Microfinance and the Environment: Where Responsibility Meets Sustainability

Usually, business development and environmental health are talked about as being mutually exclusive entities. Stories of clear-cutting rainforest for soybeans and livestock or mountaintop removal mines in West Virginia certainly reflect a reality in which, too frequently, short-term profits spell the death of entire ecosystems. Of the world’s 1.3 people living in extreme poverty (less than $1.25 a day), 90% rely on forests for their livelihood. Although there is so much reliance on the bounty of the world’s forests, they are often cleared during times of famine or recession in order to keep families afloat. The sad truth is that in this instance, they do not want to clear their source of long-term income, but they often do not have another choice. This is where microfinance comes in. With the use of microloans and business education, two pillars of the microfinance process, loanees are provided a safety net that will protect them and their economic future in times of hardships.  

In conventional economic development, booms in the bottom line are usually accompanied by increased energy usage. In both micro and macro scales, there is almost always a deterioration of the environment in response to increased consumption levels. However, a new style of microloan called MicroEnergy credits is on the rise. The allowance acts as a carbon credit, which is a permit that allows a company a certain level of pollution. The credit is tradable and often is bundled with other MicroEnergy loans and sold to larger companies. The beauty of this concept is the fact that it monetizes the environment without extracting resources, incentivizing its protection and providing an extra source of income.

In addition, microfinance tends to have a ricochet effect in the communities that run microloan operations. If one family in town begins to become more prosperous, they will spend more money in their communities, buying more supplies for their business or simply just raising their standard of living. Either way, the prosperity of one translates into increased economic success for all those they interact with. In this instance, the rebounding success can uplift an entire community, allowing them to avoid any last-resort logging. Paired with a recycling loan pool that refills anytime the microloan is paid back, microfinance has the ability to catalyze the creation of a self-sustaining community.

In the same vein, the economic growth that comes with successful microloans propels loanees to create better and more efficient facilities. With the extra money, families may help to build reliable sources of clean water in areas where dysentery and cholera are rampant. In fact, in Haiti, half of all annual deaths are caused by waterborne illnesses. Readily available clean water, something most of us take for granted, brings a reduction in energy use as well. Clean water does not need to be boiled to be made potable, reducing wood and coal consumption. In addition, communities may also upgrade power grids to be much more efficient and much less wasteful. In fact, there are a variety of microfinance organizations that provide access to alternative energies in rural communities, severing a reliance on fossil fuels.   

However, upgrading equipment does not have to stop at utilities. Around the world, around a third of all produced food is wasted. In developing countries, the majority of those losses occur in storage and transportation, all before the crops can reach market. Better storage facilities and ease of access to markets can all but eliminate this blight. In fact, it is thought world hunger could be eliminated if food waste was.

The beauty of microfinance is that it allows people to help themselves. Microloans give a loanee the ability to better their surroundings, which often extends far beyond the individual. Empowering one person translates to the betterment of their circumstances, and often, their community at large.