73% MSMEs Lack Awareness of Green Financing Options: Kinara Report

Kinara Capital, a fintech company dedicated to MSME financial inclusion, has released its 5th edition of MSME Insights revealing a striking finding. Nearly 3-in-4 MSMEs (73.2%) cited lack of awareness about available Green Financing solutions while 11.2% were deterred due to lack of clarity with the process. Despite a significant knowledge gap, the latest findings substantiate a promising picture. MSMEs are keen to Go Green! Over half (51.7%) of the MSMEs that did apply for green business loans received funding, underscoring the sector’s strong credit readiness and a willingness to embrace sustainable practices.

On the 5th edition of MSME Insights, Hardika Shah, Founder & CEO, Kinara Capital, said, "India’s ambitious Net Zero target by 2070 cannot be achieved without placing the country’s dynamic MSME sector at the heart of its climate strategy. While many MSMEs are eager to adopt sustainable practices, a significant number lack the guidance and resources to take the first step. To unlock this potential, focused awareness campaigns and technology-led solutions are essential. These efforts can bridge the Green Financing gap and catalyze large-scale, sustainable transformation across India's MSME landscape."

Kinara’s MSME Insights spotlights the role of flexible and customized Green Financing providers in addressing the evolving financing needs of MSMEs. Nearly half (46.7%) of MSMEs that accessed Green Financing chose NBFCs or fintech providers, compared to 24.1% that opted for private banks and 17.5% chose national banks. This reflects MSMEs’ preference for agile and technology-driven lending solutions, including Embedded Finance options that expedite access to credit.

Remarkably, MSMEs across Manufacturing, Trading, and Services sectors are unified in their motivation to implement environmentally-friendly solutions. Only 3.7% of the surveyed MSMEs cited lack of rewards as a barrier for not adopting sustainable solutions, indicating that MSMEs’ Go Green intent far outweighs the need for special incentives.

The 5th edition of MSME Insights was drawn from survey and analysis conducted of 3,649 MSMEs from the Manufacturing, Trading, and Services sectors across 100+ cities in the states of Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana, and Union Territory of Puducherry. Below are additional key findings from this edition.

OTHER KEY FINDINGS FROM THE 5TH EDITION OF KINARA CAPITAL’S MSME INSIGHTS:

1. MSMEs Across 100+ Cities Demonstrate High-Intent to Go Green
   The latest MSME Insights reveal an impactful trend: 74.2% of the surveyed MSMEs that are looking to avail business financing within the next year are planning to invest it in making their own business operations more sustainable. Beyond transforming their own operations, MSMEs are also eyeing opportunities in the green economy with 14.0% planning to manufacture eco-friendly products, while 11.8% want to wholesale or sell direct-to-consumer (D2C). Together, these insights highlight both the immediate intent to Go Green and the longer-term potential of MSMEs to drive climate-positive innovation.
2. MSMEs Prefer Value-Driven Green Solutions
   Notably, 1-in-4 respondents (24.9%) expressed interest in utilizing multiple green solutions, signaling both a high-intent to Go Green and a preference for solutions that can lower their operational expenses. Topping the list of solutions, 32.4% of MSMEs are interested in solar-powered products and rooftop solar to reduce their electricity costs. Close behind, 27.7% will consider electric vehicles if it lowers their current fuel expenses, while 19.3% aim to boost production by upgrading to energy-efficient (EE) machinery, such as modern CNCs. Additionally, 11.2% are prioritizing sanitation, water, and waste management solutions, reflecting a long-term commitment to climate action.
3. Trading MSMEs Sprint Ahead with Green Ambition
   More than half of Trading MSMEs (55.2%) surveyed expressed interest in availing Green Financing within the next year for their own business operations, putting them ahead of their Manufacturing counterparts by 14.07 percentage points. Trading MSMEs, which include a wide range of wholesale and retail businesses, are seeking out greener alternatives such as solar-powered cold storage, energy-efficient portable generators, reusable batteries, smart lighting and other environmentally-friendly solutions.
4. Tamil Nadu & Puducherry MSMEs at the Forefront of Green Transition

MSMEs in Tamil Nadu & the Union Territory of Puducherry have emerged as leaders with 37.5% expressing their intent to incorporate environmentally responsible practices. Following this are the MSMEs from the states of Andhra Pradesh & Telangana at 31.6% willing to invest in the green transition of their businesses. MSMEs in Karnataka followed in third place with 22.1% stating their Go Green intent; and with a combined 8.8% response rate, fewer MSMEs from the states of Gujarat & Maharashtra opted for a green transition in the near future.

5. Consumables and Metal-related MSME Sub-sectors Champion Green Adoption

Among the Manufacturing MSMEs, the metal-related sub-sectors, such as Fabrication, Machine Components, Auto Components, and Metal Works, represent 37.8% of positive responses. Within the Trading MSMEs, Consumables sub-sectors are the frontrunners with a 30.6% response from mostly B2C retail such as Provision & General stores, Healthcare & Personal Care Products, Comestibles and Medical Shops. Following Consumables, at 19.9% are the B2B Trading MSMEs selling Automobile Parts, Industrial Products, Elements & Mixtures, Polymers, and Metal & Machine Components. And, in the same range at 19.8% are the Textile & Apparel Trading MSMEs. 

Kinara Capital’s findings from its 5th Edition of MSME Insights underscores a clear message: the future of sustainable growth in the MSME sector lies in bridging the awareness gap, leveraging technology-driven financing options, and equipping MSMEs to become climate-resilient by supporting their intent to upgrade their operations.