On the final day of the 2021 United Nations Climate Change Conference (COP26) in Glasgow, adaptation and adaptation finance for developing nations is high on the agenda. Here’s why we believe SMEs can become a solution.
For over 27 years, we’ve been supporting entrepreneurs and small and medium-sized enterprises (SMEs) in some of the world’s most fragile regions, where SMEs contribute up to 40% of national income (GDP) and are important contributors to job creation (above 80% in Sub Saharan Africa). We’ve observed the rapid and disastrous impact that the climate crisis is undoubtedly having on these people and businesses, from droughts across East Africa, water scarcity in the Arab region and increasing urbanisation globally.
SMEs account for about 90% of businesses globally and over 50% of employment worldwide, according to the World Bank. Yet, when disaster strikes, SMEs are hit harder than any other businesses.
According to the UNDRR, SMEs bear around 75% of losses experienced by businesses because they lack business resilience. This is largely because reducing disaster risk requires extra spending and financial reserves, which smaller companies do not have access to. The COVID-19 pandemic made it abundantly clear that SMEs are not well-equipped to survive disasters.
SPARK is working with SMEs in fragile regions to mitigate the impact of the climate crisis on their businesses in four main ways:
SMEs are slow to adopt more resilient digital business models, such as cloud computing, which reduces reliance on physical assets that may be exposed to disasters. We provide training, coaching and mentoring in digital skills and digitisation for businesses.
According to the World Bank Enterprise Survey, 36% of SMEs in low-income countries report access to finance as the major constraint to their operations. We offer grants, competitions and loans for startups and SMEs by promoting partnerships between financial technology companies and micro-finance institutions. As we found in Rwanda, this increases the flow of financing to SMEs.
More than 80% of Sub-Saharan Africa’s population is employed in the agriculture sector, which relies heavily on rainfall and suffers from climate-driven changes in seasonal rain patterns. In regions susceptible to drought and food shortages, such as in South Sudan, we supporting innovation in improved agriculture techniques, such as drought-resilient seeds.
Through our local partnerships, we’re encouraging a focus on green entrepreneurs in the upcoming years, supporting businesses with a climate-conscious agenda that contribute to the UN’s Sustainable Development Goals.
“I do not want the next generation to leave the land”: Elham Alabbadi (pictured) is on a mission to encourage other young people to see their futures within the agricultural sector © 2021, SPARK
With a lack of policy surrounding climate provisions, many entrepreneurs in fragile regions are already inventing solutions to their community’s changing needs and making their own sustainability pledges.
For example, Iraq has experienced the loss of almost half its palm trees in the last 40 years due to war, displacement and increasingly dry conditions. Three young Iraqis founded Nakhla, a company focused on enhancing the number of palm trees and reducing deforestation by providing efficient palm tree care that uses artificial intelligence technology.
In Jordan, Elham Alabbadi has founded AlBalqa Creative Institute to support the local agricultural sector. 53% of the country’s population (3 million people) are currently vulnerable to food insecurity and by 2050, three-quarters of the population of the Arab region will be living in cities. Elham creates more rural jobs by specialising in permaculture agriculture, environmental protection initiatives and empowering farmers.
SPARK is supporting SMEs like Nakhla and AlBalqa Creative Institue with training opportunities, coaching and access to finance to ensure their businesses adapt and grow in the face of increasing climate stressors.
Eyes are now on the leaders of developed nations at COP26 to urgently make good on the promises made in 2009 to deliver $100 billion per year in climate finance to developing countries, which are disproportionately affected by the climate crisis.