Green Finance for Honduras's Farmers and Small Businesses

Honduras is one of the most unequal countries in the Western Hemisphere, and highly vulnerable to climate change and external shocks that threaten livelihoods, housing, crops and infrastructure. Agriculture is central to the country's economy, accounting for 13% of GDP and 35% of total export value, with significant knock-on effects across other sectors. Yet unsustainable agricultural practices are putting at risk the country's forests and productive sectors and the vital role they play in maintaining biodiversity, absorbing carbon, providing water and preventing soil erosion. 

Most agricultural businesses are micro, small and medium enterprises (MSMEs). Honduran MSMEs employ over 700,000 people and contribute up to 25% of GDP, but many lack access to suitable financial products, particularly in rural areas, where businesses face higher risk profiles, greater exposure to climate-related risks and weaker credit histories and collateral. Microfinance, which serves MSMEs and low-income individuals outside the traditional banking system, is a key tool in tackling social and financial exclusion. 

Objectives

The project helps MSMEs and households build economic and climate resilience by giving them access to suitable green financing, helping them invest in greener, more sustainable activities. 

It focuses on communities affected by extreme climate events, natural hazards and environmental degradation in the Yojoa Lake Basin, Sula Valley and Choluteca River Basins – areas where Global Gateway Investment Agenda infrastructure projects are also planned. 

Project activities

Funding flows through national financial institutions, which support the growth of green value chains – particularly in rural areas – driving the green transition and the system-wide change Honduras needs. These institutions provide funds to MSMEs and households for small-scale green investments to reduce the effects of extreme climate events and build resilience and adaptation. Supported investments include water-efficient irrigation, energy efficiency, renewable energy generation, circular economy initiatives, climate-resilient crops, and climate information services and technical solutions. 

(Expected) Results

The project strengthens the strategic role of Honduras's state-owned development banks in designing and delivering green finance products and investment operations for MSMEs and households. It also improves their technical and institutional capacities and green banking practices. 

In doing so, it widens access to sustainable, inclusive and gender-responsive financial services for MSMEs and households, strengthening green and climate-smart value chains and delivering a positive impact on biodiversity and climate change mitigation and adaptation. 

Implementing partners

EIB