How does your proposed innovation leverage public intervention in catalyzing private SME finance?
This venture leverages public funding and the reputation of supporting partner organizations to fund the scheme’s startup costs whilst ensuring the credibility and wide media publicity that are critical to establish consumer confidence and awareness, and draw visitors to the lending website. The public role includes financing a revolving insurance fund to cover the risk to consumers who lend to SMEs that might default on implementing the business according to Franchise guidelines, which could lead to loss of carbon credits and thus compromise loan repayment.
What barriers does your proposed solution address?
Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs.
If you checked any of these barriers, describe how your solution addresses them
Lack of collateral and lack of financial capacity: SMEs in developing nations are often under-capitalized or lack assets to ensure the collateral necessary for obtaining (working capital) loans. The standardized franchise reduces SME business implementation risk, and this allows the Carbon Financier to guarantee future carbon revenue payment. This greatly reduces the need for SME collateral.
Lack of SME access to skills / knowledge / markets: by providing a standard franchised business model, SMEs are provided with proven systems, training, coaching, monitoring and support, and thus enabled to professionally implement carbon-credit generating businesses for which they currently lack the skills, understanding or capabilities.
The unavailability of financial products tailored to SME needs is addressed by providing working capital loans on favorable terms, since they are raised from hard currency, low-interest Western consumer markets that require relatively low interest payments and protected by a publicly funded insurance fund.