By Laura Benns, Programs Director, SecondMuse
Imagine you are a woman living in a rural community in South or Southeast Asia, where many of the women in your community pick and sort waste for a living. You run a successful small collection and recycling business and want to buy additional machinery to process more plastic to grow your business. You go into a local bank requesting a loan and walk out without securing the capital you needed.
Research shows that many women business owners in the region continue to face persistent cultural and institutional barriers when looking to access finance. The challenges range from cultural perceptions that women-owned businesses are riskier and less reliable to a systemic lack of basic administrative requirements for loan applications.
This is why SecondMuse Capital, in collaboration with Visa Foundation and supported by SecondMuse Foundation, is launching a new financial mechanism called the ‘Revolving Fund’. This fund will support gender-smart Micro, Small and Medium Enterprises (MSMEs) in waste management and recycling, working to reduce plastic pollution.
The design of the Revolving Fund follows substantial research undertaken by the Future Economy Lab on the challenges and requirements of financing gender-smart climate businesses in Asia.
With an initial US$8 million evergreen Revolving Fund, the revolving loan structure enables access to a flexible, zero-interest source of capital that meets the unique needs of MSMEs in the region and provides technical assistance. The capital is both accessible and affordable — two huge barriers faced by MSMEs in the sector today.
How the Revolving Fund can create change
Offering zero-interest loans of $150,000 - $500,000, the Revolving Fund will help MSMEs scale their businesses to combat plastic pollution and reduce climate impact — whether this is purchasing machinery to more efficiently process waste or increasing scalability through additional working capital. Technical assistance will also be provided alongside the zero-interest loan.
The fund continuously recycles capital, where loans that are repaid are reinvested to fund new projects. We aim to deploy approximately $18 million and support up to 75 companies over the next 10 years — building additional processing capacity of over 365,000 metric tonnes of plastic waste. This ensures that each dollar invested works multiple times over and amplifies impact far beyond a single-use grant.
A key innovation of the Revolving Fund includes the integration of the plastic credits marketplace. By integrating the sale of plastic credits, a portion of the revenue earned is returned to the MSME to generate an additional income stream, while a portion is returned to the fund to cover operating costs of the fund and technical assistance expenses. This creates a fund that is self-sustaining or evergreen in nature.
Technical assistance and support will be tailored to each MSME, including support for business management, market strategy, workforce development, financial literacy, and capacity building focused on gender and social inclusion.
One key area of support needed is capacity- and capability-building to register and sell plastic credits on the marketplace, as the cost and technical knowledge required to go through registration is challenging for many businesses. This is why the Revolving Fund will look to upskill each MSME in this process as well as support the cost of the registration and auditing.
This was echoed in a workshop SecondMuse Capital recently held with nine MSMEs from across the South and Southeast Asia region, whose feedback has been instrumental in the design and implementation of the Revolving Fund. The workshop reinforced the strong demand for this type of capital and support the fund will provide, with participants sharing that traditional loans have not been a viable option, with financial institutions rarely interested in loaning money at affordable rates to their kind of businesses.
Many participants felt confident that the loan could significantly increase — or even double — their existing processing capabilities, with current unmet demand for their services and a seemingly never-ending supply of plastic waste to collect. They would use the funds for infrastructure improvements, training, technology and research. Participants also highly appreciated the flexible, tailored nature of this financial vehicle.
Rahul Nainani, CEO & Co-Founder of Indian MSME ReCircle told us, "It is no secret that SMEs and startups in the social impact space find it challenging to raise debt funds. We're glad to see SecondMuse set up the Revolving Fund program to address this definite need for social impact organizations. With support from the Revolving Fund, ReCircle will be able to scale operations and increase its overall socio-economic and environmental impact with a zero interest loan. We're thrilled to be part of the SecondMuse community and leverage the platform to change the way the world views waste.”
SecondMuse Capital holds the firm belief that economies can and should provide for more than a select few. But more than that - research has shown that when we place resources and decision-making power in the hands of women, they are more likely to prioritize environmental conservation and community well-being. They are also more likely to generate more revenue per dollar invested.
This means investing in women not only makes business sense but can also help us to achieve positive ripple effects throughout communities that will go a long way to solving the climate crisis.
Join us to make an impact
SecondMuse Capital is looking for partners to join us to mobilize more funding into gender-smart climate MSMEs. These enterprises are poised to catalyze change in waste management and recycling, alleviating the flow of plastic into the ocean, which is set to triple by 2040 to reach 29 million metric tons a year.
Initial grants made into the fund will signal confidence in its potential and viability. As an early funder, you will become a key strategic partner, helping to influence and support the Revolving Fund’s direction and growth.
Get in touch today at asiapacific@secondmuse.com if you are interested in the Revolving Fund or would like to co-design innovative financial mechanisms to make a lasting impact on climate.
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