By KT Reporter
The lack of proper knowledge, coupled with customer resistance and misconceptions, has been blamed for the slow adoption of Environmental, Social, and Governance (ESG) principles in lending practices among microfinance institutions in the Masaka region.
The ESG framework, adopted in 2022 by United Nations agencies, aims to align business operations with environmentally friendly practices as a strategy for conserving biodiversity. In Uganda, the framework is implemented by the Agricultural Business Initiative (aBi) Finance Limited, requiring financial institutions to refrain from financing projects that harm the environment or promote unethical social conduct.
However, Tier 4 microfinance institutions in the Masaka region are struggling to enforce these directives due to widespread knowledge gaps within the communities they serve. During a regional sensitisation meeting held on Monday, microfinance management teams expressed concern that some clients view the ESG requirements as mere restrictions designed to deny them loans.
Betty Mukasa, Board Secretary of Ssese Oil Palm Growers Cooperative (SOPGco) in Kalangala district, noted that many in the community have yet to fully understand or embrace environmental conservation, continuing instead to degrade biodiversity in pursuit of survival. She emphasized the need for policy implementers to engage directly with communities and local leaders to explain acceptable practices and encourage local enforcement.
Linda Nalubwama, Head of Marketing and Customer Growth at Masaka Microfinance Development Cooperative Trust Limited (MAMIDECOT), echoed similar concerns. She said some clients still cling to conventional but environmentally harmful ventures, such as charcoal production, timber trade, and firewood sales.
Nalubwama also warned that while some borrowers outwardly comply with ESG requirements, they clandestinely share the funds with those engaged in ecosystem-damaging activities. She stressed the need for widespread public awareness about green energy options and the enforcement of relevant laws.
David Kaweesa, Manager of Financial Services Development at aBi Finance, urged microfinance managers to take a more proactive approach in implementing the green financing framework. He said the public would eventually embrace the shift if sustainable financing options were brought within their reach. Kaweesa challenged microfinance institutions to develop and promote financial products that build climate resilience, arguing that these would naturally attract compliance with environmental policies. Beyond community sensitization and enforcement, he encouraged institutions to innovate by providing access to alternative green energy sources and leading by example-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
