Projects to fight climate change are being designed all around the world. But only five percent of them can be financed with the current international funds available, which means resources have to be used more wisely. Microfinance could be one solution.

Source: Kristin Palitza, IPS News

Climate change is one of the greatest challenges to development that the world has ever faced.

According to the World Bank, mitigation of its effects in developing countries could cost 140 to 175 billion dollars per year by 2030, while adaptation costs are expected to reach between 75 and 100 billion dollars per year between 2010 and 2050.

“The low-income masses will be most affected by climate change in their daily lives. We need solutions for mainstreaming adaptation projects to also include these people,” said African Development Bank director for energy, environment and climate change development Hela Cheikhrouhou.

She spoke at the Climate Investment Funds (CIF) 2011 Partnership Forum, held from Jun. 24-25 in Cape Town, South Africa.

The CIF, established by the World Bank and regional multilateral development banks, provide funding to support developing countries’ climate change mitigation and adaptation efforts.

Even though more than a third of CIF money have so far gone to 15 African countries, few people in rural and poverty-stricken areas – who struggle most to access financing – have been able to benefit from the schemes, largely due to administrative barriers.

“We need to make sure that funds can be accessed by rural populations because there is urgency in making climate change projects happen on the ground,” said Victor Kabengele, project coordinator at the ministry of environment of the Democratic Republic of Congo (DRC).

He demanded less red tape and fewer conditions — otherwise including the poor in climate change projects would remain an empty promise. Without money, the best ideas are worth little, Kabengele pointed out: “Money is the name of the game. Access to microcredit is therefore crucial.”

But only a few microfinance projects have been launched to date that help Africa’s poor to invest in climate change projects. One of them is a results-based financing scheme run by the Global Partnership on Output-Based Aid (GPOBA).

This partnership among six agencies include the Australian government’s aid agency AusAID, the World Bank and its International Finance Corporation, the Swedish government’s development agency SIDA, Britain’s Department for International Development and the Netherlands’ Directorate-General of Development Cooperation.

GPOBA backs private financial institutions in communities where poor people are excluded from basic services because they cannot afford to pay the full cost of user fees, for example connection fees to energy-efficient electricity schemes.

A local bank would, in this case, receive a subsidy to make available microcredit to communities to help them purchase renewable energy systems for their homes.

“We want to increase access to basic services for the poor, such as infrastructure, technology, healthcare and education, that will help them deal with climate change,” explained GPOBA senior specialist Mustafa Hussain. READ MORE