Growing green business in Montenegro

Summary:

The aim of the project is to create favorable business climate and conditions for private sector investment in low-carbon and other environmentally-friendly businesses in Montenegro.

Objectives:

The project objective is to promote private sector investment in low-carbon and green businesses in Montenegro. The project will use a combination of policy de-risking (implementation of favorable policy framework and provision of business support services) and financial de-risking instruments (improving access to finance for innovative green businesses and partnerships, in particular agriculture, tourism and energy sectors). Overall, the project will stimulate low-emission economic growth and green job creation in Montenegro.

Activities:

Ø  Policy development and business support services for green start-ups and SMEs:

·         Study and road-map for policy and incentive options for green businesses in agricultural, tourism and energy sectors;

·         Eco-Fund’s regulatory provisions developed, and advisory services provided to diversify its funding base;

·         Green Business Incubator established;

·         Entrepreneurs supported through the Green Business Incubator (50 existing and potential, including at least 20% women);

·         Training workshops to develop green business skills delivered (3 workshops training a total of 50 specialists, including at least 20% women)

 

Ø  Green business financing:

·         Capacities created within Investment-Development Fund to implement/enhance green business financing

·         Financing mechanism (performance-based payment scheme) designed and implemented

 

Ø  Raising awareness of green business practices and financing opportunities:

·         Awareness-raising activities conducted (150 existing and potential entrepreneurs and 100 stakeholders from public institutions, industry experts and academia);

·         Green Business Incubator communication tools developed (reaching out to 300 entrepreneurs).

Proposed components will help address barriers and root causes in following manner:

 

Business Barriers

Root Causes

Proposed strategy to address

Barrier 1: Insufficient pipeline of bankable low-carbon projects

1.1.  Low level of general awareness about low-carbon investment opportunities among private sector, in particular SMEs

1.2.  Low financial literacy of SMEs and limited knowledge about potential/available funding sources and mechanisms

1.3.  Limited capacities among SMEs to identify and prepare quality projects

1.4 Additional regulatory and administrative barriers due to the fact that low-carbon projects are often “first of its kind”

 

Component 3 “Raising awareness of green business practices and financing opportunities” of the project will address root causes 1.1 and 1.2

 

Component 1 “Policy development and business support services for green start-ups and SMEs” of the project will address root causes 1.3 and 1.4

Barrier 2: Limited access to finance at acceptable terms

2.1. Insufficient financial sector’s readiness and appetite to finance low-carbon projects

2.2 Lending conditions are not adapted to SME needs, in particular high equity and collateral requirements

2.3. Not all green/low-carbon projects are sufficiently financially attractive (low returns/long pay-back)

Component 2 will work with the Investment and Development Fund (IDF) of Montenegro to help address root causes 1.1, 1.4, as well as 2.1, 2.2 and 2.3. In particular, the performance-based payment mechanism is meant to compensate low-carbon project developers for additional risks (stemming from root cause 1.4) or insufficient returns and create a track record of real-life projects thus building awareness of SME sector about existence of real business opportunities (root cause 1.1), as well as awareness and confidence of financial sector regarding real environmental and financial performance of such projects. Based on this information and cases, the banking sector will be in a strong position to categorize such projects, assess risks, and adjust requirements and terms of their financial products accordingly.

 

Expected results:

Create favorable business climate and conditions for private sector investment in low-carbon and other environmentally-friendly businesses in Montenegro

Status:

Ongoing

Project start date:

April 2018

Estimated end date:

March 2021

Focus area:

  • eradicate poverty in all its forms and dimensions
  • Project office:

    UNDP in Montenegro

    Implementing partner:

    United Nations Development Programme

    Full project information  

    Funding Support by

    Donor name

  • United Nations Development Pro
  • Global Environment Fund Truste
  • Amount contributed

    $370,748

    Delivery in previous fiscal year

    2019 $52,741

    2018 $41,249

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