However, local currency bond markets in most developing countries are still limited to a few large issuers, and secondary market liquidity is a challenge. In addition, close-out netting regulations have still not been fully implemented in a number of Asian countries, though surveys indicate that this is an important tool to manage credit risk exposure and increase liquidity. DFIs play a key role in bringing about these market reforms through their capacity-building and technical assistance programmes with the various governments and central banks. These reforms, if carried out, will increase confidence in the institutional investor community to commit significant long-term capital. However, they are less likely to invest in standalone projects, as that is usually the domain of banking entities in the region. This creates a role for financial intermediaries that can structure customised portfolio investments. The European Banking Federation has created a securitisation framework which can be replicated as a best practice in Asia. The intermediaries can embed hedging mechanisms to mitigate foreign exchange and interest-rate risks which may not be palatable to investors. These structures provide investors with their required level of risk participation, while simultaneously de-risking the balance sheets of regional and local banks and freeing up capital. Blended finance plays a key role here as philanthropies and DFIs can be the investors in the riskiest parts of these structures. In addition, a number of taxonomies have been developed in the region, such as the Singapore-Asia Taxonomy for Sustainable Finance and the Asean Taxonomy, which can be used to evaluate the projects in the portfolio to ensure that the proceeds are being used for sustainable purposes. Greenwashing has been one of the key impediments to developing scale in sustainable finance. Hence at a firm level, it is important for borrowers to determine key performance indicators (KPIs) and ensure their independent monitoring. While large corporations in the region have extensive resources to design appropriate KPIs and engage external assurance firms to independently verify their performance, particularly around Scope 1, 2 or 3 emissions, it is much harder for small and medium-sized enterprises to do the same. Hence third-party advisory firms, which help companies conduct assessments and set relevant targets, are growing in importance. Some organisations, such as LowCarbonSG from Singapore, are also developing digital tools that help companies measure their emissions and thus monitor their performance. Scaling up these resources across the region will also help lenders, particularly local and regional banks, to significantly grow their sustainability-linked lending portfolios, and correspondingly create more assets that can be securitised to achieve the scale needed for interest from institutional investors. The benefits of blended finance have been well documented, but the critique around scale cannot be ignored. While the participation of DFIs and philanthropies is indeed critical to ensure viability of many projects, these efforts must translate to meaningful impact on the environment in order to achieve the Paris Agreement goals. As Asia has seen a sharp uptick in extreme weather events and their consequences, the region's economies must come together and create an enabling environment to attract the institutional investments that can make a difference. The writer is a financial sector professional who has worked in Singapore, Hong Kong and India. He has a keen interest in following current trends in sustainable finance.
Hindustan Times
05-06-2025
- Business
- Hindustan Times
Time to rethink capital for sustainability
India's emergence as the world's fourth-largest economy reflects strong domestic demand and a rapidly growing entrepreneurial landscape. However, this growth is occurring against a backdrop of mounting environmental pressures. Air pollution levels in major cities routinely exceed safe limits, over 3,500 landfills dot urban India (CPCB, 2022), and increasingly erratic climate events threaten food and water security. The need to transition to a more resource-efficient, low-carbon economy is no longer a matter of debate, but of urgency. Tech-led innovation will be central to India's circular transition. From alternative materials and clean manufacturing to waste-to-value solutions, climate-tech solutions offer scalable pathways to decarbonise industries and strengthen climate resilience. However, many of these innovations do not conform to conventional investment frameworks. Traditional ROI models prioritise near-term financial returns and proven markets. In contrast, climate-tech ventures often require longer gestation periods, operate in nascent ecosystems, and deliver multi-dimensional returns--economic, environmental and social. To bridge the gap between innovation and implementation, India needs more catalytic capital; funding that is flexible, risk-tolerant, and impact-oriented. This is especially critical for early-stage climate-tech enterprises that operate in complex, unstructured markets. Consider Brisil Technologies, which upcycles rice husk ash, an agri-waste by-product known for exacerbating PM levels into high-purity green silica for use in rubber and paints. Or altM, which converts agricultural residue into renewable feedstock for chemical manufacturing, replacing the use of petrochemicals. Another case in point is Alt Carbon, whose enhanced rock weathering solution addresses the need to permanently remove atmospheric carbon. While the markets that these innovations operate in are still maturing, the long-term environmental value is significant. These are compelling business models that solve for national priorities while representing the frontier of India's circular economy, and investors backing such ventures must be prepared for non-linear growth trajectories and long-term capital commitment. Beyond just venture capital, blended finance models, milestone-based grants, and anchor investments from development finance institutions (DFIs) can help unlock scale. To accelerate India's circular economy transition, capital allocation must evolve along five key lines: India's path to net-zero by 2070 will require more than technology; it will require an investment architecture that recognises and rewards circular, regenerative models. The circular economy is not just an environmental imperative, it is an economic one. Bringing circularity into the mainstream isn't just about cutting emissions or reducing waste, it's about reshaping India's growth trajectory. According to the MoEFCC, a circular economy could unlock a market opportunity exceeding $2 trillion by 2050 and create ~10 million additional jobs. This article is authored by Alankrita Khera, director, and Sruthi Shanmugam, lead, ACT For Environment.
Business Recorder
28-05-2025
- Business
- Business Recorder
Aurangzeb for financing facilities to small farmers in Pakistan
ISLAMABAD: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb chaired a key meeting at the Finance Division on Tuesday to review the progress and receive an update from the Task Force on un-collateralised formal credit to smallholding farmers. The meeting brought together senior representatives from Pakistan's financial sector, including commercial banks, development finance institutions (DFIs), regulators, and subject matter experts from the development sector who constitute the core of the Task Force. It focused on the recommendations presented as part of the National Subsistence Farmers Support Initiative, aimed at unlocking un-collateralised financing for small-scale farmers through innovative, technology-based solutions. Senate Functional Committee meets: SBP, NBP present various plans to promote agri, aiding farmers The minister was briefed that these recommendations were developed following an in-depth diagnostic of the practical and systemic challenges faced by smallholder tenant farmers, with the objective of proposing a sustainable, scalable solution to support their inclusion in the formal financial system. The initiative seeks to revitalise Pakistan's rural economy and strengthen food security by enabling smallholders to access credit without traditional collateral barriers. The minister was also updated on proposals to support farmers through a holistic approach promoting sustainable agriculture and rural uplift, anchored in a technology-driven framework. The proposed scheme would employ an end-to-end digital process to ensure transparency, efficiency, and a seamless customer experience. Designed as a federal programme with nationwide coverage, the initiative aims to align provincial and national efforts to boost agricultural productivity, enhance food security, and contribute meaningfully to GDP growth through inclusive agri-development. A revised scorecard was presented by the Task Force with a greater emphasis on agronomic factors— raising the weightage of agronomy from 40 to 60 percent— while maintaining a 40 percent weight on financial indicators, thereby rebalancing priorities to better reflect the realities of smallholder farming. The prototype scheme, developed by the Ministry of Finance's Task Force on Access to Finance, calls for a multi-bank and microfinance institution (MFI) delivery model implemented through a unified methodology, ensuring wide outreach and operational standardisation across financial institutions. Senator Muhammad Aurangzeb welcomed the recommendations and emphasised the importance of making the entire process time-bound and action-oriented to achieve lasting impact. He also highlighted the critical need to develop a parallel, tech-supported model for the dairy and livestock segment, recognising that most smallholder farmers maintain herds but face difficulties in securing financing for livestock acquisition, maintenance, and dairy product marketing. Noting the dual economic and nutritional value of dairy for the rural population, the minister urged the Task Force to integrate crops and livestock under a unified financial framework. He stressed that the approach must keep the client experience at the centre, prioritising ease, inclusivity, and accessibility through a robust digital journey that delivers benefits across the agricultural landscape. Copyright Business Recorder, 2025
Business Recorder
28-05-2025
- Business
- Business Recorder
Aurangzeb seeks roadmap for transition to a digital economy
ISLAMABAD: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb chaired a high-level meeting on Tuesday at the Finance Division to discuss a host of measures for advancing Pakistan's transition to a digital and less cash-dependent economy. The meeting brought together senior representatives from Pakistan's financial sector, including commercial banks, development finance institutions (DFIs), regulators, and investment experts who form the core of the Committee established by the minister to craft forward-looking recommendations to support Pakistan's transition towards a digital and less cash-dependent economy. Participants engaged in a comprehensive discussion on a series of key proposals aimed at fostering greater adoption of digital payments across the country. The group reached consensus on a range of measures intended to expand access to digital financial services, encourage the use of digital transactions, and reduce reliance on cash in everyday economic activity. Among the core areas of agreement was the need to ensure that digital payment options are widely available and accessible across various sectors, including retail, services, and public sector transactions. The participants supported steps that would encourage broad-based interoperability, leveraging Raast instant payments system in particular, leading to improved consumer choice in using digital payments platforms. It was also agreed that creating a more level playing field between cash and digital transactions is essential, and that incentive structures should be rebalanced to make digital payments more attractive and cost-effective for both consumers and businesses. The importance of improving cost structures related to digital transaction infrastructure, including merchant acquisition and service provision, was highlighted as a priority to enable wider outreach, especially for small merchants and underserved communities. Finance Minister Senator Muhammad Aurangzeb welcomed the Committee's recommendations and emphasised that digitalisation is central to Pakistan's economic modernisation agenda. He noted that increasing the footprint of digital payments will significantly enhance financial transparency, promote inclusion, and improve efficiency in both public and private sector operations. The Minister stressed that moving toward a cashless economy is not simply a policy aspiration, but a practical necessity for long-term fiscal resilience, competitiveness, and inclusive growth. 'Digitalization is the foundation of a modern financial system. We must move with urgency and coordination to create a payments environment that is inclusive, interoperable, and focused on ease of use for every Pakistani citizen.' He also underscored the importance of leveraging technology to simplify financial access for individuals and businesses while ensuring policy alignment across stakeholders. The meeting concluded with a directive from the finance minister for the committee to prepare a detailed and time-bound roadmap for implementation of these initiatives, to be submitted to the Finance Division for further action and policy consideration. Copyright Business Recorder, 2025
