A recent report from Kinara Capital reveals that while Indian micro, small, and medium enterprises (MSMEs) are eager to adopt environmentally sustainable practices, many lack the financial support and guidance to do so. The findings indicate a strong will—but limited way—when it comes to going green.
73% MSMEs Unaware of Green Finance Options
Kinara Capital surveyed 3,649 MSMEs across more than 100 cities in India. The results show that nearly 73.2% of respondents were unaware of green financing solutions available to them. Additionally, 11.2% of MSMEs said they faced confusion about the application process itself.
Despite this, the appetite for sustainability is clear. More than 74% of MSMEs seeking business loans in the coming year plan to use the funds to make their operations more eco-friendly. Of those who did apply for green loans, over 51.7% received approvals—demonstrating high credit readiness and intent to transition.
Sectors Leading the Green Charge
In the manufacturing sector, metal-related MSMEs like fabrication, machine components, and auto parts accounted for nearly 38% of positive green finance responses. In trading, B2C consumables—such as general stores and healthcare products—made up 30.6%, followed by B2B traders in industrial goods and textiles at just under 20%.
Regionally, Tamil Nadu and Puducherry led the charge, with 37.5% of MSMEs showing intent to adopt green practices. Andhra Pradesh and Telangana followed at 31.6%, and Karnataka at 22.1%. In contrast, Gujarat and Maharashtra trailed with a combined rate of only 8.8%.
MSMEs Key to India’s Net-Zero Goals
The report cites an International Finance Corporation (IFC) statistic noting that MSMEs account for over 90% of all firms globally and nearly 50% of GDP. In emerging markets, the MSME finance gap is estimated at $5.7 trillion—rising to $8 trillion when informal enterprises are included.
Kinara Capital stresses that bridging this gap could help India move significantly closer to its net-zero goals. With targeted policy support and better awareness programs, MSMEs could become powerful agents of sustainable change—reducing emissions while boosting competitiveness.
A Call for Awareness and Action
The findings suggest that while access to capital is improving, knowledge and guidance remain major bottlenecks. Experts suggest a push for awareness campaigns and simplified access to green financial products, especially through fintechs and NBFCs.
With green financing gaining momentum globally, empowering India’s MSMEs to participate in the sustainable economy could unlock both environmental and economic dividends.