Green Finance for Leather and Textile SMEs in Pakistan

The textile and leather sector is central to Pakistan’s economy and depends on the contributions of small and medium-sized enterprises (SMEs). However, these industries often use resources in an unsustainable way, and poor environmental management practices, as evidenced by high levels of water contamination and consumption, further threaten the sector’s sustainability. The environmental risks facing this sector are compounded by the pressures of rising urbanisation and industrialisation. In addressing these challenges, the public sector lacks the capacity to implement national environmental laws and standards and multilateral environmental agreements (MEAs). Furthermore, to improve their resource efficiency and environmental management practices, SMEs need more knowledge and access to financing so they can invest in suitable measures.

In light of these intersecting challenges, action is required. On the one hand, there is a need for green credit guidelines that extend capital to SMEs for green investments, and on the other hand, key private and public sector actors have to build the capacity to implement and monitor progress around these guidelines. World Wildlife Fund (WWF) Pakistan has therefore set up this project with the aim to develop a gap analysis as a reference document for various stakeholders. This analysis will serve as an initial step for the development of green finance guidelines in the leather and textile sector in Pakistan. The eventual aim is to facilitate green financing from financial institutions for leather and textile SMEs.

Contracted by WWF, adelphi was responsible for leading the research process, conducting the gap analysis and green finance study, and facilitating interviews and stakeholder consultation with key public and private players in the sector. adelphi applied its expertise and hands-on and collaborative methodologies for multi-stakeholder consultation and information dissemination to prepare the drafting of green credit guidelines that are responsive to the needs, capacities and barriers of financial institutions, industry stakeholders (including SMEs) and policymakers across Pakistan.