Go green, everybody keeps saying. The problem is, words like “green”, “sustainability”, “ecology” can lose their meaning if they’re repeated too often and especially without context. It could almost give you “green-fatigue”. Almost, until you realise that going green is actually good for your balance sheet.
So, have you heard of the “Green Loan”? The Green Loan is currently in its third edition, a partnership with the Agence Française de Développement (AFD) and is basically a financial incentive for businesses to make environment-friendly and energy-saving investments.
The idea is to stimulate the use of renewable energy and energy efficient technologies over non-renewable ones so as to reduce carbon emissions.
This might sound like jargon but it can very easily be translated into your reality as the owner of a Small and Medium Enterprise (SME). For instance, if you’re investing in new equipment and need a loan to make that happen, the very fact that you opt for equipment that’s energy-efficient, makes you eligible for a Green Loan. This means very low interest rates on top of the savings that you will make on your electricity bill.
The same goes for an investment in a new building, for instance. Choosing to equip the building with photovoltaic cells makes you de facto eligible for the Green Loan.
In any event, your Relationship Executive (RE) will discuss your options with you and guide you in fine-tuning your loan request, when the time comes.
Harry Coolen, MCB’s Business Banking Manager, SME Banking, explains that for the past year or so, “we’ve been guiding our clients and helping them fine-tune their requests so that they can benefit from this facility, if they want to. When we evaluate their projects, we look for opportunities that could be turned into a criterion for the Green Loan and inform them accordingly. For instance, if someone needs a loan for a building project, we ask them, ‘how much is your electricity bill’?”
This, you’ll find, is a vital question.
Because the next question your RE will ask you is, “how about saving a significant amount on your electricity bill?”
Here’s how it works: Investing into energy-efficient equipment or photovoltaic equipment will initially cost more because they’re generally more expensive BUT because this type of investment falls under the category of Green Loan, your interest rate will be much lower. And in the medium term, you’ll start saving a significant amount of money on your energy bills.
“SMEs need to start thinking long-term. They often think that it’s not worth investing into energy-efficient equipment because they have energy bills of say, Rs15,000 or Rs25,000. But this really is short-term thinking. That’s why we find that it’s mainly bigger companies that take advantage of the Green Loan facility because they’re more innovative and they want to cut costs. Whereas SMEs tend to focus more on the sales side and less on the cost side”, Harry explains.
Case studies: Instances where businesses have fine-tuned their loan request to become eligible for a Green Loan
Case 1: Semi-low floor buses
Purchasing a semi-low floor bus rather than a traditional one, makes you eligible for a Green Loan because these buses are less polluting. On top of that, bus owners also get a grant of Rs1 million from government, in a bid to encourage them to purchase buses of the less polluting variety. And yet, it is mostly the big companies that have shown interest in the scheme. For instance, the four big bus companies — National Transport Corporation (CNT), United Bus Service (UBS), Rose Hill Transport (RHT) and Triolet Bus Service (TBS) have all taken advantage of the facilities and converted their fleet to semi-low floors. So, the question is — what are you waiting for? Your RE will be more than happy to discuss your options whenever you’re ready.
Case 2: Photovoltaic
A company engaged in education is currently building another school. To this end, it has contracted a loan from MCB. When the Relationship Executive of the client assessed the project, it was suggested that the client changed a few of the specifications in his loan request so that at least part of his loan could be converted into a Green Loan. In the end, the client agreed to install photovoltaic cells on the roof of the new building. This decision meant that part of the loan will now carry low interest rates and that on top of it, the school’s energy bill will go down by 20 to 25%.
Case 3: Energy-efficient equipment
A company engaged in retail has recently decided to upgrade and extend its infrastructure. Faced with the loan request, the client’s Relationship Executive suggested the following amendments to the proposal: that all new equipment (Air conditioning units, refrigeration units, washing machines and other appliances) be at least 20% energy-efficient. This alone allowed part of the client’s loan to be converted into a Green Loan, bringing him savings in interest rates and on energy bills.