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Mitigating environmental risks in small-scale activities: what role for microfinance? A case study from El Salvador


  • Marion Allet


Small-scale activities in developing countries face environmental risks that represent direct threats to populations’ health and livelihoods. Recently, some donors and experts have claimed that microfinance institutions (MFIs) could play a role in fostering pro-environmental behaviours among their client microentrepreneurs. This paper seeks to identify the challenges that an MFI can face when implementing an environmental risk management program. We based our analysis on a case study of a pilot program in El Salvador, where we conducted 95 semi-structured interviews with microfinance clients, loan officers and managers. Our study first revealed that, despite a real interest from its staff, the MFI had some difficulties in building internal skills and conciliating its environmental and performance objectives, which compromised the effective implementation of the program. Furthermore, we identified that the pilot program, as it was designed, did not sufficiently take into account the psychological and economic barriers to behaviour change. Finally, we found that the effort of the microfinance institution was in some cases countered by external factors out of its reach, such as inadequate national regulations.

Suggested Citation

  • Marion Allet, 2012. "Mitigating environmental risks in small-scale activities: what role for microfinance? A case study from El Salvador," Working Papers CEB 12-021, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/123289

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    Cited by:

    1. Lucky Nugroho & Wiwik Utami & Taufik Akbar & Willy Arafah, 2017. "The Challenges of Microfinance Institutions in Empowering Micro and Small Entrepreneur to Implementating Green Activity," International Journal of Energy Economics and Policy, Econjournals, vol. 7(3), pages 66-73.

    More about this item


    Microfinance; Microenterprises; Small Enterprises; Environmental Behaviour; Behaviour Change; Environmental Management; Environmental Risks; Pollution;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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