Green Finance Boost for India’s Smallest Businesses

In a move that blends financial innovation with climate ambition, Small Industries Development Bank of India and Shell Foundation have launched a US$3.1 million initiative aimed at expanding access to green finance for India’s smallest business owners. The programme, known as the Empower Nanopreneurs for Green Transition Risk Sharing Facility, sets out to address one of the most persistent barriers to inclusive climate action: access to affordable capital.

Across India, nano-entrepreneurs form the backbone of local economies, supporting the livelihoods of hundreds of millions of people. Yet despite their importance, they often struggle to secure financing, particularly for clean technologies that could improve both productivity and environmental performance. This new initiative seeks to change that by creating a mechanism that reduces the risk for lenders while opening up new opportunities for low-income borrowers.

At the centre of the programme is a risk-sharing structure designed to encourage financial institutions to lend more confidently into underserved markets. Backed by funding from Shell Foundation and supported through the UK government’s Transforming Energy Access partnership, the facility provides a second-loss guarantee that cushions lenders against potential defaults. By absorbing a portion of the risk beyond an initial threshold, the model makes it more viable for banks and non-banking financial institutions to extend green loans to customers who would otherwise be considered too risky.

The impact is expected to be both economic and environmental. With access to finance, nano-entrepreneurs will be able to invest in productive-use energy technologies such as solar-powered dryers, cookstoves and looms. These tools not only reduce reliance on fossil fuels but also enhance income-generating capacity, helping businesses become more resilient while lowering emissions. Over the course of six years, the initiative is projected to benefit between 112,000 and 443,000 people, depending on how the financing is deployed.

Beyond direct lending, the programme also includes technical support to ensure that the transition is effective and measurable. Training, research and ongoing monitoring will help participating institutions and entrepreneurs make informed decisions, while also building a body of evidence around what works in scaling green finance at the grassroots level.

The initiative aligns closely with India’s broader climate goals, particularly its commitment to achieving net zero emissions by 2070. By focusing on small-scale enterprises and low-income communities, it highlights a growing recognition that the energy transition must be inclusive if it is to be sustainable. Rather than concentrating solely on large infrastructure projects, this approach places local businesses at the heart of the solution.

For both SIDBI and Shell Foundation, the partnership reflects a shared belief that financial systems can be redesigned to serve climate and development goals simultaneously. By unlocking private capital through targeted risk mitigation, the initiative offers a practical pathway to scale clean energy adoption where it is needed most.

As global efforts to tackle climate change increasingly turn towards implementation, models like this demonstrate how relatively modest funding, when structured effectively, can catalyse far greater impact. In India’s vast and diverse economy, empowering nano-entrepreneurs could prove to be a powerful lever for change, linking economic opportunity with environmental progress in a way that is both pragmatic and scalable.