Writings Environment PREVair - 1

ECO-CONSEIL
Institut Européen pour le Conseil en Environnement
European Institute for Environmental Counselling
Europäisches Institut für Umweltberatung

A locally based, globally active non-profit non-governmental organization devoted to
the environmental capacity-building of human resources

Headquarters:  7 rue Goethe, F-67000 Strasbourg,
tel +33 (0) 3 88 - 60 16 19, fax - 61 07 12

Case Study

An innovative environmental credit scheme for small companies:

PREVair
with relevance to Central and Eastern European Countries

U.S. Agency for International Development Conference on
Innovative Financing for Environmental Investments:

Looking towards the future

organized by the Harvard Institute for International Development
by Troy Davis, Vice-president, International Relations, ECO-Conseil
Budapest, Hungary
18-21 January 1998

Table of Contents

0. Executive Summary

1. Introduction: SMEs:  condition for a stable civil society and cause of environmental problems

2.  Description of the PREVair scheme

2.1   The "Comité PREVair"
2.2   Selection criteria for projects
2.3   Funding of the PREVair scheme
2.4   How does PREVair work in practice?

2.4.1   initial project identification
2.4.2   loan request evaluation
2.4.3   evaluation of results
2.4.4   confidentiality

3. International outreach and recognition of PREVair and the Banque Populaire

4. Relevance for Central and Eastern Europe

5.  Conclusions and Recommendations

5.1   general
5.2   specific

Annex 1: Examples of companies and sectors helped by PREVair loans

Annex 2: Examples of measures financed by PREVair

Annex 3: Members of the PREVair Committee of Experts

Annex 4: Strong points / benefits of PREVair environmental credit scheme

Annex 5: Lessons learned and  Some further questions

Executive Summary

Small companies in industrialized countries are one of the greatest sources of employment growth and often form the backbone of a healthy and diversified economy which is more flexible and resilient to economic shocks.  A strong medium sized segment of the economy provides social stability as well as the growth of a middle-class which has a stake in political stability.  However, small and medium enterprises (SMEs) are collectively a main source of diffuse pollutions, together with agriculture, transport and households. For a variety of reasons,  SMEs are also very hard to reach, and therefore programmes in the last 10 years which have tried to reach them have often met with mitigated success.

Since 1989, the number of SMEs in transition countries has sharply increased, with a vast majority in the retail sector, but more and more are being created in the primary, commercial and industrial sectors.  It is important to accompany this positive economic trend with measures to assist them to make the right investment decisions during the process of capital formation, especially to adopt environmentally-sound technologies, which are not at the top of priorities for small business owners.

International financial institutions (IFIs) programmes for SMEs from are few and far between, mainly because transaction costs are much higher relative to the transaction costs for infrastructure or large companies' projects. Though they recognize the problem, IFIs naturally prefer larger-scale projects and schemes, mainly because of limited human resources. 

This case study presents a way out of this conundrum, as a variant on micro-credit which one could call "mini-credit".  It describes an innovative way to reach SMEs and entice them to make environmental investments to improve environmental performance, through a low-interest credit scheme. This scheme helps SME owners to get over the financial, technical and psychological) hurdles associated with a problem they essentially consider as an externality or a public good.

The PREVair programme is a private sector bank programme to provide low-interest loans to SMEs, mainly commercial or consumer service companies, for environmental investments. In the 8 years it has been operating, it has loaned over 10 M US$ to over 300 small companies for various environmental investments, both preventive and end-of-the-pipe. It has several innovative characteristics, all of which were crucial to the long-term success of the programme:

-  it is based on a close multi-stakeholder cross-sectoral partnership between a bank, a NGO, local, regional and national authorities, business and farmers' associations, and private companies including an insurance company, each with a right of veto,

- it was originally designed with the impetus of a locally-based, internationally active NGO, which acts as a continual source of new information, publicity and support for the transfer of the programme,

- it includes a technical assistance programme for SMEs to define their needs through the services of an eco-counsellor.

The Banque Populaire du Haut-Rhin has obtained recognition of its approach over the years: in 1993 by the European Parliament, in 1995 by the French Ministry of the Environment, in 1996 by the UN CSD and in 1997 by the European Investment Fund of the European Investment Bank. It became on 5 September 1996 the first French bank to sign the UNEP Declaration on Banking and the Environment.

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