Filling the Missing Middle Financing Gap – Innovative financing for small and growing biodiversity enterprises in Malawi

Gutierrez, Lina; Mirko Zürker and Tione Kaonga 2022: Filling the Missing Middle Financing Gap. Innovative financing for small and growing biodiversity enterprises in Malawi. Berlin: adelphi research gGmbH.

Biodiversity loss has detrimental effects on the functioning of our natural environments and the people who live and depend on them for their livelihoods. Deforestation in Malawi and Zambia is rampant and a major threat to biodiversity. This loss is caused by excessive natural resource demands, encroachment into forested areas, and land use change. Governments have begun expanding their policies, and acts such as the 2018 National Resilience Strategy in Zambia and the 2015 National Forest Policy in Malawi have illustrated a growing urgency and action in conservation efforts. However, not all of the solutions have been fully developed.

One major solution actor that has been side-lined are biodiversity MSMEs. These small-scale businesses hold the key to ensuring better biodiversity conservation. Whether it be reducing the demand for wood or generating sustainable agriculture practices, biodiversity enterprises are the embodiment of the concept of think global, act local when it comes to biodiversity conservation. They deliver triple bottom line achievements and successfully improve the well-being of their local communities. Unfortunately, they also fall within the missing middle, where MSMEs fall into a financial bubble that restricts their access to finance – for example, high interest rates, short payback periods, or failing to fit in the high-growth category that larger funds prefer. Financial institutions need to break down barriers to finance and develop innovative solutions that would include more conservation related entrepreneurship.

The two scoping reports for Zambia and Malawi: Filling the Missing Middle Financing Gap aim to

  1. give a brief review of the country's state and challenges to biodiversity conservation;
  2. highlight how the current policy agenda is taking strides toward biodiversity conservation and how MSMEs contribute to support these actions;
  3. clarify the shortfalls of current financing for MSMEs and present the best practices for biodiversity conservation financing;
  4. depict the current ecosystem of biodiversity finance available for MSMEs;
  5. present a future road map and recommendations to improve biodiversity financing for MSMEs.