Q1: Could you take our readers through MicroSave Consulting’s work in the space of climate change and sustainability, in India.

What are the key areas of focus, as you work with the supply-demand value chain to drive initiatives to tackle climate change?

MSC Consulting has been the “world’s local expert” in the field of financial inclusion, government payments, and increasingly now in Agriculture. Our work on climate is built on this substrate of over 25 years of work in financial, economic, and social inclusion in the digital age.

Specifically, we focus on - a) climate resilient agri-food systems, renewable energy & just transition and urban resilience. Our approaches are informed by our deep experience in finance, demand-driven & locally-led solutions and digital deployments. We provide our services to development actors like DFIs, MDBs, philanthropies, financial institutions, impact funds and governments through services such as research, strategy, training and capacity development, MEL, and fund structuring. We have so far executed 20+ projects across both Asia and Africa.

Some examples of our work that showcase our work in these field is as follows:

• Our work on energy transition here
• Locally-led adaptation approaches white paper, here, here,
• Our work on strengthening climate resilience and adaptation through financials services here, here, here, here, here
• Role of digital technologies and blended finance in climate change here, here, here
• Gender and climate change here

Q2: We have read about how MicroSave is closely looking to build climate-resilient agri-food systems and increase access of smallholders to clean and affordable energy. In your assessment, what are some of the untapped opportunities within climate-resilient agriculture, where innovations are yet to reach the last mile?

From a smallholder’s perspective, what are some of the common omissions you are coming across in climate tech that enterprises need to be mindful of?

Adaptation and resilience projects generally receive less funding compared to mitigation due to number of challenges such as an unclear taxonomy, the lack of standardized impact metrics, and lack of investment cases. We have seen private investments flow in India for agriculture, particularly for technologies such as hydroponics and drip irrigation for example, and increasing funding for parametric insurance. The built environment, water related technologies, supply chain resilience, are areas that are emerging with some private investments.

However, adaptation is challenging because it is very localized, and highly linked to general development. We lack local granular data on climate risks and vulnerabilities that can help identify adaptation strategies, and we often lack capacities across different scales to integrate climate risks into our development related activities.

Small holder farmers in particular face significant challenges from climate change to their lives and livelihoods. This often means that small-holder farmers are not willing to take additional risks, and in fact, we need to be careful that we are not adding additional challenges to their already difficult lives through new and untested approaches and technologies. Also a reliance on digital solutions alone is often not enough and solutions will need to have ‘boots-on-the-ground’ to address the needs of India’s smallholder marginal farmers. These challenges call for potential solution providers to work closely with organizations that are plugged to large networks of small holder farmers, and with ones that deeply understand issues related to the adoption of agricultural practices and technologies by small-holder and marginal farmers.

Q3: In a similar vein, what are some of the immediate areas, where catalytic capital providers could build capacity of the ecosystem to become more receptive towards the upcoming innovations?

It will help to understand the pathways to integrate climate change considerations into development sector programs.

Catalytic capital providers (CCP) have a big role to prime the ecosystem to become more receptive to innovations.

• Innovators are typically products/services firms who have a disruptive product or a service with a tangible impact on advancing climate change adaptation. In order to survive and thrive, such firms will need capital to grow and scale. The nature of support will thus vary depending on the firm’s maturity. This could be in the form of a venture debt or equity depending on the firm’s stage. Similarly, some may even require incubation and acceleration support which could come in the form of a technical advisory on aspects such as product-market fit, go-to-market strategy etc.
• For the sector to scale, it requires that the mainstream Financial institutions begin to increase their exposure. Here too CCPs have a big role. Some tested methods include setting up a risk sharing facility in form of guarantees, or concessional debt or TA for commercial banks to lend.

The pathways to integrate climate change considerations into development sector programs can have several starting points. One of this is to set up a taxonomy, so as to be able to assess the A&R benefits of any development intervention- whether led by the public sector or private sector. This whitepaper from MSC on the locally-led adaptation identifies some approaches that can be integrated with development planning to either assess the A&R benefits of a development intervention or to identify an A&R intervention for a community.

Q4: As per recent research, climate adaptation-related interventions in India, continue to face challenges in raising commercial capital.

In your assessment, currently where do climate adaptation centric innovations stand in terms of marketability and gradually reach commercial viability?

What will it take for solutions like digital crop microinsurance and climate risk insurance products/weather-index based microinsurance, to scale up?

Yes, we do not see a lot of commercial finance flowing for adaptation. Most of the investments that we see today in adaptation is driven by government spending or through development funding through bilateral or multi-lateral donors. Part of this challenge has to do with the fact that adaptation is often a public good, and getting private finance to fund public goods can be challenging. A second challenge, one I touched on earlier, is that there can be significant overlap between adaptation and general development, and it can be a challenge to identify what is adaptation and what is general development without the additional context related to climate change risks and vulnerabilities.

However, we think the case for unlocking commercial finance for adaptation is very strong, as our adaptation needs are only going to get bigger in the future. The challenge is to identify products and services, with the appropriate business case, that can solve some (of course not all), of the challenges we face due to climate change. Recently, MSC has identified nearly a dozen practices and technologies for building resilience in agriculture without impacting yields significantly. Examples include crop diversification, anti-methanogenic feed supplements, Sustainable Rice Intensification on the practices side, and drip and sprinkler irrigation system, and stress tolerant seed varieties on the product or technology side. However, significant work needs to happen to ensure that these technologies indeed build resilience and appropriate for the specific context where they can be scaled up.

The Government of India runs one of the biggest insurance programs with links to climate change. Launched in 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) provides comprehensive insurance coverage to farmers against yield losses from pre-sowing to post-harvest phases due to non-preventable risks such as natural fire and lightning, storms, floods and landslides, droughts, and pests. Farmers have a fixed premium of 2% of the sum assured for Kharif crops, 1.5% for Rabi crops, and 5% for horticulture crops. The rest of the premiums are subsidized equally by state and central governments. Yet, the PMFBY program faces significant challenges such as operational challenges for claims settlements, lack of integration of technological advances, and lack of awareness and reach among vulnerable farmers of the insurance scheme. Transitioning the PMFBY scheme into a technology enabled parametric insurance program could provide a major boost for scaling up climate related digital and index-based insurance products. This could be a major game changer to enabling other private sector actors to provide a range of products and services for scaling up the use of insurance for managing climate risks in the country.

Q5: From your experience with the EVOLVE program, how could such interventions be replicated, in order to mobilize more climate finance.

What is the nature of capacity building that financial institutions require to incorporate a climate thesis to their lending approach?

Replication of programs like EVOLVE program will require three specific elements:

• Project Anchor: the project is anchored by a DFI (like NABARD and SIDBI) that has the resources and influence to nudge FIs (banks, SFBs, RRBs, MFIs etc.) to build their portfolio on a theme that’s either new or less well understood (like climate). Refer the blog here
• Support on the upstream: Create a blended finance facility within the DFI, as they will be able to attract catalytic capital. The facility should offer products and services like guarantees, concessional debt or TA, in addition to playing a role of a market-maker, in ancillary services. For instance, EVOLVE program has a component on incentivizing firms that are into telematics for assessing battery life, or into the secondary sales market for EVs etc. Services like these reduce the lending risks for banks and create a conducive ecosystem for FIs to lend
• Support on the downstream: In addition, FIs would need support on three fronts- a) identifying market segments, b) developing financing products, c) information on product and technology firms whose products are in demand and need to be financed

The blended finance facility allows FIs the cushion or comfort against expected credit losses, and allows them the headroom required to test new products, and refine its products and services.

Q6: Going ahead, what are the key interventions that MicroSave is looking to focus on?

At MSC, we recognize that climate change is one of the biggest challenges we face and that speed and scale of our response is of utmost importance. We also know that the impacts of climate change are not uniform—it is people who are marginalized and living in poverty who are often the most vulnerable. This challenge means that partnerships and collaborations are critical, as it is unlikely that any one organization can have the impact required for the challenge we face.

MSC’s work on climate change and sustainability is focused on improving the lives of people with low and middle incomes, who are often the most vulnerable to the impacts of climate change. We focus on solving the complex challenges brought about by climate change in our food and agricultural systems, in our energy systems, and in our urban and built environment. We provide a range of services which includes research and analysis, strategy design and development, financial product development and financial structuring, monitoring and evaluation, and technical support around implementation of various programs and strategies. We work in partnerships with a wide range of actors, from governments, companies, financial service providers, and catalytic capital providers to build resilience, unlock financial flows, and enable scaling up through the use of digital technologies.

Background of MicroSave Consulting

MicroSave Consulting (MSC) is an international advisory and development consulting firm that has, for 25 years, pushed the world toward meaningful financial, social, and economic inclusion. With about 315 staff of different nationalities and varied expertise, we are proud to be working in over 68 developing countries across Africa, Asia, and the Pacific.

We combine global vision with local expertise to offer advisory, consultancy, and technical assistance services to diverse stakeholders, including governments, multilateral institutions, financial entities, philanthropic organizations, and impact advisors. We also provide evidence-based research, technical assistance, program management, strategy formulation, mentorship, business case development, and knowledge management support to incubation labs/accelerators. MSC has a dedicated Climate Change and Sustainability practice group to fulfill our commitment to climate resilience, adaptability, and supporting low carbon economies.

Our vision is to strengthen the capacity of institutions to deliver market-led, scalable financial, economic, and social inclusion in the digital age to all people through:

• Guiding policy & and facilitating partnerships to develop enabling ecosystems;
• Comprehensive, customized strategic advice;
• Actionable, onsite, operational assistance.

We work across multiple sectors and have multi-faceted expertise as depicted below.



For further details about MSC’s work and footprint across continents, please refer to our corporate brochure.